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Analysis: Chengdu takes on hi-tech challenges

Posted: 23 Jun 2010 ?? ?Print Version ?Bookmark and Share

Keywords:Chengdu electronics market? software? LCD? IC-packaging? wafer fab?

Chengdu City is fast becoming the next major biotechnology, chip, information technology (IT), LED and renewable energy hub in China. In those efforts, the city has taken several steps forward in IT and software!and a step back in semiconductors, as it has stumbled in a fab project with China's Semiconductor Manufacturing International Corp. (SMIC). In addition, increasing labor rates are a concern in Chengdu.

Compared to other hi-tech development zones in China!such as Beijing and Shanghai!Chengdu is still "five years behind," said Michael McKerreghan, a chip veteran in Asia, who is on the board of commissioners at Unisem Berhad, a chip-packaging company.

On the other hand, "there is a can-do spirit" in Chengdu, said Robin Martin, VP of the technology and manufacturing group and general manager of assembly test and manufacturing at Intel Corp. In 2002, Martin helped set up Intel's huge chip-assembly plant in Chengdu.

In fact, Chengdu has come a long way in a short period. The city is the capital of the Sichuan province, which itself has a population of 80 million people. Chengdu also bills itself as the logistics, business, finance, science, transportation and communications hub in southwest China.

In 2008, Chengdu suffered a blow, when a devastating earthquake measuring 8.0 on the Richter scale hit the city and region. But the region appears to have recovered from the event: In 2009, Chengdu's GDP reached RMB 450 billion ($66.2 billion), up 14.7 percent, according to government figures.

Chengdu's hi-tech origins can be traced back to 1991, when the government set up the Chengdu Hi-Tech Industrial Development Zone (CDHT). The CDHT is the main hi-tech industrial development park in Chengdu. At the time, the CDHT was considered "one of the six pilot (hi-tech) zones," which was backed by the government-sponsored Ministry of Science and Technology.

In 2000, the central government launched a major program to develop China's inner region economies, including Chengdu. The so-called "Go-West" campaign was aimed to balance the growth with China's more-developed coastal regions and cities like Shanghai.

On the industrial/hi-tech front, the CDHT is leading the charge in Chengdu. It is developing a massive science park. With a planned area of 87km?, CDHT consists of the South Park (51km?) and the West Park (36km?). Over 16,000 companies are registered in the CDHT, including Intel, Microsoft, Motorola, Siemens, Nokia, Ericsson, Corning, Sony, Sumitomo, Toyota, NEC, Carrefour, UPS and Alcatel.

Chengdu has made enormous strides as of late and may have found its niche: IT and software. The city claims to have one of China's largest software parks; nearly every multinational has set up shop at the site. Chengdu has not only lured multinationals to the region by offering attractive tax breaks and other incentives, but the city also gives foreign companies a foothold into the huge consumer base in central and western China.

Not all has gone smoothly, however. Its once low labor rates are steadily increasing, reportedly thanks to chip giant Intel. Like most cities in China, Chengdu faces many challenges to keep its labor costs!and engineering salaries!in check.

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