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Electronics & InformationContentsChapter I Chinese electronic information industry development guidelines of 2005·····························································1I. General situation ································································································································································· 1II. Communication industry development ······························································································································ 1(I)Telecom development ··············································································································································· 11. The telecom industry continued developing and achieved the objectives designated in the Tenth Five-year Plan.···· 12. The growth rate of phone subscribers decreased, mobile phone service stimulated the industry, and a largeproportion of the Internet users choose the broadband ······························································································· 23. Telecom network continued expanding and new technologies were applied and spread············································ 34. The investment scale kept stable and industrial profit was gradually promoted························································· 35. Achievements have been made for the Phone to Village Project, and rural areas were further informatized ············· 36. Telecom service quality was largely improved··········································································································· 3(II)Operation of Chinese fundamental telecom enterprises in 2005·············································································· 41. China Telecommunications Corporation ···················································································································· 42. China Network Communications Group Corporation ································································································ 43. China Mobile Communications Corporation·············································································································· 44. China United Telecommunications Corporation········································································································· 45. China Satellite Communications Corporation ············································································································ 56. China TieTong Telecommunications Corporation ······································································································ 5(III)Post service development ······································································································································· 51. Post service continued growing in a healthy way······································································································· 52. Fixed asset investment structure was regulated, and communication network and capacity was improved··············· 63. Service conditions and quality were improved··········································································································· 6III. Electronic information industry development ·················································································································· 61. Major economic objectives for the industry accomplished························································································· 62. The industrial development growth was stable, and the profit increased from a low to a high point ························· 73. Structural adjustment expedited and the proportion of high-end products increased·················································· 74. Output increased to highest records and industrial internationalization was increasingly strengthened····················· 85. Enterprises’ size was enlarged and industrial aggregation effect became obvious ····················································· 86. Industrial concentration was promoted and regional aggregation effect became distinct··········································· 97. Software sector development······································································································································ 9IV. Industrial management in Chinese information industry ·································································································· 91. Structural reform and the work of laws and regulations were improved ···································································· 92. Market regulation, public management and public service were promoted······························································ 103. Independent innovation was stressed and standard research and formulation was reinforced·································· 104. Informatization was further improved ······················································································································ 105. International cooperation and exchanges·················································································································· 11V. Development objectives of Chinese information industry in 2006 ·················································································· 11VI. Chinese information industry development during the Tenth Five-year Plan (2001-2005) period································· 11VII. Chinese information industry development objectives during the Eleventh Five-year Plan period (2006-2010) ········· 12Chapter II Development outlines of Chinese electronic information industry in 2006························································13I. Overview··········································································································································································· 13II. Communication industry development ···························································································································· 13(I)Telecom development ············································································································································· 13·I·

China Business Guide1. Telecom industry continued rapid development and speeded up industrial transfer················································· 132. Telecom subscriber number continued growing and the transfer of voice serve to mobile mode became obvious ·· 143. Telecom network size kept expanding and new technologies were widely used ······················································ 144. Investment amount started to rebound and investment return gradually increased··················································· 145. Informatization work was boosted in rural areas to support countryside building···················································· 156. Telecom service quality has been promoted and telecom charge reduced as a whole··············································· 157. The Internet scale expanded stably and network capacity constantly rose ······························································· 15(II)Operation of Chinese fundamental telecom enterprises in 2006············································································ 161. China Telecommunications Corporation ·················································································································· 162. China Network Communications Group Corporation ······························································································ 163. China Mobile Communications Corporation············································································································ 164. China United Telecommunications Corporation······································································································· 165. China Satellite Communications Corporation ·········································································································· 176. China TieTong Telecommunications Corporation ···································································································· 17(III)Post service development ····································································································································· 171. Post service kept stable growth································································································································· 172. Post communication network capacity was promoted ······························································································ 173. Post service quality was promoted ··························································································································· 17III. Electronic information industry development ················································································································ 181. Major economic objectives for the industry accomplished······················································································· 182. The industry grew rapidly and stably and operation quality was constantly improved ············································ 183. Restructuring was deepened and communication and accessory sector developed rapidly ······································ 184. Foreign trade hit high volume and industrial internationalization was advanced ····················································· 185. Enterprises expanded and industry cluster effect increased······················································································ 196. Market competition became increasingly furious and industrial pattern was further tuned······································ 207. Software sector development···································································································································· 20IV. Industrial management in information industry·············································································································· 211. Governmental functions were further transferred and policies and regulations were further improved ··················· 212. Market regulation, social management and public service were enhanced to promote industrial transfer ··············· 213. State innovation strategy was implemented and technological progress was made·················································· 214. National informatization development strategy was implemented and social informatization buildingwas boosted ······························································································································································ 225. International cooperation and exchanges·················································································································· 22V. Development objectives of information industry in 2007 ································································································ 221. Macro control objectives in information industry in 2007························································································ 222. Major tasks in 2007 ·················································································································································· 22Chapter III Chinese electronic information industry development and potential analysis·················································24Section I Review of electronic information industry during the Tenth Five-year Plan periodI. Industrial development during the Tenth Five-year Plan period························································································ 241. Major economic objectives were reached in advance······························································································· 242. Turnout and sales volume of major products were among the top in the world························································ 243. The industry plays a more important role in national economy················································································ 244. Industrial quality was rapidly improved thanks to restructuring··············································································· 255. Core sectors speeded up to develop·························································································································· 266. Significant progresses have been made in some key technologies ··········································································· 26II. Experience during the Tenth Five-year Plan period········································································································· 271. Formulate policies that benefit for industrial development ······················································································ 27·II·

Electronics & Information2. Insist on the development approach of opening and cooperation ············································································· 273. Support advantageous enterprises in priority············································································································ 274. Make use of key projects to advance technological progress ··················································································· 275. Drive industrial development with informatization utilization ················································································· 286. Explore new methods for building industrial professional teams ············································································· 28Section 2 Performance of main sectors of the electronics and information industry in 2005I. Communication equipment manufacturing industry ········································································································· 32(I)General introduction················································································································································ 32(II)Production and sale················································································································································ 321.Changing and complex development environment, stable growth of production speed ········································· 332.Growth mode changes gradually and the overall strength buildup ········································································· 333.Rapid development of the telecom operation sector enhances development of the manufacturi- ng industry········ 334.Growing market demand stimulates the industry to develop rapidly······································································ 335.Soaring export drives the industrial economy development ··················································································· 33(III)Scientific research and new product development································································································ 341.3G mobile communication system ························································································································· 342.Optical fiber communication equipment and system······························································································ 343.China-made digital trunking system······················································································································· 344.Wireless access system··········································································································································· 355.Scientific and technological achievements ············································································································· 35(IV)International cooperation and foreign trade·········································································································· 351.Import and export ··················································································································································· 352.Participating in international competition··············································································································· 36(V)Market prospect····················································································································································· 361.Mobile communication industry····························································································································· 372.Optical communication industry····························································································································· 373.Network equipment (server, router Ethernet exchanger) ························································································ 38(VI)Development trend ··············································································································································· 39II. Radio & television equipment industry ··························································································································· 411.General introduction·················································································································································· 412.Production and sale ··················································································································································· 41III. Consumable electronics industry···································································································································· 42(I)General introduction················································································································································ 42(II)Production and sale················································································································································ 43(III)Scientific research and new products···················································································································· 441.Formulate standards with support from the governments and participation of enterprises····································· 442.Color TV products·················································································································································· 443.Rear projection TV product···································································································································· 454.Front projection product········································································································································· 455.Digital TV industry················································································································································· 456.Digital laser player and key components················································································································ 457.Acoustics products·················································································································································· 46(IV)International and domestic cooperation and foreign trade···················································································· 46(V)Market development trend····································································································································· 47(VI)Existing problems················································································································································· 48(VII)Development direction········································································································································ 49IV. Computer industry ·························································································································································· 50·III·

Electronics & Information(IV)International cooperation and foreign trade·········································································································· 89(V)Main enterprises ···················································································································································· 90X. Electronic component industry········································································································································ 94(I)Overview································································································································································· 94(II)Production and sales ·············································································································································· 95(III)Scientific research and new product ····················································································································· 96(IV)Major engineering and key project······················································································································· 96(V)International cooperation and foreign trade··········································································································· 96(VI)Main enterprises ··················································································································································· 98(VII)Market prospect ················································································································································ 100XI.Special electronic materials industry·························································································································· 109(I)Overview······························································································································································· 109(II)Production and sales ············································································································································ 109(III)Scientific research and new products·················································································································· 115(IV)Important engineering and key projects ············································································································· 116(V)Market analysis and forecasting ·························································································································· 116XII. Optical and photonics industry ··································································································································· 118(I)Overview······························································································································································· 118(II)Production and sales ············································································································································ 118(III)Scientific research and new products·················································································································· 118(IV)Key projects ······················································································································································· 119(V)International cooperation and foreign trade········································································································· 120(VI)Market analysis and expectations······················································································································· 120XIII. Development of China Aerospace Science and Technology Corporation (CASC)···················································· 126(I)Overview······························································································································································· 126(II)Scientific research and production······················································································································· 127(III)International cooperation and foreign trade········································································································ 128(IV)Application and construction of information technology ··················································································· 128(V)Expectations ························································································································································ 128Chapter IV China’s Information Building and Technical Applications ···············································································129I. Review ············································································································································································ 129II. The building of information infrastructure ···················································································································· 129(I)Telecom network··················································································································································· 129(II)Internet································································································································································· 130(III)Broadcasting TV network··································································································································· 130III. The building of information laws and regulations as well as policy and environment ················································· 130IV. The status quo of information and IT technology applications····················································································· 131(I)Agricultural and rural information building ·········································································································· 131(II)The enterprise information building····················································································································· 132(III)Urban information building ································································································································ 133V. The contributions of China’s information industry to the information development······················································ 135(I)Electronic information product manufacturing industry························································································ 135(II)Software industry················································································································································· 135(III)Communications industry··································································································································· 136(IV)The technical innovation made progress ············································································································ 136Chapter V Technological Progress ··············································································································································137·V·

China Business GuideSection I Review of the Information Technology of the Ministry of Information IndustryI. Review ·········································································································································································· 137II. Key tasks in the year 2005··········································································································································· 137(I)strengthen technological policy making and planning guidance ··········································································· 137(II)Strengthening technical innovation, and fully promoting the industrial core competitive power Organizing therelated domestic units to conduct the research and development of home- made high-performance 64-bit CPU 138(III)Accelerating the implementation of standard strategy and developing well the standard researchand formulation ·················································································································································· 141(IV)Speeding up the implementation of intellectual property strategy, attaching more attention to theintellectual property issues ································································································································· 143(V)Intensify the supervision according to laws, and creating a fair and just, effective and orderlymarket environment·············································································································································· 143(VI)Developing actively international technological communication and cooperation············································· 144III. Key Tasks in the year 2006··········································································································································· 1441.Strengthening policy formulation and planning guidance ···················································································· 1452.Accelerating the research and development of the core technologies in the key fields such as IC, software, keycomponents and etc ·············································································································································· 1453.Accelerating the building of technical innovation system with the enterprise as the main body·························· 1454.Strengthening the standard formulation················································································································ 1455.Strengthening the protection of intellectual property···························································································· 1456.Strengthening the quality management of electronic information products·························································· 1467.Establishing and completing the management system of telecom charging testing·············································· 1468.Further strengthening the international technological communications and cooperation ····································· 146Section II the Various Standards on the Electronic Information Industry Approved and Released in 2005I. Review ············································································································································································ 146II. The work emphasis of standards in the year 2006 ········································································································· 149Section III the Domestic patent authorization in 2005I. Review ············································································································································································ 152II. Cases of electronic patent infringement························································································································· 154II. Cases of electronic patent infringement························································································································· 155Chapter VI Market Operation·····················································································································································159Section I. Economic Performance of Electronic Information Industry in 2005I.Review ············································································································································································ 159II. Main Characteristics ······················································································································································ 162(I)Industry development and efficiency growth tended to be low at first then high ·················································· 162(II)Structural adjustment was sped up and proportions of high-end products were increased··································· 162(III)Software industry grew significantly and exports continued its rapid development··········································· 163(IV)International level was further enhanced and three types of foreign-funded enterprises became increasinglyprominent ··························································································································································· 163(V)Concentration degree of industry continued to improve and regional aggregation effects became more and moreobvious ································································································································································· 163III. Main Problems ····························································································································································· 163(I)Increasing pressures on upgrading structural adjustment and efficiency growth lagged far behind······················ 163(II)Independent innovation ability was weak and technological dependence had not been changed ························ 164(III)Relatively slow development of local enterprises whose gap with foreign-funded enterprises was widening ··· 164(IV)Steps of “going abroad” were relatively stagnant and the ability to deal with trade frictions was poor ············· 164Section II. Review on the Development of the 20th Session Top 100 Electronic Information Enterprises ························ 165·VI·

Electronics & Information(V)Comprehensive competitive strength has been improved continuously······························································· 165(VI)Technical innovation capability has been enhanced significantly ······································································ 166(VII)Well-known brands are increasingly growing to maturity················································································· 166(VIII)Work on standards has been continuously accelerated····················································································· 166(IX)International operation is stepped up to a new level··························································································· 166(X)Structural adjustment is pushed forward orderly ································································································· 166Section III. Development Situation of China's Color TV Industry in 2005I.Review ··········································································································································································· 167(I)Rapid growth of flat screen televisions became a new economic growth point ···················································· 167(II)Urban market shares of flat screen TVs were more than that of traditional CRT TV for the first························ 167(III)Color TV enterprises entered a new hot competition·························································································· 168(IV)Investments in research and development were increased and core technologies of TV manufacturerswere broken through··········································································································································· 168(V)Exports were transferred into high-end products, and color TV products faced new development opportunities168(VI)Industrial independent coordination development capabilities were enhanced ·················································· 169II. Prospect of Development in 2006·································································································································· 169Section IV. Review of China's Computer Industry Development in 2005China electronic computer industry was expanded further in 2005 and continued to maintain a rapid development ········ 170(I)Industry scale continued to expand and ranked first in the industry······································································ 170(II)Output and sales rates of products maintained good levels·················································································· 170(III)Large-screen LCD monitors and large-capacity hard disk gradually became the development directionof desktop PC ····················································································································································· 171(IV)Increase rate of desktop PC slowed down and notebook computers accounted for a larger proportion ofmicro-computers················································································································································· 171(V)Intensified market competition ···························································································································· 171(VI)Demands in the domestic market increased and growth rate of exports slowed down ······································· 172(VII)Regional concentration was further enhanced··································································································· 172(VIII)Further reliance on foreign-funded enterprises of computer industry······························································ 172Section V. Review of the Development of China's Software Industry in 2005I. Review ············································································································································································ 173(I)Software industry scale continued to expand and accounted for more than 1 / 10 of electronicinformation industry ············································································································································· 173(II)Industrial structures were further adjusted and proportions of software services and systems integrationwere increased ······················································································································································ 173(III)Export growth rates of software were lowered but growth potential was tremendous········································ 173(IV)Software companies were expanded continuously and their strengths were stronger ········································ 174(V)Further improved regional concentration of the software industry and gap of the software industry betweenChinese east areas and west areas is still widening ······························································································ 174II. Prospect for Development in 2006 ································································································································ 175(I)New industrial policies will pay more attention to cultivate large software enterprises and support independentinnovation····························································································································································· 175(II)A large number of foreign funds will be invested into China's software market and domestic softwareenterprises will face up with both challenges and opportunities··········································································· 175(III)Information-based enterprises, online games, mobile software will continue to be hot points in the softwaremarket, and more attention will be paid to network security and network services············································ 176Section VI. Review of the Development of China Mobile Phone Industry in 2005I. Review ············································································································································································ 177·VII·

China Business Guide(I)As the global mobile phone manufacturing base, China further consolidated its status········································ 177(II)Exports of mobile phones continued to maintain a rapid growth, which mainly stimulated the industrialdevelopment ························································································································································· 177(III)Market structures of products were further adjusted··························································································· 178(IV)China-made brand mobile phones have begun to enter the market of mobile customized phone ······················ 179(V)Fresh mobile phone enterprises allied to share market ························································································ 179(VI)Much severer market competition ······················································································································ 179(VII)Speedily updating of products··························································································································· 179(VIII)Insufficient funds restricted the development of domestic mobile phone enterprises······································ 179(IX)China made technological breakthroughs in the area of 3G ··············································································· 179(X)Channel partners began to be engaged in customized business of mobile phones··············································· 180II. Analysis of the Situation in 2006··································································································································· 180Chapter VII International Cooperation and Product Import and Export Trade ·······························································182Section I. Strengthening Overseas Cooperation and Promoting Industrial DevelopmentI. Review ············································································································································································ 182II. Promoting “bringing in”, and deepening the overseas industrial cooperation ······························································· 182(I)Attaching importance to China’s market, and developing cooperation of mutual benefit····································· 182(II)Enlarging the investment on scientific research in China and strengthening technical communication andcooperation··························································································································································· 183(III)Guiding foreign enterprises to invest in the Western Region, and uniting foreign fund to revive the NortheastRegion ································································································································································ 183III. Implementing “going outward”, and promoting the internationalization development of enterprises·························· 184(IV)The Government promotes enterprises to “go outward” ···················································································· 184(V)the Diversification of enterprises to “going outward” ························································································· 186IV. Developing overseas cooperation and communication be means of the multilateral and bilateral cooperative system 187V. Prospects········································································································································································ 188Section II Review of the Import and Export of Electronic Information Products in 2005I.Review ············································································································································································· 189II. Characteristics of the export ·········································································································································· 190(I)The export growth speed of communication equipments, computer products and radio TV equipments andproducts is lower than the average growth speed ································································································· 190(II)Processing trade is still the main trading pattern of the electronic information product export ··························· 191(III)The proportion taken by foreign-funded enterprises was increased···································································· 191(IV)The export market is still rather concentrated····································································································· 192(V)The export provinces and cities still concentrate on the eastern coastal regions·················································· 192III. Characteristics of import ·············································································································································· 193IV. Problems existed··························································································································································· 193V. Prospects········································································································································································ 194Chapter VIII Overall Data Statistics ··········································································································································213I. Main data statistics of China’s economic development (1998-2006, focusing on the electronic information industry)·· 213II. List of Top 100 Electronics Information Enterprises 2006 (the 20th)············································································ 220III. List of Top 100 Electronics Information Enterprises 2007 (the 21st)··········································································· 222·VIII·

Electronics & InformationChapter I Chinese electronic information industry development guidelinesof 2005I. General situationElectronic information industry is a basic, pioneering and pillar industry in Chinese economy, playing an important rolein modernization and the process of building a well-off society in an all-round way. In 2005, endeavours have been made toexpedite industrial development, promote independent innovation capabilities, push the communication in rural areas,strengthen market regulation, boost informatization, and guarantee network and information security in Chinese electronicinformation industry, which contributed to Chinese economic and social development.In 2005, the increment value of electronic information industry was 1,320 billion yuan, accounting for 7.2% in GDP.The increment of electronic information industry was 901.1 billion yuan, and communication industry 415.69 billion yuan.The sales revenue of electronic information industry was 3840 billion yuan, and the export amount of electronic informationproducts was US$268.17B. The number of fixed line users in China was 350 million, and mobile phone subscribers 390million. The total number of phone subscribers was 740 million. The communication network size and the number ofsubscribers remained at the first place in the world. The number of netizens exceeded 100 million and ranked at the secondplace.II. Communication industry developmentIn 2005, the total communication service amount was 1200 billion yuan, increasing by 23.8%. The amount for telecomsector was 1140.3 billion yuan, increasing by 24.7%, and post sector 62.55 billion yuan, increasing by 10.8%. The salesrevenue of electronic information industry was 641.73 billion yuan, increasing by 11.1%. The sales revenue of telecom sectorwas 584.01 billion yuan, and post 57.72 billion yuan. The increment value of telecom sector was 415.69 billion yuan, and thefixed asset investment in telecom sector was 214.18 billion yuan.(I)Telecom developmentIn 2005, the total amount of telecom services in China was over 1000 billion yuan. The number of the Internet visitorsreached 100 million. Broadband was widely spread. The phone is available to more villages. The fixed asset investmentexceeded 200 billion yuan for consecutive six years. The ratio of investment to return decreased to a half of the ratio at theend of the Ninth Five-year Plan, indicating the investment became more reasonable and effective. The telecom sectordevelopment area was widened, the communication market became mature, the service quality was largely improved, thetelecom regulation system was gradually improved, the regulation measures turned more scientific and comprehensive, anorderly market competition pattern was being formed, and capital pluralism process was advanced. Among 17,300value-added telecom companies in China, 97% are non-public ownership companies and companies containing non-publiccapital. In the basic telecom sector, there are over 60 companies containing non-public capital.1. The telecom industry continued developing and achieved the objectives designated in theTenth Five-year PlanIn 2005, the objectives specified in the Tenth Five-year plan for Chinese telecom industry have been all realized. Thetotal telecom service amount grew rapidly to 1140.3 billion yuan, increasing by 24.7% than 2004. The income growth wasrelatively stable in telecom industry. The service income in 2005 was 584.01 billion yuan, increasing by 11.4% than 2004.·1·

China Business GuideThe service income accounted for 3.2% in the total GDP. In this industry, the value increment was 383.1 billion yuan,accounting for 2.3% in the total GDP. The number of telecom users also grew. By the end of 2005, the number of Chinesephone subscribers was 740 million, and the phone popularization rate was 57.3 phones in every 100 people.In 2005, the sales amount of major telecom services rapidly grew. The number of local calls and calls between localnetworks was 622.24 billion, increasing by 5.6%. The calling time of fixed line toll phone was 89.42 billion minutes,increasing by 20.6%. The calling time of mobile phone was 1250.74 billion minutes, increasing by 32.3%, where the callingtime of mobile toll call was 71.26 billion minutes, increasing by 18.1%. The calling time of IP phone was 134.02 billionminutes, increasing by 16.6%. The number of short messages was 304.63 billion, increasing by 40.3%.The scale, number of subscribers and service amount increased fast. This indicates that Chinese telecom industry is in astable development stage, and that the economy and the society increasingly demands telecom services. The telecom industryplays a more and more important role in economic and social development, and its basic and pioneering status becomes moreand more obvious.2. The growth rate of phone subscribers decreased, mobile phone service stimulated the industry,and a large proportion of the Internet users choose the broadbandIn 2005, the number of new phone users in China was 97.27 million, which was 16.61 million lower than the incrementof 2004. The growth rates of both fixed line and mobiles decreased. The decrements of new fixed line and mobile users wererespectively 10.32 million and 6.29 million. The proportion of new PHS users in the new fixed line users decreased by 3.5%than 2004. The PHS service didn’t boost fixed line service as energetically as before.Mobile service became more powerful than fixed line service. In 2005, the number of new mobile subscribers was 1.5times of new fixed line subscribers. When PHS service with mobile communication features was included in mobile service,the multiple would be 4.3.The revenue structure of 2005 was almost the same with that of 2004. The proportions of mobile service and datacommunication network service slightly went up, and the revenue proportions of fixed line local phone network service andtoll call network service shrank.Figure 1. Telecom revenue structure of 2005Datacommunicationnetwork serviceincome 6.80%Other income0.30%Toll callnetwork serviceincome 17.80%Mobilecommunicationnetwork serviceincome 45.10%Fixed local linenetwork serviceincome 30%In 2005, the number of Chinese netizens was 111 million, continued with a rapid growth rate. The Internet disseminationrate was 8.6%. The broadband access mode became more popular. In China, the number of broadband users was 64.3 million,accounting for 57.9% in the total netizens. The broadband has become the most popular access mode.More and more dial-up users of basic telecom operators turned to the broadband. In 2005, the decrement of dial-up userswas 15,627,000, and the increment of broadband users was 12,425,000. The total number of broadband users reached 37.35million, increasing by 50.2% than 2004. The number of ADSL subscribers was 26.36 million, accounting for 70.3% inbroadband users of basic telecom operators. The broadband access mode was proved to be the main Internet access mode.·2·

Electronics & Information3. Telecom network continued expanding and new technologies were applied and spreadIn 2005, the length of newly built optic fibre cable was 554,000 km, and the total optic fibre cable length reached4,072,000 km. The length of new optic fibre core was 9,547,000 km, and the total length was 75,966,000. The increment offixed toll call switch capacity was 1,086,000 channels, and the total number reached 13,716,000 channels. The increment oflocal switch capacity was 48,493,000 sets, and the total number reached 471,961,000 sets, where the capacity increment ofreceiving network equipment was 38,308,000 sets, and the total number reached 211,207,000 sets. The capacity increment ofmobile phone switch was 85,574,000 sets, and the total number was 482,417,000 sets. The installation rates of fixed line andmobile phone were 76.4% and 81.4%. The number of new Internet broadband access ends was 12,966,000, and the totalnumber hit 48,747,000. The Internet international outlet broadband was 136,106M. The total number of websites was694,000, and the total number of domain names was 2,592,000.As the network enlarged, telecom technologies were also widely used. The application of soft switch technologypermeated from long-distance field to local field, and the existing network was transiting to NGN smoothly. Some centralcities have launched EDGE-based commercial network and services and started CDMA1XEV-DO experiments. In someactivities, mobile multimedia applications, such video stream and VOD, were demonstrated to the public. The fundamentaltransfer network was further improved, and ASON was deployed and tested in the existing network. The operation supportsystem was also optimized, service support and network operation capacities were enhanced, and network quality wasbrought to another level.4. The investment scale kept stable and industrial profit was gradually promotedThe fixed asset investment in telecom industry was 209.78 billion yuan in 2005, decreasing by 4.6% than 2004. Thefixed asset investment has been over 200 billion yuan for consecutive six years. Large-scale construction investment phasefor the existing network almost ended, operators upgraded and optimized the network according to user development. Theprediction of 3G made by operators had an effect on the investment. At the same time, operators had poor initiativeperformance and lacked new investment fields. Moreover, the capital market stressed the return. Therefore, telecom operatorswere prudent in investment.As the investment decreased, the profit margin of the entire industry rose up. The total profit of the six majorfundamental telecom operators was 126.51 billion yuan, increasing by 31.5% than 2004, and this growth rate was higher thanthe revenue growth rate. Confronted with the pressures from both competition and capital market, telecom operators realizedthe significance of profit priority. They optimized cost structures, carried out unified procurement, developed potentialsinside enterprises, reasonably distributed resources, effectively controlled service cost, and gradually promoted their profitmargins.5. Achievements have been made for the Phone to Village Project, and rural areas were furtherinformatizedGreat achievements have been made for the Phone to Village Project in 2005. Phones were connected to 45,913administrative villages in 2005. The proportion of administrative villages with telecom network covered reached 97.1%,increasing by nearly 6% than 2004. This achievement was higher than the objective specified in the Tenth Five-year Plan interms of telecom network extension. The implementation of the Project has promoted telecom service quality, and improvedcommunication infrastructure in rural areas.While pushing up telecom infrastructure construction in rural areas, telecom operators took steps to develop informationservices that are suitable for the market, science and technology, culture, education, and entertainment in rural areas. Telecomoperators endeavoured to provide information services and promoted informatization in rural areas, and contributed to ruraleconomic development and farmers’ living condition.6. Telecom service quality was largely improvedIn 2005, telecom services were further spread in China. The phone coverage rate reached 57.3 phones per 100 people,increasing by 7.3% than 2004. The fixed line coverage rate was 27.3 phones per 100 people, and the mobile phone coveragerate was 30 phones per 100 people, increasing by 4.4%. The coverage rate of the Internet was 8.6%, increasing by 1.3%.·3·

China Business GuideMore and more telecom services have been launched for users to choose. New services, such as mobile cartoon, mobilechat, voice short message, and PHS short message are satisfying various consumers. Customized services oriented to variousindustries and enterprises at all levels boosted informatization in industries and enterprises. Market competition urgedtelecom charges to get down, which benefited for the public.A telecom service quality system integrated with government regulation, self-discipline of enterprises, and publicsupervision, took its shape. Complaint hotlines for service quality and periodical announcement of service quality ofenterprises have improved telecom service quality. Frequently complained issues have been solved, and telecom users werefurther satisfied.(II)Operation of Chinese fundamental telecom enterprises in 20051. China Telecommunications CorporationIn 2005, the revenue of major services of China Telecom was 169.3 billion yuan, increasing by 6.4%. The subscribernumber increment was 24.89 million, and the total number reached 214 million. The broadband user number increment was7.68 million, and the total number reached 21,948,000. The proportion of non-voice service income in the revenue of majorservices was 23.7%.By the end of 2005, China Telecom connected 17,266 administrative villages to the phone network, 7,026 villages morethan the designated goal, which was almost 1.7 times of the total number specified in the Phone to Village Project during theTenth Five-year Plan.2. China Network Communications Group CorporationIn 2005, the revenue of China Netcom was 94.95 billion yuan, and the profit was 10.28 billion yuan. The fixed linesubscriber number increment was 3.32 million, and the total number reached 91 million. The PHS subscriber numberincrement was 6.16 million, and the total number reached 28.83 million. The broadband user number increment was 3.41million, and the total number reached 12.05 million.In January 2005, China Netcom formally subscribed 20% equities of PCCW after its additional stock issue, and becameits second largest shareholder. In the second half of 2005, China Netcom established strategic cooperative relations withSpanish Telecom, which held 5% shares of listed companies of China Netcom. The proportion will increase from 5% to9.9%.China Netcom finished investment and acquirement of Shanxi, Heilongjiang, Jilin and Inner Mongolian subsidies inOctober 2005, and the main operation body of China Netcom was listed successfully.By the end of 2005, China Netcom covered 4,576 administrative villages into the telecom network, which was 145% ofthe task of Phone to Village Project specified by the state.3. China Mobile Communications CorporationIn 2005, the revenue of major services of China Mobile was 235.8 billion yuan, increasing by 18.9% than 2004. Thetotal profit was 79.2 billion yuan, increasing by 23% than 2004. The subscriber increment remained at a high level. Thesubscriber number increment was 43 million, and the total number reached 264 million.China Mobile energetically pushed up the Phone to Village Project, and covered 26,631 villages, 34% higher than theassigned task.The rank of China Mobile went up to the 36th place among world companies in terms of market value issued by theBusiness Weekly, and China Mobile became a telecom operator with the largest market value in Asia. The market value ofChina Mobile was also among the top in the world.4. China United Telecommunications CorporationIn 2005, the mobile subscriber number increment was 15,962,000, and the total number reached 129 million. The GSMsubscriber number increment was 10.81 million, and the total number reached 95,879,000. The CDMA subscriber numberincrement was 5,152,000, and the total number reached 33,465,000. The revenue of major services stably grew. The revenueof major services hit 77.7 billion yuan in 2005, increasing by 7% than 2004. The profit exceeded 4.08 billion yuan.·4·

Electronics & InformationInternational roaming services of GSM network provided by China Unicom have been connected to 248 operators from118 countries and regions, and international roaming services of CDMA network have been connected to 18 operators from15 countries and regions.China Unicom brought phones to 4,631 administrative villages in 10 provinces and autonomous regions, which was 557higher than the number assigned in the Phone to Village Project.China Unicom was granted CDMA licence of Macao SAR, and established China Unicom (Macao) Co., Ltd.5. China Satellite Communications CorporationThe revenue of major services of China Satcom increased by 14.3% in 2005. The company pushed the market ofcommunication satellite transponder rent service, and the service revenue increased by 16.5%. Economic profit of satellitetransponder was largely boosted up. The company also improved the IP communication network, and the number of citiescovered by this service increased to 206. Operation performance transition occurred in terms of satellite mobilecommunication and geographical information service for the first time. New economic growth points, based on NGN voiceservice, services provided by China Satcom Guomai Communications Co., Ltd, and satellite navigation and positioningservice, largely pushed up the company’s operation.China Satcom signed a development financial cooperation agreement of 15 billion yuan with the National DevelopmentBank.6. China TieTong Telecommunications CorporationIn 2005, China Tietong followed the operation principle of characteristic profit-oriented development, further dividedthe market, strengthened regional operation system, customer manager system and entire-process marketing control system ofthe marketing organization management system, promoted marketing management quality, and realized simultaneous rapidgrowth of both scale and profit.In 2005, the total telecom service amount of China Tietong was 16.95 billion yuan, increasing by 37.6% than 2004. Thesales revenue was 13.7 billion yuan, increasing by 28.6%. The fixed asset investment was 8.7 billion yuan. The number offixed line subscribers increased to 16,206,000, and the number of the Internet users hit 2,473,000, increasing of 1,059,000.The company made a new attempt in capital operation, issuing ten-year fixed interest rate bond of one billion yuan forthe first time in China.(III)Post service developmentIn 2005, the total amount of post industry was 62.55 billion yuan, increasing by 10.8%. The total revenue of postservices was 57.72 billion yuan, increasing by 8.1% than 2004. The revenue of delivery service was almost the same with lastyear. Post financial service revenue increased by 16.7%, and philately service revenue decreased by 20%.1. Post service continued growing in a healthy wayIn 2005, the number of letters was 7.35 billion, and the revenue from letter post service was 5.03 billion yuan. Thenumber of packages was 95,318,000, and the revenue was 2.28 billion yuan. The number of newspaper orders was 15.03billion, and magazines one billion. The sales amount of philately stamps was 1.21 billion, and philately brochures29,408,000.The express service sector, under furious competition pressure, consolidated network advantage and achieved a highgrowth rate. The service amount was 230 pieces in 2005, increasing by 15.7%, and the sales revenue was 6.58 billion yuan,increasing by 19.4%.The logistic sector system was improved based on the unified and efficient logistic network, and the market share wasalso increased. The sales revenue of logistic sector was 1.95 billion yuan, increasing by 1.5%.The balance of post saving was 1,359.87 billion yuan at the end of 2005, increasing by 26.1% on a y-o-y basis. Thesaving revenue was 28.21 billion yuan, increasing by 14.4%.International services continued growing. The total sales revenue of international postal services was 3.37 billion yuan,increasing by 17.3%. The total number of international packages, including Hong Kong, Macao, and Taiwan, was 1,567,000,·5·

China Business Guideincreasing by 5.2%. The total number of international express pieces was 6,988,000, increasing by 28.7%. The total numberof international bills of exchange was 178,000, increasing by 68.4%.In 2005, the agency service revenue of China Post was 840 million yuan, including 760 million yuan for providingtelecom services. China Post issued 8,003,000 numbers for telecom operators and sold 81,822,000 cards for telecomoperators. The proportion of long-term service revenue, such as charging as an agent, went up, and the agency telecomservice structure was optimized.The post ticket service continued growing fast. In 2005, the sales revenue was 62.65 million yuan, including 4.52million yuan of 175,000 airline tickets, 45.52 million yuan of 3.29 million railway passenger tickets, 6.37 million yuan of300,000 performance tickets, 3.45 million yuan of 28.75 million lottery tickets, and 1.43 million yuan of 880,000 vehicle andsteamer tickets. Jiangsu Provincial Post Bureau was responsible for selling tickets for the Tenth National Games, and wasawarded E-commerce Example of the Ministry of Commerce.In 2005, the information service revenue was 19.72 million yuan, increasing by 13.99% than 2004, including 12.39million yuan of post short message service. The post payment gateway deal was 996 million yuan.2. Fixed asset investment structure was regulated, and communication network and capacity wasimprovedIn 2005, China Post expedited capacity building in agency and information services. It launched nationwide postpayment gateway service, which supported online payment of e-commerce, established the national post short messageaccess platform, added 19 post short message services such as remit return service and EMS sent information service, and setup a post electronic service platform that uses business counter and electronic information (11185, 183 website and shortmessage) as access mode and provides the public with all-round services (including telecom service, ticket service, receivingof public utilities fee, governmental administrative transactions, information service, and value-added service).China Post has nine special post transporters, five post boats, 406 post train compartments, and 50,000 post vehicles(including 12,000 post transport vehicles). China Post has 107 post letter classification machines, 103 letter sorting machines,616 business letter production systems, 130 presswork and package classification machines, 67 newspaper and magazinedistribution lines, 7,175 ATMs, and 9,932 post charge devices.3. Service conditions and quality were improvedIn 2005, there were 66,000 post offices and agents all over the country, including 47,000 offices located in rural area.There were 24,000 informatized offices, 47,000 post newspaper, magazine, and book booths, 17,000 philately booths, and35,000 post saving offices. There were 21,000 post routes, including 1,651 air post routes, 108 first-level railway post routes,and 162 first-level road post routes. There were 367,000 post box groups, 202,000 post boxes, and 37,529,000 post deliverypoints. The number of counties (townships) where post saving service was available was 21,000, and the number of citieswhere 11185 customer service centre was available was 298. The number of letter per capita was 6, and the number ofnewspaper and magazine volumes every 100 people was 11. Each post office or service berth covered 20,000 peopleaveragely.III. Electronic information industry development1. Major economic objectives for the industry accomplishedIn 2005, the sales revenue of electronic information industry was 3,841.7 billion yuan, increasing by 24.8% than 2004.The revenue of software and system integration was 390.6 billion yuan, increasing by 40.5% than 2004. The industrial addedvalue was 901.1 billion yuan, increasing by 28.4% than 2004. The profit and tax was 196.4 billion yuan, increasing by 15.3%than 2004. The export and import amount was US$488.7B, increasing by 25.8% than 2004. The product structure wasadjusted. The outputs of computers, mobile phones, and colour TV sets were at the first place in the world, and thenew-generation video-audio products, communication and network devices, and new displays became new economic growthpoints. The large-enterprise strategy was proved to be successful. There were 22 enterprises with the sales revenue over 10billion yuan, and there were two enterprises with the sales revenue over 100 billion yuan. The building of national electronic·6·

Electronics & Informationinformation production bases and parks was stably pushed up, and industrial aggregation effect became obvious. Theproportion of sales revenue, industrial added value, total profit, and employment population in the Pearl River Delta, YangtzeRiver Delta and Bohai Rim was over 70% in the total industry.Table 1 Production of major electronic information products in 2005Product Unit Output Increase compared with 2004(%)Mobile phonesProgramme control switchesMobile base stationsColour TV setsMicrocomputersServersDisplaysIC10,000 sets10,000 lines10,000 channels10,000 sets10,000 sets10,000 sets10,000 sets100M blocks30354.07720.9724.58283.28083.8318.016057.6265.830.01.364.911.535.388.958.212.92. The industrial development growth was stable, and the profit increased from a low to a highpointThe electronic information industry continued stable growth in 2005 based on high-speed development in 2004, and thegrowth rate in every month was over 20%. The industrial added value accounted for 13.6% among all industries. The growthrate was 12% larger than the average level in China. The contribution rate of this industry to all industries was 20.8%.The industry displayed a stable growth from the perspective of development speed. In the first three quarters, the salesrevenue and industrial added value of electronic information industry increased by around 21%. In the fourth quarter, thegrowth rates of the sales revenue and industrial added value were over 24%, increasing by over 3% than the first threequarters. As raw material cost rose, some industries stepped to periodical depression, and enterprises deal with surplus stock,the profit of the industry presented a negative growth since the second quarter. The profit of communication device sector andelectronic accessory sector dropped fast. When the market recovered and company stock reduced in the third quarter, theprofit of the whole industry started to climb up. Negative growth was overturned in October.3. Structural adjustment expedited and the proportion of high-end products increasedIn 2005, the growth rates of computer sector and electronic accessory sector were higher than the average growth rate ofthe whole industry, and the two sectors drove the whole industry. The sales revenue of enterprises above the designated sizein the industry was 1,512.3 billion yuan, increasing by 29% than 2004 and 4% higher than the industrial average. The profitwas 48.2 billion yuan, increasing by 21% than 2004 and 7.6% higher than the industrial average. As enterprises speeded upnew product development and market development, the product structure was gradually upgraded, and the proportion ofhigh-end products constantly increased. LCD and plasma products became economic growth points in colour TV set sector.The growth rates of LCD and plasma products were over 200%. In the computer sector, laptops accounted for nearly 60% inmicrocomputers, increasing by 5% than 2004.·7·

China Business GuideTable 2 Sector proportions of electronic information manufacturing in 2005Electronicinformationelectromechanical products8.1%ElectronicElectronicspecialdevices 2.3%appliances10.6%Householdvideo-audioproducts10.9%Broadcastingand TVequipment0.9%Electronicaccessories16.6%Radars 0.3%Electronicmeasurementinstrument Other0.9% products 0.8%Communicationequipment17.8%Computers30.8%4. Output increased to highest records and industrial internationalization was increasinglystrengthenedIn 2005, the output of Chinese electronic information products kept growing at a high speed. The export and importamount was US$488.73B, increasing by 25.8% than 2004 and accounting for 34.4% in the total international trade amount inChina.In 2005, the export amount of Chinese electronic information products was US$268.17B, increasing by 29.2% than2004, accounting for 35.2% in the total export amount in China, and contributing 36% to national export increase. The totalimport amount was US$220.56B, increasing by 21.9% than 2004.The internationalization of Chinese electronic information industry was quickened in 2005. Multinational companiesstrengthened their Chinese strategies global resource integration. More and more multinational companies’ subsidiaries inChina became solely foreign capital funded companies, and multinational companies set up more and more regionalheadquarters and R&D centres. The position of foreign-invested companies rose up in electronic information industry. Thesales revenue of foreign-invested companies was 2,402.1 billion yuan, industrial added value 502.6 billion yuan, 82.2 billionyuan, and export US$234.1M, accounting for 77%, 77%, 77% and 87 in the industries above statistical threshold respectively.These proportions were higher than the ones of last year. At the same time, Chinese enterprises also tried to go global,enlarging themselves through multinational M&A in order to reinforce international competitiveness.5. Enterprises’ size was enlarged and industrial aggregation effect became obviousThe taking of the 20th top 100 electronic information manufacturers was 964.3 billion yuan, increasing by 18.2% thanthe taking of the 19th top 100 ones and accounting for 25.1% in the total amount in the industry. The profit of thesemanufacturers was 24.8 billion yuan, accounting for 19% in the total amount in the industry. The tax was 28.9 billion yuan,increasing by 7% than the tax of the 19th top 100 ones. The proportion of top 100 companies in the total number ofmanufacturers was less than 2‰, and these top 100 companies brought 1/4 taking and 1/5 profit in the whole industry.Among the 20th top 100 electronic information manufacturers, 22 companies realized takings of over 10 billion yuan. Thetakings of Legend and Haier were over 100 billion yuan, which was close to the lowest standard of Fortune 500 enterprises.Among the 20th top 100 electronic information manufacturers, 16 companies were listed for the first time. Sixteencompanies were excluded due to restructuring or low growth rate. This indicated a dynamic competition mechanism.Over the past two decades, the development of the top 100 companies was characterized by the following points. Firstly,the entire scale constantly increased fast, and the dominant role was highlighted. The taking of the top 100 companiesincreased from 11.6 billion yuan of the first top 100 companies to 964.3 billion yuan of the 20th top 100 companies,increasing by over 64 times. The average annual growth rate reached 26.2%. These companies have become majormanufacturers of main electronic products, and have formed regional industrial groups with these companies at the core.Secondly, the industrial structure became reasonable and the industrial chain was improved. Product structure was adjustedall the time, mainstream products were upgraded from time to time, the structure was optimized, and regional industrialstructure was further coordinated. The top 100 companies have become a dominant part that implemented regional gradstransfer of electronic information industry. Thirdly, the investment in R&D increased year by year, and independent·8·

Electronics & Informationinnovation ability was promoted remarkably. The top 100 companies invested more and more in R&D, made greatachievements in core technologies, accumulated more and more independent intellectual property rights, and boosted theupgrade of technical structure and product structure. Fourthly, the top 100 companies quickened internationalization, andplayed an important role in international trade balance in Chinese electronic information industry. Product output structurewas upgraded, international operation started to transfer from product output to capital and brand output. Some enterpriseshave owned world brands.6. Industrial concentration was promoted and regional aggregation effect became distinctEastern coastal area was still a main electronic information industrial base. The largest eight enterprises were located inthe east. In the Yangtze River Delta, Pearl River Delta and Bohai Sea Rim, the proportion of labour force, sales revenue,industrial added value and profit was over 80% respectively, larger than the proportion of 2004. The building of industrialbases and parks was enhanced. The industrial size and total profit and tax of nine formally established national electronicinformation industrial bases accounted for over 3/4 in the whole industry. Industrial aggregation effect and advantageousposition of bases became more evident.7. Software sector developmentIn 2005, the sales revenue of Chinese software industry was 390.6 billion yuan, increasing by 40.5% than 2004. Thesales revenue of software products was 193.15 billion yuan, increasing by 26.4% than 2004 and accounting for 49.5% in thetotal income of software industry. The revenue of system integration was 105.9 billion yuan, increasing by 84.7% than 2004.The revenue of software service was 91.55 billion yuan, increasing by 201.9% than 2004. The software export amount wasUS$3.59B, increasing by 28.2%. Beijing, Guangdong, Shanghai and Jiangsu remained key areas of Chinese software industry.Beijing held the largest size, and the revenue was 91.4 billion yuan, increasing by 42% than 2004. Jiangsu had the largestgrowth rate, and the revenue was 41.6 billion yuan, increasing by 98.9% than 2004. Software bases developed fast, including11 national software industrial bases and six national software export bases. In terms of sales revenue, software companies inthe bases accounted for 3/4 in all software companies in China. Software companies continued enlarging size andstrengthening competitiveness. Among the largest 100 software companies in 2004, 21 companies had the sales revenue ofover one billion yuan. In 2005, another five companies realized sales revenue of over one billion yuan. At the same time, thesales income of the top 100 software companies appraised in 2004 was over 100 billion yuan in 2005, increasing by 16.4%than 2004. The export amount was US$1.59B, accounting for 45% in the total export amount in the software sector.Table 2 Software industry income composition (%) from 2004 to 20052004 2005 Proportion changeSoftware product income 63.5 49.5 -14.0System integration income 23.9 27.1 3.2Software service income 12.6 23.4 10.8IV. Industrial management in Chinese information industry1. Structural reform and the work of laws and regulations were improvedPolicy research was carried out with regard to telecom market competition structure and capacity building of telecommonitoring and regulation according to the requirement of the State Council on deepening the telecom system reform.Enterprises were guided to strengthen internal reform and establish and improve the modern enterprise system. Post systemreform was stably boosted. The Administrative Licence Law and the Implementation Guidelines on Carrying throughAdministration According to Law were implemented to impel governmental function transfer and administration according tolaw. The legislation on Telecom Law was promoted, and the draft has been rendered to relevant departments of the StateCouncil. Judicial interpretation of inter-link and inter-connect was made. The Electronic Signature Law has been put intoforce. The Post Law and Wireless Management Regulations were being revised. Legal system in electronic informationindustry was improved, and the legislation on software and system integration was speeded up. The Eleventh Five-year Planof the information industry has been formulated. Communication and cooperation in information industry across the straits·9·

China Business Guidewas promoted, and the technical standard forum of information industry across the straits was successfully held. CEPAagreement was further carried through.2. Market regulation, public management and public service were promotedTelecom regulatory departments carried through the circular on enhancing monitoring and management over telecommarket of the State Council and requirements of the Ministry of Information Industry, and achievements have been made inrectifying and normalizing the market order. The guide on market access was reinforced to drive competition and prosperityin the market. System building was enhanced, inter-network settlement relation was adjusted, and monitoring systems wereestablished, so the general situation of convergence turned better. The essence of the documents on strengthening telecomcharge management issued by the State Council and the National Development and Reform Commission was carried throughto advance the reform of telecom charge management mode, as a result of which, the market price competition order turnedbetter. The access system of telecom equipment was standardized and inspection management was improved. Themanagement on telecom piping and local network was improved, and the competition of communication building market wasstandardized. Telecom charging systems were tested in the industry. Frequently complained problems on service quality havebeen solved, and customers’ rights and interests were safeguarded. Service quality was improved and communication in ruralareas was advanced. Emergency communication was also enhanced. Radio frequency planning, monitoring and stationmanagement, and technical facility building were stably boosted, and partial achievements were made in rectifying civilaviation frequencies. The management on key products, such as satellite, broadcasting and TV receivers, and tax-controlgathering device, was intensified, and anti-pollution work of electronic information products was branched out.Achievements were made in operation alarm and monitoring of industrial economy.3. Independent innovation was stressed and standard research and formulation was reinforcedThe Eleventh Five-year Plan and Medium and Long-term Plan for 2020 of Technological Development in InformationIndustry (Outlines) were completed in 2005. Macro control and guide on technological development in information industrywas enhanced, and the guide of technological development policies and product development project in information industrywas made.Technical innovation and reforms on systems and mechanisms shall be pushed through exerting the dominant role of thegovernment, the basic role of the market in technical resource distribution, the principal role of enterprises in technicalinnovation, the pioneering role of national scientific research institutes, and fundamental and supporting role of universitiesand colleges, in order to combine various technical innovation powers. Relevant industrial policies have been implemented,and the management rules on IC special R&D fund were made to create a favourable environment for software and ICindustry. Great achievements have been made in the Starlight China Chip Project, and the IC design level reached 0.13microns. R&D and industrialization of CUP, Chinese language Linux, 3G technology, trunking communication, and digitalTV was largely promoted. A number of technologies and products with independent intellectual property emerged. The gapbetween Chinese level and international advanced level was reduced.Standardization work was pushed up and enterprises energetically took part in international competition. Enterpriseswere directed to formulate standards in an open mode in order to quicken the formulation of standards of networkconvergence, service quality, 3G, and digital trunking communication. Research and formulation of independent standardswere supported. Enterprises shall energetically participate in international standardization activities to raise Chinese statusand role in international standard formulation.4. Informatization was further improvedKey informatization projects, including Gold Card Project, Gold Tax Project, and custom electronic law enforcementsystem, were energetically advanced. Digital gas long-distance monitoring and control system was spread in coal mine safetyproduction field. The effect of enterprise informatization was obvious, and CAD/CAM was popularized in key nationalenterprises. IC card application, such as 2-G ID card, was disseminated under the support of relevant departments. Electronicadministration, e-commerce, city informatization and agricultural informatization were promoted, information resourcedevelopment and utilization was spread, and more and more online services for the public were launched. Basic work, such·10·

Electronics & Informationas electronic certification service management and informatization training, was smoothly carried out. Pilot extensionprojects of modern long-distance education for rural cadres were implemented under the support of concerning departments.5. International cooperation and exchangesInternational cooperation and exchanges were promoted, and Chinese enterprises made achievements in developinginternational market. International economic and technological cooperation and exchange was carried out in more fields andchannels deeply. Powerful Chinese enterprises were encouraged to develop international market. Progresses were made inoverseas M&A and overseas establishment of factories and R&D institutions. Useful experience was accumulated.Vice Premier Huang Ju of the State Council attended the Tunis Stage Conference of Information Society World Summitin 2005, and leaders of the Ministry of Information Industry, followed by a delegation, attended APEC Telecom MinistersConference, establishing bilateral and multilateral communication and cooperation platforms and boosting informationindustry cooperation between China and the US, Russia, Japan, Korea and Europe. China-ASEAN telecom week activity washeld, and substantial progresses have been made in key projects, such as Great Mekong Sub-region Information Highway.China also supported Hong Kong SAR to prepare for ITU Telecom World 2006.V. Development objectives of Chinese information industry in 2006Macro development objective of Chinese information industry in 2006 was that the added value would reach 1,570billion yuan, including 470 billion yuan in communication sector, 1,100 billion yuan in electronic information sector, 1,500billion yuan of total communication service amount (increasing by 24%), and 700 billion yuan of communication servicerevenue (increasing by 10% or so). The number of new fixed line users will be 30 million, and the number of new mobilesubscribers will be 480 million. Fixed main line popularization rate will reach 29% and mobile phone popularization rate willreach 34%. Fixed asset investment will be about 200 billion yuan. The sales revenue of electronic information industry willbe 4,660 billion yuan, increasing by 21.3%. The sales revenue of software and system integration will be 500 billion yuan,increasing by 28.2%. The total profit and tax will be 185 billion yuan, increasing by 6.2%. Export amount will increase by15%.VI. Chinese information industry development during the Tenth Five-year Plan(2001-2005) periodSince of start of the Tenth Five-year Plan period, information industry departments in China implemented policies andguidelines of the state, and worked hard in expediting industrial development, deepening system reform, promotingindependent innovation capacity, developing communication facilities in rural areas, strengthening market control, boostinginformatization, and guaranteeing network and information security. Development objectives of the Tenth Five-year Planhave been achieved with flying colours, and information industry contributed a lot to Chinese social and economicdevelopment. During the Tenth Five-year Plan period, the growth rates of Chinese communication service amount and salesrevenue were 27.6% and 13.4%. The average annual number of new phone users was 100 million. The number of fixed lineusers and the number of mobile phone subscribers jumped to the first place in the world, and the number of netizens was atthe second place. In the five years, the fixed asset investment was 1,000 billion yuan, and the raised fund of telecomenterprises listed in overseas markets was US$25.25B. The average annual growth rate of sales revenue of enterprises abovethe designated size was 27.3%, the industrial size expanded by 2.3 times within five years, and the average annual growthrate of total profit and tax was 12.4%. Meantime, the average growth rate of software sector was over 40%, and the sizeincreased by four times. The proportion of software sector in the whole electronic information industry increased from 6.3%in 2001 to 11.2% in 2005. The average annual export growth rate of electronic information products was as high as 35.3%,and the total absorbed foreign investment was US$100B. During this period, the state promulgated 368 national standards·11·

China Business Guideand 647 industrial standards, and the total number of patent applications was 228,000. The state carried out 2,545 projects ofMultiple Plan in information technology dissemination and application, and the investment amount was 62.57 billion yuan.Over the past five years, great successes have been made in some fields. The competitive pattern in the telecom markettook its shape, and telecom regulation systems at provincial and ministry levels have been established. Achievements havebeen made in the Phone to Village Project, and 97.1% of administrative villages in the country were covered with phonenetwork. Telecom charge marketization reform was substantially improved, and consumers benefited from the reform. 3Gtechnology R&D and industrialization and network technology experiment were strengthened, laying a solid foundation forfuture development. The state has issued industrial policies and independent innovation capacity was promoted. Export ofelectronic information products increased fast, accounting for over 1/3 in the total export amount in China. Chinese enterpriseendeavoured to develop international market and brought their international competitiveness to another level.VII. Chinese information industry development objectives during the EleventhFive-year Plan period (2006-2010)Major objectives of Chinese information industry development objectives during the Eleventh Five-year Plan period areas follows. By 2010, the information industrial added value is 2,260 billion yuan, accounting for 10% in the GDP, including1,600 billion yuan of electronic information sector, 604 billion yuan of telecom sector, and 56 billion yuan of post sector. Thesales revenue of electronic information sector will reach 7,000 billion yuan, including 1,000 billion yuan of software andsystem integration. The proportion of electronic product export in the total export amount in the state remains at about 35%.The sales revenue of telecom sector will be 915 billion yuan, increasing by 10% on a y-o-y basis. The sales revenue of postservice will be 82 billion yuan, increasing by 8% on a y-o-y basis. The total number of phone users reach one billion, and thenumber of netizens reach 200 million. Phone service and Internet service will be available to every village and every country.At the same time, innovation capacity, competitiveness and coordinated development will be boosted.During the Eleventh Five-year Plan period, main tasks of developing the information industry consist of maintaining thehealthy, fast and orderly development trend in the whole industry, promoting Chinese position in global industrial pattern,boosting technical innovation system building with enterprises as the main body, combining introducing and going global,driving international cooperation in a wider field and in a deeper level, improving industrial management and marketregulation system, enhancing legal system building, establishing an industrial policy system that benefits the industry,improving communication service quality, strengthening the application of information technologies, and pushing upinformatization building.·12·

Electronics & InformationChapter II Development outlines of Chinese electronic informationindustry in 2006I. OverviewThe year of 2006 was the first year of the Eleventh Five-year Plan period. Chinese information industry focused onrestructuring, independent innovation and functional transfer. The industry developed in a rapid, balanced and healthy way.The start of the Eleventh Five-year Plan was favourable. Communication sector transfer witnessed positive effects. Electronicinformation industry maintained fast and stable development mode. Independent innovation capacity was promoted.Industrial management and market regulation was further strengthened. Informatization work was deepened. Notableprogresses were made in foreign communication and cooperation, governmental function transfer, administration accordingto law, and team building.In 2006, the increment value of electronic information industry was 1,560 billion yuan, accounting for 7.5% in GDP.The increment of electronic information industry was 1,100 billion yuan, and communication industry 464.2 billion yuan.The sales revenue of electronic information industry was 4,750 billion yuan, and the export and import amount of electronicinformation products was US$651.7B, accounting for 37% in total Chinese foreign trade amount. The number of fixed lineusers in China was 368 million, and mobile phone subscribers 461 million. The total number of phone subscribers was 830million. The communication network size and the number of subscribers remained at the first place in the world. The numberof netizens reached 137 million and ranked at the second place.II. Communication industry developmentIn 2006, the total communication service amount was 1,530 billion yuan, increasing by 25.6%. The amount for telecomsector was 1,460 billion yuan, increasing by 26.1%, and post sector 72.9 billion yuan, increasing by 16.9%. The sales revenueof communication services was 712.1 billion yuan, increasing by 11.6%. The sales revenue of telecom sector was 648.4billion yuan, and post 63.7 billion yuan. The increment value of communication services was 464.2 billion yuan, and thefixed asset investment in communication services was 222.7 billion yuan.(I)Telecom development1. Telecom industry continued rapid development and speeded up industrial transferIn 2006, the total telecom service amount was 1,460 billion yuan, increasing by 26.1% than 2005. The income growthwas stable in telecom industry. The service income in 2006 was 648.4 billion yuan, increasing by 11.7% than 2005,accounting for 3.1% in the total GDP. The added value of telecom sector was 383.1 billion yuan, accounting for 1.8 % in thetotal GDP.In 2006, major telecom service amounts continued growing largely. The number of local calls and calls between localnetworks was 679.57 billion, decreasing by 3.6%. The calling time of fixed line domestic toll phone was 97.2 billion minutes,increasing by 8.8%. The calling time of mobile phone was 1686.7 billion minutes, increasing by 34.7%, where the callingtime of mobile toll call was 97.8 billion minutes, increasing by 37%. The calling time of IP phone was 148.9 billion minutes,increasing by 10.7%. The number of mobile short messages was 429.7 billion, increasing by 41%.Telecom operators innovated in technology, service and management, and expedited the transfer to an informationservice sector. Innovation in value added services was vivid, and the number of enterprises and the number of practitionersconstantly increased. The growth rate of service sales revenue was dramatically higher than that of basic telecom service. In·13·

China Business Guide2006, the revenue of non-voice service increased by 34.2%, and the proportion in the total service revenue increased from22% in 2005 to 26% in 2006. In terms of fixed line services, the sales revenue of broadband access increased by 25% than2005, accounting for over a half in the total revenue increment of fixed line services. Broadband service has become the mostimportant drive of fixed line services. Value added service revenue of basic operators reached 100 billion yuan, increasing byover 40% than 2005, and value added service developed most rapidly. Mobile value added services contributed more than25% to operators. Traditional SMS revenue remained a high growth rate. The growth rates of new value added services, suchas CRBT and WAP, were almost 100%.Figure 1. Telecom revenue structure of 2006Toll callnetwork serviceincome 17.42%Datacommunicationnetwork serviceincome 7.92%Other income0.1%Mobilecommunicationnetwork serviceincome 47.26%Fixed localline networkservice income27.29%2. Telecom subscriber number continued growing and the transfer of voice serve to mobile modebecame obviousIn 2006, the total number of telecom subscribers continued growing. The total number of phone users in China reached800 million, and the number of mobile users reached 400 million. The number of new phone users was 85.04 million, and thetotal number reached 830 million. The number of new fixed line users was 17.37 million, and the total number hit 368million. The number of new PHS users was 5.83 million, and the total number increased to 91.13 million. The number of newmobile users was 67.68 million, and the total number reached 461 million. The proportion of mobile voice service revenuewent on rising. This proportion was 56.4% in 2006, increasing by nearly 3% tan 2005. The proportion of fixed line servicerevenue decreased from 46.2% in 2005 to 43.6% in 2006.3. Telecom network size kept expanding and new technologies were widely usedIn 2006, the length of newly built optic fibre cable was 186,000 km, and the total optic fibre cable length reached4,259,000 km. The length of new optic fibre core was 12,968,000 km, and the total length was 88,934,000. The increment offixed toll call switch capacity was 769,000 channels, and the total number reached 14,485,000 channels. The increment oflocal switch capacity was 30,665,000 sets, and the total number reached 502,626,000 sets, where the capacity increment ofreceiving network equipment was 23,414,000 sets, and the total number reached 234,622,000 sets. The capacity increment ofmobile phone switch was 128,181,000 sets, and the total number was 610,599,000 sets. The number of new Internetbroadband access ends among basic telecom operators was 16,067,000, and the total number hit 64,814,000.As the network enlarged, telecom technologies were also widely used. NGN soft switch technology was commercializedin both long distance service and local service in all over the country, and IMS technology was being tested on schedule.Depending on IP dual networks, unified network platform, and other technological concepts and schemes, QoS andsecurity problem of IP carrying network has been partially solved. ASON has been commercialized in inter-city field andprovincial major field. Broadband access has been expedited through ADSL2+ and VDSL, and FTTx was also put into use ina small scale. Operation supporting technologies were also innovated. TD-SCDMA technology was being tested smoothly,and stage outcomes have been made to support 3G development in the future.4. Investment amount started to rebound and investment return gradually increasedIn 2006, fixed asset investment in telecom sector was 218.7 billion yuan, increasing by 7.5%. Fixed communicationenterprises investment decreased by 6.3%, but mobile communication enterprise investment increased by 19.6%.·14·

Electronics & InformationTelecom operators focused on different investment fields according to service and network development demand.Mobile communication operators concentrated on network expansion and auxiliary equipment optimization to meet thedemand of drastic increment of users and voice service amount. The number of new 2M circuits of mobile toll call servicewas 252,000, and the number of new mobile phone switches was 128,181,000 sets, increasing largely than 2005. Fixed linecommunication operators focused on network access, and invested far less in PSTN and PHS network. In 2006, the numberof new Internet broadband users was 16,067,000, while the number was 12,578,000 in 2005. The number of new 2M circuitsof fixed toll call service was 26,000, which was about 1/3 of the increment of 2005. The number of new local switches was30,665 sets, which was about 2/3 of the increment of 2005. In addition, fixed line communication operators invested more infixed network intelligentization alteration, introduction of soft switch devices, and IP inter-city network optimization tofacilitate the transfer.The investment return of the whole industry rose year by year. The ROI decreased from 41.2% in 2004 and 35.1% in2005 to 33.7% in 2006. The total profit of six basic telecom operators was 134.7 billion yuan, increasing by 16.3% than 2005,which was higher than the income growth rate.5. Informatization work was boosted in rural areas to support countryside buildingThe Phone to Village Project was continued in 2006, and the informatization was promoted in rural areas. The numberof administrative villages that were just connected to the phone network in 2006 was 13,740, and was higher than theobjective designed in early 2006. The proportion of administrative villages covered by phone network increased from 97.1%in 2005 to 98.9% in 2006. In 24 provinces, autonomous regions and municipalities directly under the central government, alladministrative villages have been covered with phone network. Telecom service quality has been promoted.As the Phone to Village Project was carried out, telecom operators also established various information serviceplatforms in rural areas to promote value added services and Internet services, and integrate technical, supply and demand,and educational resources in relation to new countryside construction based on service sub-branches and informatizationworkstations in rural areas. Telecom operators made use of fixed line phones, mobile phones, short messages, messagedevices, and broadband access to develop political, productive and market information in connection with agriculture,countryside and farmers, which promoted informatization in rural areas. In Jiangxi and Hubei provinces, broadband accesswas available to every county, and the number of agriculture-related websites was over 6,000. Telecom operators providedfarmers with agriculture-related information and multiple information services, and contributed to new countrysideconstruction.6. Telecom service quality has been promoted and telecom charge reduced as a wholeIn 2006, telecom services were further spread in China. The phone coverage rate reached 63.4 phones per 100 people,increasing by 6.1% than 2005. The fixed line coverage rate was 28.1 phones per 100 people, increasing by 1.1%, and themobile phone coverage rate was 35.3 phones per 100 people, increasing by 5%.Basic telecom service market became more standard and orderly, network operation and convergence went smoothly,communication quality was stably raised, marketing flow was further improved, telecom service protocols were standardized,and customer satisfaction largely increased. Service quality of value added telecom services was dramatically promoted,management of information services was normalized, supervision and management system of information services wasimproved, customer complaints were solved, the number of complaints on charge and SMS was reduced, protective measuresfor users’ rights and interests were specified and implemented, the service quality of value added telecom market was rapidlypromoted.In 2006, Chinese general telecom charge reduced by 11.3% than that at the end of 2005. Unbalanced telecom chargingstandard in different places was changed. Mobile phone charges in high-level charging standard areas, including Beijing andShanghai, remarkably dropped. Competent authorities carried through more flexible charging standards in rural areas andissued policies on reducing inter-region telecom charge. Telecom operators have provided various charging packages thatwere suitable for local practice in rural areas.7. The Internet scale expanded stably and network capacity constantly rose·15·

China Business GuideThe number of Chinese netizens was 137 million in 2006, and the Internet popularization rate was 10.5%. The numberof broadband users was 90.7 million, with the annual growth rate of 41.1%. Broadband netizens accounted for 65.7% in thetotal netizens. The number of mobile online service users was 17 million, which came to a certain scale. China had 4.1million domain names, and the number of state CN domain names hit 1.8 million, jumping to the fourth place in the list ofglobal state top-level domain name. China had 4.47 web pages, 122TB page bytes, 843,000 websites, and 98,016,000 IPaddresses.Chinese Internet trunk units were scaled up, network structure became flat, network coverage rate increased, optic fibreextended to user locations, and network capacity was promoted. In 2006, the total amount of international outlet broadbandwas 256.7G, and the number of ISPs was over 13,000. Chinese electronic administration, enterprise information ande-commerce have been advanced. Notable progresses have been made in rural information household building. Over 96%counties and towns could access to the Internet.(II)Operation of Chinese fundamental telecom enterprises in 20061. China Telecommunications CorporationIn 2006, the revenue of major services of China Telecom was 173.2 billion yuan, increasing by 5.3%. The subscribernumber increment was 14 million, and the total number reached 228 million. The broadband user number increment was 8.05million, and the total number reached 30 million, increasing by 36.7%. The proportion of non-voice service income in therevenue of major services was 29.7%.China Telecom determined the operation strategy of deepening service transfer and implementing customer brand. Thecompany launched Biz Navigator and One Home brands, and succeeded in comprehensive information services, includingBest Tone service and enterprise informatization applications.The first six provincial industrial companies under China Telecom were listed in HKSE on December 8, 2006, and theraised fund was HK$3.26B.China Telecom was specified as the communication partner of World EXPO Shanghai 2010 in 2006.2. China Network Communications Group CorporationIn 2006, the service revenue of China Netcom was 96.9 billion yuan, and the profit was 9.6 billion yuan. The fixed linesubscriber number increment was 1.57 million, and the total number reached 121 million. The PHS subscriber numberincrement was 760,000, and the total number reached 29.59 million. The broadband user number increment was 4.34 million,and the total number reached 16.39 million.China Netcom boosted system innovation, operation innovation, technological innovation and service innovation, andmade substantial progress in innovation. The company actively carried out combination product market strategy, launchedAffection 1+, Popular Call and Sun Master services, spread CNC Connected, CNC View, and 114 services, and opened thefirst all-video website CNCMAX in China.3. China Mobile Communications CorporationIn 2006, the revenue of major services of China Mobile was 286.3 billion yuan, increasing by 21.4% than 2005. Thetotal profit was 97.8 billion yuan, increasing by 23.5% than 2005. The subscriber increment remained at a high level. Thesubscriber number increment was 53 million, and the total number reached 317 million. China Mobile ranked at the firstplace in network scale and number of subscribers in the world, and its market value rose to the first place among all telecomoperators in the world in 2006.China Mobile continued its approach to a mobile information expert in 2006 through active product innovation andservice marketing, and the revenue proportion of value added services continued going up. Nong Xin Tong, Weather Report,Xiao Xin Tong and e-Bank services have been widely spread.China Mobile was specified as the communication partner of World EXPO Shanghai 2010 in 2006.4. China United Telecommunications CorporationIn 2006, the mobile subscriber number increment was 14,890,000, and the total number reached 144 million. The totalGSM subscriber number was 107 million, and the total CDMA subscriber number was 37,300,000. The revenue of major·16·

Electronics & Informationservices stably grew. The revenue of major services hit 82.1 billion yuan in 2006, increasing by 5.7% than 2005. The profitexceeded 4.1 billion yuan.China Unicom promoted brand marketing in 2006, focusing on Shijiefeng, U-power, Ruyitong and Xinshikong brands.The company succeeded in independent innovation. CDMA/GSM dual-network dual-standby terminal technology wasawarded the first prize of technological progress by China Institute of Communications.China Unicom won the bid of 3G licence in Macao in 2006, issued US$1B transferable bonds to Korean SK Telecom,and signed a strategic ally frame agreement with the company.5. China Satellite Communications CorporationIn 2006, China Satcom promoted satellite communication broadcasting capacity. Zhongxing 6B and Zhongxing No. 9satellite projects went smoothly, Beijing gateway station of satellite broadband service was completed, satellitecommunication broadcasting market was further developed, and more services were launched. Ground networkcommunication service was promoted, and the key point of digital trunking service has changed to market development stage.The company actively carried out satellite navigation and positioning service and e-map geographical information service,and the high-end e-map database was available to over 200 cities in China, accounting for 75% in Chinese auto navigationmarket. The market share of personal mobile navigation based on mobile/PDA reached 50%.6. China TieTong Telecommunications CorporationIn 2006, the total telecom service amount of China Tietong was 20.2 billion yuan, increasing by 18.9% than 2005. Thesales revenue was 15.5 billion yuan, increasing by 13%. The fixed asset investment was 8.6 billion yuan, and the profitincreased by 52% than 2005.China Tietong implemented the development strategy of combining dedicated network with regionalization in 2006. Thecompany made use of rail transport dedicated communication network, consolidated market share in relatively developedareas, and stepped up characteristic services with low investment, short return period and high added value.(III)Post service developmentIn 2006, the total amount of post industry was 72.9 billion yuan, increasing by 16.9% than 2005. The total revenue ofpost services was 63.7 billion yuan, increasing by 10.5% than 2005.1. Post service kept stable growthLetter service was further restructured and scaled up. The total number of letters was 7.13 billion, and the revenue ofbusiness letters increased by 22.3% than 2005. In 2006, the total number of ordered and sold newspapers and periodicals was16.39 billion. Philately service continued developing in a healthy way. The sales amount of philately stamps was 1.05 billion,and philately brochures 26,899,000.New modes have been created in agency and information services, and national SMS platform was used as a key todevelop information value-added services and new e-commerce services. The revenue of agency and information servicesincreased by 11.6% than 2005.In 2006, the service amount was 270 pieces in 2005, increasing by 18% than 2005. The sales revenue of logistic serviceincreased by 15.9% than last year, and the revenue of distribution and mail order service increased by 49.5% than last year.The balance of post saving was 1,601.96 billion yuan at the end of 2006, increasing by 17.8% on a y-o-y basis. Currentdeposit balance accounted for 33.7% in the total saving balance. The saving revenue increased by 11.2% than 2005.2. Post communication network capacity was promotedThe post communication network was further integrated and optimized in 2006. China Post had 11 special posttransporters, three post boats, 399 post train compartments, 54,000 post vehicles, and 21,000 post routes (including 1,040 airroutes, 163 railway routes, and 15,000 road routes). The total length of post route (one-way route) was 3,369,000km. Therewere 98,000 post routes in rural areas and 50,000 post segment roads in urban areas.3. Post service quality was promoted·17·

China Business GuideIn 2006, there were 63,000 post offices and agents in all over the country, including 44,000 offices located in rural areas.There were 33,000 informatized offices, 44,000 post newspaper, magazine, and book booths, 15,000 philately booths, and36,000 post saving offices. There were 533,000 post box groups, and 42,870,000 post delivery points.III. Electronic information industry development1. Major economic objectives for the industry accomplishedIn 2006, the sales revenue of Chinese electronic information industry was 4,750 billion yuan, increasing by 23.6% than2005. The revenue of software and system integration was 480.1 billion yuan, increasing by 22.9% than 2005. The industrialadded value was 1,100 billion yuan, increasing by 22.1% than 2005. The profit and tax was 259.8 billion yuan, increasing by32.3% than 2005. The export and import amount was US$651.7B, accounting for 37% of the total foreign trade amount ofChina. Comprehensive competitiveness of major enterprises was promoted. There were 10 enterprises with the sales revenueover 20 billion yuan, and there were two enterprises with the sales revenue over 100 billion yuan. Industrial restructuring wasspeeded up, software outsourcing service developed fast, IC design capability was improved, new economic growth pointsemerged, such as flat panel display, and communication products, computers, and new-generation electronic consumablesdrove the industry. The building of national electronic information production bases and parks was stably pushed up, andindustrial aggregation and impulse effect became obvious.Table 1 Production of major electronic information products in 2006Product Unit Output Increase compared with 2004(%)Mobile phonesProgramme control switchesMobile base stationsColour TV setsMicrocomputersICDigital cameras10,000 sets10,000 lines10,000 channels10,000 sets10,000 sets100M blocks10,000 sets48,0147,4051,1458,3759,3363366,69558.2-4.158.01.115.526.321.22. The industry grew rapidly and stably and operation quality was constantly improvedIn 2006, Chinese electronic information industry added value accounted for 5.25% in the GDP, increasing by 0.31%than 2005, and contributed over 7% to GDP growth. The added value accounted for more than 10% in Chinese industrialadded value, and contributed over 15% to Chinese industrial added value. The average monthly growth rates of sales revenueand added value of electronic information enterprises at above designated size were over 24%, higher than that in 2005. Thegeneral development trend was stable, and the monthly growth rate fluctuation was within 3%. The manufacturing was in theleading position in the whole industry in China. The growth rate of average monthly added value was 8% higher than that ofthe whole industry in China. The production connected well to the sale. The ratios of production to sale of mobile phones,computers and colour TV sets were all over 98%. The proportion of high-end products went up. Laptops accounted for 63%in microcomputers, and flat panel TV sets accounted for 12% in colour TV sets, increasing by 3% and 4% than 2005respectively.3. Restructuring was deepened and communication and accessory sector developed rapidlyInformation technology updated faster, industrial structure was increasingly upgraded, and communication equipmentand accessory sector developed rapidly. Thanks to entire-machine transfer and upgrade, the market demand of new-type partsand accessories was enormously driven. The production and profit growth rates of accessory sector were over 25% in 2006,and IC sector went to a new rapid development phase. Telecom operation networks were upgraded, and the state investedmore in telecom facilities in rural areas. As a result, telecom equipment sector developed fast, and the growth rates of salesrevenue and profit were as high as over 30%, which was higher than the average level of the whole industry. Due totechnological upgrade, household electric appliance sector developed relatively slowly, and the growth rate of revenue andprofit was largely lower than the average level of the whole industry.4. Foreign trade hit high volume and industrial internationalization was advanced·18·

Electronics & InformationIn 2006, the export and import amount of Chinese electronic information industry was US$651.7B, accounting for 37%in total Chinese foreign trade amount. The export amount was US$364B with the growth rate of 35.7%, accounting for 37.6%in total Chinese export amount. The import amount was US$287.7B, increasing by 30.5% and accounting for 36.3% in totalChinese import amount. China accounted for over 15% in global electronic information product export and import amount.Many products were at the top in the world, mobile phone accounting for 47%, including computer accounting for 40%, andcolour TV set accounting for 48%.Figure 2 Proportions of electronic products in the whole industry (%)ElectronicElectronicspecial devicesinformation1.91%electromechanical products5.73%Electronicmeasurementinstrument0.78%Other products0.90%Radars 0.31%Broadcastingand TVequipment 0.60%Householdvideo-audioproducts 10.22%Computers32.74%Electronicappliances10.97%Electronicaccessories16.81%Communicationequipment19.03%Chinese electronic information industry internationalization was increasingly advanced in 2006. The sales revenue,industrial added value and profit of foreign-invested enterprises accounted for 79%, 79% and 76% among manufacturersabove the designated size. Processing export made it possible for foreign-invested companies to expand. The export amountof these enterprises accounted for over 4/5 in the whole industry, so the foreign trade dependency of the whole industry hitover 50%. Multinational companies invested more in China, and localization and R&D transfer trend became evident.Upstream and downstream industries pushed each other and started to transfer to China. Local enterprises mendedinternational market development. International M&As accomplished by some Chinese large-size enterprises started topresent positive effects.5. Enterprises expanded and industry cluster effect increasedThe taking of the 21st top 100 electronic information manufacturers was 1,120 billion yuan, increasing by 16.9% thanthe taking of the 20th top 100 ones and accounting for 23.7% in the total amount in the industry. The profit of thesemanufacturers was 22.3 billion yuan, and the tax was over 35 billion yuan. Export delivery value increased by over 21%.Among the 21st top 100 electronic information manufacturers, 25 companies realized takings of over 10 billion yuan, whilethe number was 22 among the 20th top 100 ones. The takings of Legend and Haier were over 100 billion yuan, and thetakings of Huawei, BOE Co., Ltd and Midea Group were over 50 billion yuan.The lowest standard of the 21st top 100 electronic information manufacturers was 1.87 billion yuan, increasing by 27%than 1.47 billion yuan of the last top 100 ones. The order of the top 100 enterprises was dynamic. Ten companies were listedfor the first time and ten companies were excluded due to restructuring or low growth rate.The development of the 21st top 100 companies was characterized by the following points:The general scale continued expanding, and enterprise economy concentration was further heightened. In 2006, the salesvolume of colour TV sets was 71.24 million sets among the 100 companies, accounting for 85.1% in the whole industry. Thesales volume of programme control switches was 23 million sets, accounting for 31.1% in the whole industry. The salesvolume of computers was 25.88 million sets, accounting for 27.7% in the whole industry. The sales volume of mobile phoneswas 64.27 million sets, accounting for 13.4% in the whole industry. The total taking of the top 10 companies in thesecompanies was 603.5 yuan, accounting for 47.7% in the total taking of the 100 companies.·19·

China Business GuideThe investment in R&D increased and independent innovation capability was promoted. High-volume R&D investmentled to success in core technologies among the top 100 companies. As independent intellectual property was accumulated, thegrowth rate and amount of patent application in information technology field in China exceeded the growth rate and amountin foreign countries.Structural adjustment was promoted and basic core products were developed fast. The enterprises developedtechnologies of next generation network, new generation mobile communication, digital TV, informatized householdelectrical appliances, IC, software and new-type displays, optimized product structure, and explored new economic growthpoints.Enterprises in diverse sectors of the economy developed simultaneously, and the power of private companies increased.In terms of equity structure, the number of solely state-owned enterprises reduced, and the number of collective and privatecompanies increased. Economic sector diversity drove the top 100 companies.6. Market competition became increasingly furious and industrial pattern was further tunedIn 2006, foreign-invested enterprises stressed on low-end market, challenged the cost and market advantage of localenterprises, and expanded their market shares.Upgraded competition in part and accessory sector had a heavy effect on whole-set sector. For example, more furiouscompetition in chip and LCD panel sector largely decreased the price of whole set. This indicated that a competitive patternbased on an industrial chain was taking its shape.Service providers and channel dealers challenged manufacturers. Telecom operators concentrated on customizationservice, large-size channel dealers entered manufacturing field, and some outsource-oriented factories started to develop theirown brands. This will lead to a reshuffle in the industrial pattern.The competition between states and between regions became drastic. Neighbouring regions increasingly stressed ondeveloping electronic information industry, and increasingly showed their advantages in market and labour force.International industrial transfer and multinational investment started to diverge.7. Software sector developmentIn 2006, the sales revenue of software industry was 480.1 billion yuan, increasing by 22.9% than 2005. The added valuewas 183.8 billion yuan, increasing by 22%. The number of practitioners reached 1.29 million.The industrial structure was optimized. The growth rate of software service and system integration exceeded that ofsoftware products, and the proportion of software service and system integration in the total revenue in software andinformation service industry rose year by year. The sales income of software service and system integration was 238.4 billionyuan in 2006, accounting for 49.6% in the total sales income in software and information service industry. Under thefinancial support supplied by the state, enterprises and other entities invested more in R&D and made progresses in operatingsystem, database, middleware, Chinese language office software, and information security software.There were almost 100 software companies with more than 1,000 employees in 2006, 62 companies with more than onebillion yuan of software sales income, and 594 companies with more than 100 million yuan of software sales income. Thenumber of key software companies planned by the state was 152, including 69 companies with more than 100 million yuan.By the end of 2006, 448 companies have passed CMM/CMM12~5 appraisal and 38 companies have passed CMM5/CMM15appraisal.In 2006, software industry scale of five provinces and municipalities in China was over 30 billion yuan, and they wereBeijing, Guangdong, Shanghai, Jiangsu and Zhejiang. The total scale was 308.8 billion yuan, accounting for 64.3% in thetotal scale of China.Software and information service outsourcing sector developed fast and became a new economic growth point insoftware and information service industry. In 2006, Chinese software export was over US$6B, and the income of softwareand information service outsourcing was over US$2B. Embedded software was more widely used. The total production valueof embedded software reached 102.8 billion yuan in 2006, and the revenue of embedded software accounted for 21.4% in therevenue of the whole software and information service industry.·20·

Electronics & InformationThe sales revenue of Chinese e-game market was 6.54 billion yuan in 2006, increasing by 73.5% than 2005. The directincome that e-game sector brought to relevant sectors was 33.32 billion yuan, which was 5.1 times of e-game market size.Independently developed Chinese online games showed strong competition potentials, and the market size reached 4.24billion yuan.The outcome of the education with record of formal schooling for software professionals was noticeable. In 2006,29,000 postgraduates in software and relevant majors left universities and colleges, and 72,000 graduates and junior collegestudents left school. There were 35 demonstration software schools and 35 demonstration software vocational schools.The Ministry of Information Industry formulated the Software Company Certification Standard and Management Rules,Software Product Management Rules, and supportive regulations with relevant authorities in 2006. Software property rightdeals were standardized, genuine software work was enhanced, the strike on software piracy was enhanced, and marketenvironment for software industry development was improved.IV. Industrial management in information industry1. Governmental functions were further transferred and policies and regulations were furtherimprovedThe Ministry of Information Industry played governmental roles in an all-round way in 2006 and made achievements inthe transformation of governmental functions, administration according to law, and team building. The Ministry promoteddrafting the Telecom Law and revising the Post Law and Radio Management Regulations, and issued some regulations,including the Management Rules on Pollution Control of Electronic Information Products. Meantime, the Ministry initiatedthe research and formulation of the Development Regulations on Software and IC Industry, formulated schemes on advancingadministrative law enforcement responsibility system, enhanced policy making, information release and administrationpublicizing, implemented post system reform, continued carrying out CEPA and industrial cooperation between Chinesemainland and Hong Kong, Macao and Taiwan, and successfully held the second and third technical standard forums ofinformation industry across the straits.2. Market regulation, social management and public service were enhanced to promoteindustrial transferThe state reinforced to plan and guide industrial development, and formulated the industrial plan, functional plan andregional plan during the Eleventh Five-year Plan period. Telecom regulatory authorities insisted on the concept of puttingpeople first and regulating for the public and the requirement of maximizing social benefit, safeguarded legal rights andinterests of consumers, worked hard to create new management modes, carried out various activities, such as SmoothNetwork and Sincere Service, and Sunshine Green Network Project, and made achievements in network convergence andnetwork and information security management. Competent authorities solved frequently complained problems, includingmobile information service and junk mails, boosted the reform of telecom charging management mode, guided enterprises toreduce relatively high mobile service charge and inter-region calling charge in some areas, strengthened the supervision onconstruction project management and quality, improved telecom construction market order, revised and issued the FrequencySegmentation Regulation, enhanced station management, carried out special campaigns in striking software piracy andrectifying mobile phone market order with relevant departments, intensified the management on tax-control gatheringmachine and other products, neatened and normalized electronic information product industry, and intensified safe productionsupervision and management.3. State innovation strategy was implemented and technological progress was madeIn 2006, the Ministry of Information Industry held the National Technological Innovation Conference of InformationIndustry, promulgated the Outlines of the Eleventh Five-year Plan and Medium and Long-term Plan for 2020 ofTechnological Development in Information Industry, initiated the implementation scheme formulation of key technologicalprojects, such as the new-generation broadband wireless mobile communication, set up a number of software and IC publicservice platforms, and brought the function of industrial allies on R&D and fruit industrialization into play. Technologies and·21·

China Business Guideproducts with independent intellectual property emerged in IC, software, digital TV, digital trunking, optical communication,and information security. Operators established R&D centres and invested more in R&D, and improved the innovationmechanism. New fruits were produced in standard and intellectual property field, 284 industrial standards were released in2006, and 49 of them were approved national standards.4. National informatization development strategy was implemented and social informatizationbuilding was boostedThe National Informatization Development Strategy was carried through industry wide in 2006, key informatizationprojects were pushed up under the support of relevant departments, and the work on electronic administration, e-commerce,and enterprise and city informatization was reinforced. The Electronic Signature Law was implemented, electroniccertification service was improved, and network credit system was further built stably. The formulation of the InformationTechnology Application Regulations was initiated, and the multiple plan of information technology dissemination wasfulfilled. The Opinions on the participation of the Information Industry in Building a New Socialist Countryside were studiedand proposed, and initial outcomes were made in trial comprehensive information service in rural informatization. Thesupervision on information system engineering was enhanced, and the pilot project of modern long-distance education forcadres in rural areas was promoted.5. International cooperation and exchangesInternational cooperation and exchange was strengthened, Chinese enterprises developed the international market in awider scope, and foreign capital was more effectively utilized. China modulated the export tax rebate of some electronicproducts, did a good job during the transition period after China’s access to the WTO, and took part in negotiations betweenChina and free trade zones of related countries and regions. Cooperation between China and the US, Russia, ASEAN, andJapan-Korea were enhanced. The candidate for ITU deputy general secretary recommended by China was elected, and Chinacontinued to act as a trustee state in ITU. ITU Telecom World 2006 was successfully hosted in Hong Kong under the supportof relevant parties.A number of international information communication conferences were held in China in 2006, and many cooperationagreements were signed between national governments and between competent departments under national governments.Relevant bodies also took part in or organized a series of activities of Russian Year.V. Development objectives of information industry in 20071. Macro control objectives in information industry in 2007The added value reaches 1,860 billion yuan, including 530 billion yuan in communication sector, 1,330 billion yuan inelectronic information sector. The total communication service amount reaches 1,870 billion yuan (increasing by 23%), andthe revenue of non-voice services accounts for 30%. The number of new fixed line users and mobile subscribers will be 70million, and the total number reaches 900 million. The popularization rates are 29% and 39.4% respectively. Fixed assetinvestment will be over 200 billion yuan. The sales revenue of major services in electronic information industry will be 5,800billion yuan, increasing by 22%. The sales amount of software and system integration will be 580 billion yuan, increasingby 21%. The total profit and tax will be 280 billion yuan, increasing by 7%. Export amount will reach US$400B, increasingby 10%.2. Major tasks in 2007The scientific outlook on development shall be implemented in an all-round way, the structure, scale and quality shall bestressed at the same time, and the industrial increase mode shall be transferred to an intensive mode. The technology, serviceand market shall be closely combined with each other, and independent innovation capacity shall be promoted. The principleof putting people first and regulating for the public shall be insisted on, harmonious development in both rural and urbanareas shall be boosted, and hot issues shall be taken as key problems to be solved. Administration according to law shall bepersisted in, government functions shall be further transformed, system and mechanism reform shall be deepened, telecomand electronic industries shall be energetically advanced, and rapid and healthy development shall be realized.·22·

Electronics & InformationThe following aspects shall be reinforced in 2007:1. Strengthen and improve macro guiding and boost functional transfer and administration according to law;2. Push restructuring and upgrade in electronic industry;3. Expedite telecom sector development and industrial transfer;4. Improve technological innovation capacity in information industry;5. Reinforce and standardize market management;6. Provide communication service and support for the building of a new socialist countryside;7. Expedite product export and international cooperation and exchange;8. Promote network and information security management;9. Step up informatization and information technology application.·23·

China Business GuideChapter III Chinese electronic information industry development andpotential analysisThis chapter analyzes the development of key fields in Chinese electronic information industry from 2001 to 2005. Theanalysis includes household electrical appliances, but it excludes white goods.Section I Review of electronic information industry during the Tenth Five-year PlanperiodI. Industrial development during the Tenth Five-year Plan periodThe Tenth Five-year Plan period of China is from 2001 to 2005.During the Tenth Five-year Plan period, Chinese electronic information industry developed fast, and China became animportant electronic information product manufacturing base in the world. Initial achievements have been made in industrialrestructuring, significant achievements have been made in some key fields, and core basic sectors, such as software and IC,developed rapidly. Industrial agglomeration effect became obvious, and continued advancing national economy. Electronicinformation industry has become the largest industry and largest export industry in Chinese industrial development.1. Major economic objectives were reached in advanceFrom 2000 to 2005, the sales revenue increased from 607 billion yuan to 3,840 billion yuan, industrial added value grewfrom 133 billion yuan to 900 billion yuan, accounting for 4.94% in the GDP, the export amount mounted from US$55B toUS$268B, accounting for 35% in the total export amount in China, and the contractual foreign investment amount was aboutUS100B. See Figure 1 for Chinese electronic information industry scale from 2001 to 2005.Unit: 100 million yuan38400400002655030000200001188514000188801000002001 2002 2003 2004 2005Figure 1 Chinese electronic information industry scale from 2001 to 20052. Turnout and sales volume of major products were among the top in the worldIn 2005, China produced 303 million mobile phones, 81 million PCs, 82.83 million colour TV sets, 86.17 million colourkinescopes, and 34 billion IC blocks. The turnout of colour TV, colour kinescope, PBX and mobile phone was at the firstplace in the world, and the turnout of computer, printer and CD-drive were among the top in the world. The display turnoutmanufactured within Chinese territory accounted for 50% of the total output in the world, mobile phone turnout accountedfor 31% in the world, colour TV set turnout accounted for 43%, laser disc drive turnout accounted for 80%, and laptopturnout accounted for 40%.3. The industry plays a more important role in national economyThe proportion of added value of Chinese electronic information industry in the total GDP increased from 1.6% at theend of the Ninth Five-year Plan period to 4.94% in 2005. Chinese electronic information industry contributed 8.8% to GDPgrowth, and the driving power increased. The industrial added value of electronic information industry accounted for 13.6%·24·

Electronics & Informationin the total added value of industry of China. The growth rate of electronic information industry was 11.8% higher than theaverage industrial growth rate in China, and the contribution rate reached 20.8%. Chinese electronic information industryplayed a more and more important role in national economy. In 2005, the foreign trade amount of electronic informationproducts was US$488.73B, accounting for 34.4% in the total international trade amount of China. The export amount wasUS268.17B, accounting for 35.2% in the total export amount of China and increasing by 29.2%. The import amount wasUS$220.56B, accounting for 33.4% in the total import amount of China and increasing by 21.9%. The export and importamounts ranked at the first among all industries. The industry continued to act as a pillar in export in China. See Figure 2 forexport amount of Chinese electronic information products from 2001 to 2005, and see Figure 3 for the proportion ofelectronic information products in Chinese export amount from 2001 to 2005.Unit: US$100M2075268230002500142120001500 650920100050002001 2002 2003 2004 2005Figure 2 Export of Chinese electronic information products from 2001 to2005Unit:%403024.32028.034.036.035.21002001 2002 2003 2004 2005Figure 3 Proportion of electronic information products in Chineseexport amount from 2001 to 2005By the end of 2005, the total number of employees in the industry was 7.6 million, 6.9 million higher than the number in2000. The industry contributed to China’s employment.4. Industrial quality was rapidly improved thanks to restructuringProduct structure aimed at high technology, high quality and high added value. The scale and technological level of keyproducts have been largely improved. The proportion of entire machines and parts and accessories that contain hightechnologies in exports rose. The output of mobile phones mounted from 53.96 million in 2000 to 303 million in 2005,increasing by 40% per year. The industrial size of mobile phone ascended to the top in the world. The proportion ofaccessories in export amount stably increased, new accessory sector developed fast, and industrial status constantly rose up.LCD and plasm module products became a new economic growth point. The output of the products increased by over 200%in 2005. The laptop turnout accounted for 60% in microcomputer turnout, increasing by 5% than 2004.Industrial concentration was high, and regional agglomeration effect got increasingly apparent. China has establishednine state-level electronic information industrial bases and 34 state-level parks, which have formed regional industrialclusters. In the Yangtze River Delta, Pearl River Delta and Bohai Sea Rim, the proportions of labour force, sales revenue,industrial added value and profit in the whole industry were all over 80%, and the leading positions were consolidated. The·25·

China Business Guideindustrial size and total profit of the nine state-level bases accounted for over 3/4 in the whole industry. Industrial clustereffect and base advantages became notable and increasingly important in global industrial layout.Advantageous enterprises quickly rose. By the end of 2005, two enterprises hit the sales revenue of over 100 billionyuan, and 22 enterprises over 10 billion yuan. Lenovo, BOE, Huawei, ZTE, Haier and TCL have made breakthrough inmultinational operation and accumulated experience in grasping core technology in a short time, expanding company scale,improving management, attracting international professionals, and setting up global marketing network through going global.5. Core sectors speeded up to developThe State Council issued policies on promoting IC and software in 2000. Under the guide and drive of industrial policies,the sales revenue of software and system integration in China was 390 billion yuan in 2005, 4.9 times of that of 2001. Thesoftware export gained US$3.59B, five times of that of 2001. Software sector started to largely push information industry andnational economy. The industrial scale of IC reached 70.23 billion yuan, increasing by 55.2%, 3.8 times of that of 2001. Thesales revenue of IC design was 12.43 billion yuan, increasing by 53%. Products with independent intellectual property wereput into the market. Over the past five years, China set up nine 8-inch IC production lines and one 12-inch IC production line.The gap in chip manufacturing between Chinese level and international level has been largely reduced.In 2005, the sales revenue of component sector was 1,110.9 billion yuan (including electronic parts, electroniccomponents and electromechanical components), increasing by 17%. Enterprises expanded, products turned small and flat,and product frequency turned higher. Over 80% of electronic components were flat. The outputs of capacitors, inductors andspecial micro motors were among the top in the world. New-type flat panel display components have been largely promoted.Two 5-G TFT-LCD pre-procedure production lines were set up and put into production, and the number of patents inTFT-LCD field drastically went up.During the Tenth Five-year Plan period, encouraging progresses have been made in electronic material and dedicatedequipment. The turnout of ever-magnet ferrite ranked at the top in the world, and the technology reached to world-classstandard. IC production equipment at 6-inch level or below could meet partial domestic demand, 8-inch ion injection devicewas invented, and filling and sealing devices used to produce back-course modules of small-size LCD displays and COGhave been introduced to mainstream market.6. Significant progresses have been made in some key technologiesNew progresses have been made in IC, software, mobile communication, new-type elements and accessories, digitalvideo and audio, computers, and other fields. Transnational M&A has become an effective way through which Chineseenterprise improve key technological level and promote core competitiveness. TD-SCDMA, GoTa, GT800, IGRS and familynetwork standards, which were initiated by enterprises or enterprise allies, have been issued.In terms of IC, China is able to design, develop, and commercially produce 0.18-0.25-micron ICs. Somehigh-performance chips have been developed. The chips for the 2G ID cards can be put into mass production. Softwareproducts with independent intellectual property have been widely used in each sector of economic and social development,and the market share is relatively high. In terms of communication industry, digital PBX, digital mobile communication,DWDM, and other key products can be put into mass production, and the technological level is at the world class.TD-SCDMA is recognized as one of the 3G communication standards by ITU and 3GPP. The gap of core technology ofnew-type components and photoelectron between Chinese status and international advanced level is being reduced, and massproduction technology for optical fibre pre-set bar has been tackled. Significant progresses have been made in digital TVstandard formulation, cable digital TV products that use set-card separation technology have been commercialized, andsupport capacity for key parts, such as dedicated chips and digital tuners, has been largely promoted. The calculationcapability of Galaxy computer and Dawning computer rose to among top 100 in the world. High-performance servers, suchas Lenovo Shenteng Server, broke down foreign blockage in high-end server sector. Routers and switches produced byHuawei and ZTE have reached international standard. Notable achievements have been made in next-generation Internet coreequipment R&D.·26·

Electronics & InformationII. Experience during the Tenth Five-year Plan period1. Formulate policies that benefit for industrial developmentDuring the Tenth Five-year Plan period, the stress and support by the state for Chinese electronic information industryplayed a key role in the development of the industry. Under the support of the State Council and relevant authorities, Chinaissued many policies promoting mobile communication, IC and software sectors, adjusted export tax rebate ratio of someelectronic products, and timely updated foreign investment industry category and the category of industries in which Chinaencourages to invest. The Ministry of Information Industry issued documents to push information industry to go global andbuild national electronic information industrial bases and parks, and formulated industrial implementation guidelines forcarrying through national strategies of Revitalizing the Northeast and Western Development. Since 2002, the Ministry ofInformation Industry held work report meetings of key tasks in electronic information industry on a periodical basis of eachyear, disseminated annual key task arrangements to the whole industry, improved industrial technological developmentpolicies, and organized to formulate technical standards. These measures and policies have improved industrial developmentcontext, encouraged Chinese and foreign enterprises, guided Chinese IC, software and mobile communication sectors todevelop fast, advanced regional industrial restructuring and differentiated development, and driven information industry intoan industry with the largest scale and potentials in China.2. Insist on the development approach of opening and cooperationDuring the Tenth Five-year Plan period, Chinese electronic information industry made full use of the opportunity ofChina’s access to the WTO, adjusted policies and measures, and tried to attract more foreign investment. According topreliminary statistics, all electronic information enterprises among Fortune 500 enterprises have invested in China, and 90%of top 100 information technology companies in the world have directly invested in China. In electronic information industry,the proportion of foreign investment in the total foreign investment in China increased from 10% at the end of the NinthFive-year Plan period to over 15%.The position of foreign-invested companies continued rising in electronic information industry. In 2005, the salesrevenue of foreign-invested companies was 2,402.1 billion yuan, accounting for 77% of the total revenue of all companiesabove designated scale. The industrial added value was 502.6 billion yuan, accounting for 77% of the total added value of allcompanies above designated scale. The profit was 82.2 billion yuan, accounting for 77% of the total profit of all companiesabove designated scale. The export amount was US$234.1B, accounting for 87% of the total amount of all companies abovedesignated scale. Foreign-invested companies have largely pushed the whole industry.Over the past five years, the industry responded to various trade barriers and discriminative anti-dumping terms,encouraged companies to go global by making use of two markets and two kinds of resources, energetically extendedindustrial development space, promoted cooperation between communication operation and manufacturing, constructedinter-support industrial chains, and worked hard to develop the international market.3. Support advantageous enterprises in priorityThrough policy guidance and arrangements of significant projects, enterprises with advantages in the industry weresupported, and instruction and assistance were provided for leading companies in terms of transnational M&A andresponding to barriers to trade in order to promote their international competitiveness. In 2005, the total revenue of the top100 electronic information companies was 964.3 billion yuan. The size of Lenovo and Haier was close to the lowest standardof world top 500 electronic information companies. BOE, TCL and Huawei were marching to 100 billion yuan. Somecompanies have started to participate international competition at a higher level, and have had large-volume export capacitywith independent brand and transnational operation capabilities. In addition, the state also provided strengthened guidanceand special fund to support innovative small and medium-size companies with their own characteristics.4. Make use of key projects to advance technological progressDuring the Tenth Five-year Plan period, the state organized and implemented many key projects, including digitalmobile communication industrialization, digital TV R&D and industrialization, TD-SCDMA R&D and industrialization,software industry, network products, new-type components, photoelectron products, auto electronics, next generation Internet,·27·

China Business Guideinformation security products, company technical progress, industrial upgrade, and enterprise informatization, cultivatedsoftware, IC and new-type components core industries, and built up industrial chains of 3G mobile communication, digitalTV and photoelectron products. The central government has invested more than 10 billion yuan over the past five years, andprovince-level governments also set up special funds to advance industrial development, push private investment, promoteindustrial transfer of independent intellectual property results, drive technical progress and product restructuring amongenterprises, and intensify industrial development potentials.5. Drive industrial development with informatization utilizationDuring the Tenth Five-year Plan period, Chinese informatization building was deepened. Wide application ofinformation technologies and products provided development opportunities for industrial development, in particular localenterprises. In recent years, the popularization rate of information infrastructure standard and information terminals in Chinakept increasing, which advanced communication, computer, video-audio products, entire machine, and relevant componentsectors. Significant informatization projects, including electronic administration, e-commerce and company informatization,went on smoothly, and speeded up software, information service and information security sectors. Informatization buildingput higher requirements on information technology and product, and expedited technical innovation and product update.6. Explore new methods for building industrial professional teamsDuring the Tenth Five-year Plan period, Chinese electronic information industry explored talent cultivation, introductionand arrangement. Talent cultivation work was implemented on schedule, and progresses were made in talent cultivation forvarious directions. Vocational qualification certification was carried out among computer and software specialists, privateinvestment was absorbed to run software schools, and software engineering master education oriented to application wasstrengthened. The mechanism of joint cultivation of professionals by using international resource was established, talentabsorption work was reinforced, and talent encouragement mechanism was improved. Supportive policies were made toencourage and attract software and IC technicians to access to hi-tech technological parks and software development zones.Foreign IT professionals were encouraged to come to China. The industry tried to create a favourable environment to attractand keep talents through technical improvement, provision of shares of management and intellectual property, options, andother encouragement measures.1200010000800060004000200001157664673916Unit:100 million yuan2356 2110 1924Guangdong Jiangsu Shanghai Zhejiang Shandong BeijingFigure 4. Top six provinces with the largest gross industrial production value in electronicinformation manufacturing in 2005·28·

Electronics & Information2500200022221637Unit: 100 million yuan15001000490 452 404 3925000Guangdong Jiangsu Shangdong Zhejiang Fujian BeijingFigure 5. Top six provinces with the largest industrial added value in electronicinformation manufacturing in 2005120001000080006000400020001113970933968Uint:100 million yuan2190 2026 19680Guangdong Jiangsu Shanghai Zhejiang Shandong BeijingFigure 6. Top six provinces with the largest sales revenue in electronicinformation manufacturing in 2005104.6Unit:100 million yuan12010067.38044.36026.94020.3 17.6200Guangdong Jiangsu Shangdong Shanghai Beijing TianjingFigure 7. Top six provinces with the largest profit and tax in electronic informationmanufacturing in 2005·29·

China Business Guide200173.5 142.2Unit:100 million yuan15010059.040.7 30.1 23.3500Jiangsu Guangdong Shanghai Shandong Zhejiang TianjingFigure 8. Top six provinces with the largest foreign investment utilization in electronicinformation manufacturing in 20051000800600400914569416 390Unit:100 million yuan273 2522000Beijing Guangdong Jiangsu Shanghai Zhejiang ShandongFigure 9. Top six provinces with the largest software revenue in 2005Long-distancecall17.80%Digitalcommunication6.80%Other0.30%Fixed line30%Figure 10. Proportions of communication servicesMobilecommunication45.10%·30·

Electronics & InformationTable 1. List of national electronic information industrial parks in 2005No. Applicant Name of national electronic information industrial park01Administrative Committee of BeijingEconomic-Technological Development AreaNational Communication Industrial Park (Beijing)02Administrative Committee of TianjinEconomic-Technological Development AreaNational Communication Industrial Park (Tianjin)03Administrative Committee of Qingdao Hi-techIndustrial Development AreaNational Communication Industrial Park (Qingdao)04Administrative Committee of HangzhouHi-tech Industrial Development AreaNational Communication Industrial Park (Hangzhou)05 Beijing Strong High-tech Development Corp.National Computer and Network Product Industrial Park(Beijing)06Administrative Committee of Hangzhou National Computer and Network Product Industrial ParkEconomic-Technological Development Area (Hangzhou)07Administrative Committee of FuqingRongqiao Economic-TechnologicalNational Display Industrial Park (Fuqing)Development Area in Fujian08Administrative Committee of Qingdao National Household Electronic Product Industrial ParkEconomic-Technological Development Area (Qingdao)09People’s Government of Shunde District, National Household Electronic Product Industrial ParkFoshan City, Guangdong Province(Shunde)10People’s Government of Huizhou City,Guangdong ProvinceNational Video-Audio Product Industrial Park (Huizhou)11Administrative Committee of TianjinNational Chemical and Physical Power Supply IndustrialNew-tech Industrial ParkPark (Tianjin)12People’s Government of Xinxiang City, Henan National Chemical and Physical Power Supply IndustrialProvincePark (Xinxiang)13Administrative Committee of Guiyang Hi-techIndustrial Development AreaNational Piece-shape Component Industrial Park (Guiyang)14Administrative Committee of TianjinEconomic-Technological Development AreaNational Piece-shape Component Industrial Park (Tianjin)15Jiaxing Information Industry Bureau of National electromechanical Component Industrial ParkZhejiang Province(Jiaxing)16People’s Government of Fuyang City,Zhejiang ProvinceNational Optical Fibre and Cable Industrial Park (Fuyang)17Administrative Committee of TonglingElectronic Material Industrial Park of Anhui National Electronic Material Industrial Park (Tongling)Province18People’s Government of Yichang City, HubeiProvinceNational Electronic Material Industrial Park (Yichang)19People’s Government of Anyang City, HenanProvinceNational Display Product Industrial Park (Anyang)20Xianyang Development and ReformCommittee of Shaanxi ProvinceNational Display Product Industrial Park (Xianyang)21Administrative Committee of NanjingEconomic-Technological Development AreaNational Display Product Industrial Park (Nanjing)22Administrative Committee of FuzhouEconomic-Technological Development AreaNational Display Product Industrial Park (Fuzhou)23People’s Government of Foshan City,Guangdong ProvinceNational Display Product Industrial Park (Foshan)24Administrative Committee of WujiangEconomic-Technological Development Area National Display Product Industrial Park (Wujiang)of Jiangsu Province25 Shanghai Zhangjiang (Group) Co., Ltd National IC Industrial Park (Shanghai)26Administrative Committee of ZhongguancunScience ParkNational IC Industrial Park (Beijing)27Administrative Committee of SuzhouIndustrial ParkNational IC Industrial Park (Suzhou)·31·

China Business Guide28293031323334Administrative Committee of Ningbo BondedArea of Zhejiang ProvinceAdministrative Committee of TianjinEconomic-Technological Development AreaAdministrative Committee of Wuhan EastLake High-tech Development Zone of HubeiProvincePeople’s Government of Xuchang City, HenanProvinceAdministrative Committee of Wuxi NewDistrictPeople’s Government of Mianyang City,Sichuan ProvinceAdministrative Committee of ChengduEconomic-Technological Development AreaNational IC Industrial Park (Ningbo)National IC Industrial Park (Tianjin)National Photoelectron Industrial Park (Wuhan)National Electric and Electronic Systems Industrial Park(Xuchang)National LCD Industrial Park (Wuxi)National Video-audio Product Industrial Park (MianyangScience and Technology City)National Electronic Component Industrial Park (Chengdu)Section 2 Performance of main sectors of the electronics and information industryin 2005I. Communication equipment manufacturing industry(I)General introductionIn 2005 which is the last year of the 10th Five Year Plan period, the communication equipment manufacturing industryhas maintained a good development momentum with further improved production capacity and concentration and newbreakthroughs in scientific and technological development. The economic indexes of the equipment manufacturing industrycontinuously maintained a leading position in the electronics and information industry. Spurred by the good developmentmomentum of 3G in the international market, the mobile communication industry continuously develops rapidly in China.The TD-SCDMA has basically reached the level of large-scale commercial application. A batch of state-owned TD-SCDMAmanufacturers have grown up and formed a complete industry chain, enabling the mobile communication industry to enterinto a new development stage. The China-made digital trunking communication products have passed the technicalassessment, entered into the practicality and industrialization stage and have been successfully employed. The opticaltransmission equipment development has tended to mature and reached the world-leading level in terms of the technicaladvancement and commercialization. The optical fiber and optical cable industry is recovering; great progresses have beenmade in the network communication equipment. The broadband access equipment gradually becomes the major force of thesector. The network equipment has started to prize the high-end market after occupying the intermediate and lower-endmarket, obviously enhancing development of the e-governance, e-business, enterprise informatization and socialinformatization of the urban and rural areas. The export of communication products has increased compared with that of theprevious year; the independent innovation capability and market competitiveness of the enterprises have been improvedslightly. The general situation of the communication industry of China in 2005 shows that the macro control measures of thecentral government have been put into effect, and achievements have been made in the industry and product restructuring ofthe communication equipment manufacturing industry. The sector enjoys a good development momentum.(II)Production and saleIn 2005, the communication equipment manufacturing industry reported sales revenues of 613.2 billion yuan, increasedby 29.7% on a year-on-year basis, accounting for 15.96% of the total sales revenues of products of the electronics andinformation industry; completed 147.2 billion yuan of industrial increment value (current price), up 27.1%, accounting for16.34% of the industry increment value of the electronics and information industry; the sector reported profits of 24.4 billionyuan, decreased by 15.4%, accounting for 18.67% of the total profits of the electronics and information industry; it completed10.3 billion yuan of taxes, up 42.3%, accounting for 10.4% of the electronics and information industry; the product export·32·

Electronics & Informationvalue reached US$43.364 billion, up 45.85%, accounting for 19.8% of the total export of the electronics and informationindustry; the product import value reached US$16.028 billion, up 15.32%, accounting for 7.26% of the total import value ofthe electronics and information industry.In 2005, the production and sale of the communication equipment manufacturing industry show the followingcharacteristics:1.Changing and complex development environment, stable growth of production speedIn 2005 the main economic indexes of the communication equipment manufacturing industry grow steadily. Thecommunication equipment manufacturing industry ranked the first position in terms of the total taxes and the second positionin terms of the sales revenue, industry increment value and export value. Affected by the domestic and internationalenvironment, the total profits of the sector has decreased compared with that of the previous year, but still maintained the firstposition of the industry. The communication equipment manufacturing industry is still an important element drivingeconomic benefit growth of the electronics and information industry.2.Growth mode changes gradually and the overall strength buildupBy means of reform deepening and industry restructuring, the communication equipment manufacturing industry hasgradually transferred from the extensive mode to intensive mode in terms of the economic growth mode. Most of theenterprises have paid attentions to control the gross, reduce inventory, adjust the structure, develop new products and increasetechnical contents of the products. The mobile phone sector has secured its leading role in the industry in the marketcompetition. While the mobile phone market access system has transferred from application and approval to ratification, thesector attracted many new enterprises. Currently there are more than 60 enterprises in the sector and the overall strength ofthe sector has been enhanced, boosting the production speed, output, sales revenue and export significantly.3.Rapid development of the telecom operation sector enhances development of the manufacturingindustryIn 2005, the telecom operation sector has maintained the rapid development. The sector has completed 1,219.8 billionyuan of communication businesses in total, up 24.6%; it reported business revenues of 637.3 billion yuan, up 11.3%; newlyincreased fixed line subscribers have reached 38.67 million households and newly increased mobile phone subscribers havereached 58.60 million households. As of the end of 2005, the total number of the fixed line subscribers reached 350 millionhouseholds while the mobile phone subscribers reached 393 million households. The popularization rate of the fixed linereached 27.0% while that of the mobile phone has reached 30.3%. Stimulated by the rapid development of the telecom sector,the handset output has reached 304 million sets, up 30%. The fixed line phone sets, program-control exchanger, mobileexchange and mobile workstation have maintained a steady development.4.Growing market demand stimulates the industry to develop rapidlyThe year of 2005 has seen adjustment of the communication product manufacturing industry. The facts that the nextgeneration communication system building is coming, the central government is carrying out the communication andinformatization project in the rural area, the operators increase procurement of the communication equipment and getinvolved in the sales juncture of the terminal field via product customization to prepare for improving the network systemand launching new businesses has boosted the communication manufacturing industry. In addition, the global telecominvestment has increased gradually, the multinational companies have increased investment in China and resource integratingand the domestic telecom operators and equipment enterprises are speeding up paces of going global. All these elements havedriven the product export to grow rapidly.5.Soaring export drives the industrial economy developmentThe communication product export in 2005 increased by 45.85% on a year-on-year basis, about 10 percentage pointshigher than that of the whole industry, contributing to the total export of the electronics and information industry which brokeUS$200 billion.·33·

China Business GuideCurrently the communication equipment manufacturing industry of China is expanding its size with a solid industryfoundation and obviously improved production concentration. Famous brands, dominant enterprises and industrial bases aretaking shape and the international competitiveness are boosting.(III)Scientific research and new product development1.3G mobile communication systemAs of 2005, breakthroughs have been made in the R&D and industrialization of the TD-SCDMA. A complete industrychain has been formed with completion of the TD-SCDMA core network, base stations, terminals and the peripheral productsystems such as different chips, driving the TD-SCDMA products to get mature and commercialization. In terms of thesystem equipment development, Datang Telecom Technology & Industry Group (Datang Telecom for short), TD Tech Co.Ltd.(TD Tech for short), ZTE, Putian Telecommunications and so on have improved their R&D works and enhanceddevelopment of the TD-SCDMA system. The system equipment of these enterprises has been transferred to network testing.On the terminal chip development, Spreadtrum Communications Inc., Beijing Tianji Technologies, Commit InformationTechnologies Co. Ltd., Datang Telecom, Chongqing Chongyou Information Technology Co. Ltd., and HolleyCommunications all have made breakthroughs. Following Datang Mobile which developed the first TD-SCDMA handset ofthe world, Amoi, Hisense, Ningbo Bird, Lenovo Holdings, CECW, Holley Communications, Chongyou InformationTechnology and Inventec Appliances Corp. have completed their commercial terminal solutions and developed nearly 20terminals and digital cards. Currently ten-odd products are undergoing network testing. What's more, Beijing ZhongchuangTelecom Test Co. Ltd., Starpoint Communications Software Co. Ltd. and Hubei Zhongyou Technology Industry &Commerce Co. Ltd. and so on have developed the network and terminal online testing equipment. China has madebreakthroughs in the product development of the system, chip, terminal, instrument and software and established a basicallycomplete TD-SCDMA industry chain, formed an industry group and laid a foundation for the successive development of theTD-SCDMA technology.Currently the Chinese enterprises have possessed of hundreds of core patents of TD-SCDMA and formed a TD-SCDMApatent group. Patent protection has been obtained for some patents in the US and Japan and other countries and regions. TheChinese enterprises consolidated the patent advantages of China in the TD-SCDMA field.2.Optical fiber communication equipment and systemCooperating with the relevant units, the scientific researchers of Wuhan Research Institute of Post andTelecommunication have successfully developed the first STM-256 40Gb/s SDH equipment meeting the ITU-T standard withthree years of hard working under organization and guidance of the Ministry of Information Industry. And a long-distancetransmission of 560km on the common G652 and G655 optical fiber has been realized.The project has studied and solved the technical difficulties of 40Gb/s super-high speed optical signal processing,40Gb/s optical signal modulating and demodulating, STM-256 MUX and framing procedure, large capacity cross-connection,large capacity system design, super-high speed photoelectron devices, 40Gb/s optical fiber transmission, dispersionmanagement technology, large information flow network management technology and the mechanical structure of high-speedhigh-power equipment, and developed the 40Gb/s SDH equipment meeting the ITU-T standards. On the transmission, theproject has solved the core difficulties of dispersion and non-linear of 40Gb/s optical signal transmission. With precisiondispersion management and technologies combining EDFA and RAMAN, the project realized error-free transmission of40Gb/s optical signals of 560km long on the common G652b and G655b optical fibers.40Gb/s SDH (STM-256) technology is one of the symbols of the super-high speed optical communication technologystrength. The breakthrough of the technology in China enables China to reach a world leading level in terms of the opticalcommunication technology. The successful development of 40Gb/s SDH optical transmission equipment and the success oflong-distance transmission of 40Gb/s optical signals lay a foundation for China to promote and employ 40Gb/s systemequipment.3.China-made digital trunking system·34·

Electronics & InformationThe Ministry of Information Technology drafted out the General Development Thinking of 800MHz Digital TrunkingBusiness of China in 2002 and organized the large communication equipment manufacturers such as ZTE and Huawei toconduct R&D of digital trunking technology. ZTE independently developed the CDMA-based GOTA digital trunkingsystem while Huawei independently developed GSM-R-based GT800 digital trunking system. In June 2006, the GOTAdigital trunking system and GT800 digital trunking system was assessed for the technical performance by the relevanttechnical assessment committees organized by the Ministry of Information Technology, especially their core technologies andtechnical innovation, and passed the assessment. In October 2005, ZTE's GOTA system was named the exclusive digitaltrunking communication product used at the 10 th National Games of China held in Nanjing for direction and dispatch of thecommunication missions. The successful application of the system shows the technical advantages and application capabilityof the China-made digital trunking system.4.Wireless access systemSCDMA technology is the wireless access technology with independent intellectual property right independentlydeveloped by Xinwei Telecom Technology Inc. of Datang Telecom. So far the company has not only developed 1800MHzcomprehensive wireless access system and 400MHz countryside wireless access system, but developed and improved theSCDMA technical standards of which it completely owns the core technologies and the intellectual property rights andrealized large-scale commercial application. The technology has won the first prize of National Scientific and TechnologicalProgress Prize and the Gold of China Patent awarded by the State Council.Currently the network scale and subscribers of the SCDMA wireless access system have increased significantly. As ofNovember 30, 2005, the 1800MHz SCDMA wireless access system has been employed in 116 cities from 21 provinces,municipalities and autonomous regions with support and coordination from the operators. The operators included ChinaTelecom, CNC, Unicom, China Railcom and the dedicated networks of PetroChina and Sinopec. The network scale exceeded10million lines with more than 3 million of subscribers. These operators also set up networks in Sri Lanka and Mongolia etc.Since passing the design finalization assessment for production conducted by the Ministry of Information Industry inFebruary 2005, 400MHz SCDMA rural wireless access system has experienced rapid growth of application. Nearly 500,000lines of networks have been built in 18 provinces, municipalities and autonomous regions with more than 100,000subscribers. The system plays an important role in the project of extending telephone access to every village implemented bythe Ministry of Information Industry.5.Scientific and technological achievementsA batch of scientific and technical achievements of the communication industry won awards from the centralgovernment and the Ministry of Information Industry in 2005, including 3 achievements submitted by the Ministry ofInformation Industry (see Table 1 for details) and 3 achievements submitted by the other units of the information industry(see Table 2 for details). Including the awards mentioned above, a batch of scientific and technical achievements of thecommunication industry won the "Scientific and Technical Awards of Information Science of the Chinese Institute ofElectronics" and the "Scientific and technical Awards of the Chinese Institute of Communication".(IV)International cooperation and foreign trade1.Import and exportAccording to statistics of China Customs, the communication equipment export value in 2005 hits US$43.363 billion,up 45.85% on a year-on-year basis, accounting for 19.8% of the total export value of the electronics and information products,5.5 percentage points higher than that of the previous year. The communication equipment import value hits US$16.028billion, up 15.32%, accounting for 7.26% of the total import value of the electronics and information products. The growthrate was lower than that 2004.The export of products with high technical content increased significantly in 2005. The export value of mobile phoneincreased by 45%, that of the switchboards increased by 24.9%; and that of the optical transmission equipment increasedby 112.7%. All the export growth rates of major communication products were much higher than that of 2004. The significantgrowth of the export value was a result of the international information industry restructuring and the rapid development of·35·

China Business Guidethe telecom industry of China. It also indicated that the industry upgrade of the communication equipment manufacturingindustry has produced results while the "going global" strategy implemented by the central government yielded effect.2.Participating in international competitionIn 2005, the communication equipment manufacturing industry of China continuously expanded the overseas market onthe basis of participating in the international competition in 2004 and embarked on a scalized stage. The industry witnessedconstant increase of technical content in the products, many fields reaching the world leading level, customer group expandedto the developed countries and significant increase of sales value.ZTE Corporation. ZTE's wireless product application of CDMA, GSM, PHS, 3G GCDMA2000 and 3G WCDMAexceeded 150 million lines in total in the market home and abroad. In November 2005, the World Summit on the InformationSociety was held in Tunis and ZTE supplied the latest 3G mobile communication service for the Summit. In December of thesame year, ZTE started to supply 3G mobile phone to the UK market and then get access to the world's cutting edge arena of3G. Currently ZTE has set up nearly 200 NGN commercial networks in China, the US, Pakistan, Mongolia and Philippineand the total designed capacity of the network system exceeded 30million lines. It has set up 14 business platforms in theoverseas markets and established business ties with more than 500 operators from over 100 countries and regions.Huawei Technologies Co. Ltd. Huawei boasts a global marketing and service network to offer prompt and high qualityservices for customers across the world. Currently Huawei's products and solutions have been employed by 28 operators ofthe Top 50 operators of the world, serving more than 1 billion users in the world. In 2005, Huawei obtained 29 WCDMAcommercial networks in the world; its GSM products have been employed in more than 80 countries for commercialpurposes to a certain scale, serving 120 million of subscribers. Its CDMA network has served 40 million of subscribers of theworld and it has obtained 19 CDMA2000 1xEV-DO commercial contracts; Huawei served more than 10 million of users withthe CDMA softswitch network and built the largest CDMA softswitch network of the world in Pakistan; it has set up morethan 100 networks of mobile softswitch in more than 60 countries, serving more than 100 million of users across the world; itranked the second position in the optical network market in terms of the market share and the first position in thelong-distance wave division multiplexing market. it has secured the largest market share in the Asia-Pacific optical networkmarket for five years in a row; totaling more than 410,000 sets of OptiX optical network products have been employed in theworld with scalized application in more than 80 countries and regions; Huawei took the largest market share in the globalmarket in terms of the NGN, reaching 27.68% and the sales volume reached 28 million ports; the shipment of the wirelessterminals including 3G mobile phone, 3G data card and CDMA mobile phone exceeded 10 million sets in the global marketand have been used for commercial purpose to a certain scale in the mainstream mobile markets such as Europe andAsia-Pacific. Huawei has become the largest wireless terminal manufacturer of China.Wuhan Research Institute of Post and Telecommunication. The Institute attaches importance to the overseas market andbuilds Fiberhome brand in the global market via product export, project contracting, joint venture production and jointoperation. With establishment of the international marketing system, a series of products are exported to more than 20countries and regions such as the US, Canada, Italy, Netherlands and Switzerland; the high-end DWDM system has beenexported to the Silicon Valley of the US; it has undertaken construction of the state-level power grid trunk line of Indonesia,the state-level trunk line of the natural gas trunk line of India, the state-level telecom trunk line of Burma, the state-leveltrunk line of national defense of Burma, the state-level trunk line of the railway department of Iran and the state-leveltelecom trunk line of Bhutan and so on. More than 60% of the optical and photoelectric products are exported and occupy acertain market share in the North American, European and Southeast Asian markets.In a word, the communication equipment manufacturing of China has gradually entered into the international market tocompete with the overseas counterparts under the "going global" strategy of the Chinese government.(V)Market prospectIn 2005, the production size and output of the mobile communication products have been significantly increased drivenby the rapid development of the telecom industry and the mobile communication product industry became one of the pillar·36·

Electronics & Informationindustries of the electronic and information industry. The others such as the optical communication products, networkequipment, access equipment and trunking equipment have also greatly developed.1.Mobile communication industryProduct sale: In 2005, China has produced 307 million handsets, up 31.8% on a year-on-year basis; of which, 304millionhandsets were distributed, increased by 32.2%; of which 228 million handsets were exported, up 56.2%. The export value hitsUS$20.66 billion, up 46.0%. In the same year, 7.25 million channels of mobile base stations were sold, up 69.4%. The totalhandset output of the year accounted for 36.8% of the total output of the world. China became the largest handset productionbase of the world with the production capacity exceeding 350 million sets.Market development and features: In 2005, a new turn of structure change happened in the handset market. First of all,the foreign-funded enterprises increased their market share in China. Relying on the strong capital and technical strength, theforeign brand handset manufacturers speeded up new product release to occupy the market on the one hand after completelygetting acquaintance with the situation of the local market, and offered products covering the high-end, medium-end andlower-end markets and enforced competition with the local manufacturers in the medium-end and lower-end market. In 2005,the foreign-funded enterprises occupied 59.4% of the handset market of China, 3.9 percentage points higher than that of 2004.Secondly, the local handset manufacturers' market share was declining. In 2005, the local brand handset manufacturersgradually lost their original competitive advantages and the growth momentum. The main reasons lie on the capital andtechnical defects that constrain development of the enterprises when the original competitive advantages on the channels,price and acquaintance of the local market are weakening. In addition, the facts that the enterprises' fast expansion, laggardnew handset model release, too many product quality problems and profit declining even losses made the local brand handsetmanufacturers' market share declined from 44.5% in 2004 to 40.6% in 2005. See Figure 1 for the Top 3 handsetmanufacturers' market share between 2003 and 2005. Thirdly, the production concentration is further increased with enlargedproduction scale and production congregating to the dominant enterprises. Take the handset industry of China for example.The total output of Top 10 manufacturers accounted for 72.9% of the total in 2004 and the sales volume accounted for 72.8%of the total. In 2005, if calculated on the same indexes, the total output of the Top 10 enterprises accounted for 78.7% whilethe sales accounted for 78.4%. Fourthly, the competition in the local brand handset market is fierce. On the one hand, the rawmaterials, power and labor costs are increasing; on the other hand, the structural and stage overplus of handsets make themarket price of China-made handsets to continue a decreasing trend and the profits are continuously squeezed. Theforeign-funded enterprises continuously enforce development of the lower-end market, which will certainly squeeze themarket share of local brands and the competition between the handset manufacturers of local brands will be even fierce.Unit:%31.64022.5 17.52002003 2004 2005Figure 1: Market share of Top 3 local brand handset manufacturersin the Chinese market between 2003 and 2005.2.Optical communication industryProduct sale: In 2005, the optical communication industry recovers and maintains a stable growth. The rapid growth ofthe broadband data business, VoIP and multi-media data business and the increasing demand from the dedicated powernetworks such as the power network and petroleum network stimulated recovery of the optical communication industry. In2005, the optical cable consumption increased by 1.40million core-km on a year-on-year basis, hitting 17.40 million core-km.Because of the price lowering, the market size decreased by 370 million yuan on a year-on-year basis to 3.31 billion yuan.The optical fiber production capacity exceeds the market demand and the whole industry is facing challenges. The opticalnetwork equipment gradually becomes a development force with building of the broadband sector. The market reaches 13.8billion yuan, up 8.9%. The Chinese communication enterprises best represented by Huawei, ZTE and Wuhan FiberHomeTechnologies Group have become strong challenges of the foreign manufacturers that had monopolized the opticalcommunication market of China. Currently several production bases of the optical device industry have been established in·37·

China Business GuideChina with about 10 optical device manufacturers. The total output value of the active optical devices and passive opticaldevices was about 3 billion yuan.Market development and features: In terms of the optical fiber and optical cable, the production is overcapacity and thesupply exceeds demand. The optical fiber and optical cable production can meet the local demand. However, the specialoptical fiber such as the optical fiber for the FTTH still needs import although the total import is not large. The optical fiberpre-form that controls the optical fiber is the core technology with high profits. As the Chinese manufacturers of optical fiberpre-form are still left behind by the foreign counterparts, the import volume is still large. In addition, the Chinese optical fiberand optical cable have limited competitiveness in the international market as these products have nearly lost the priceadvantages in the international market and the costs can hardly be reduced . The export is small.In terms of the optical communication equipment and system, the local production is overcapacity and the supplyexceeds demand. The China-made optical communication equipment and system prices are much lower than that of theinternational market, thus the local manufacturers enjoy price advantages. Especially in the lower-end product market, theChinese account for 12% of the global market.On the optical devices, the passive optical device sector is overcapacity and the supply exceeds demand. The export isrelative large, especially the lower-end products such as the optical fiber connector, coupler and optical filter. Currently,China has become a world OEM of the passive optical devices. However, the raw materials or core component of the passiveoptical devices still need import, for example, the filter for the optical filter. The active optical device sector is overcapacitytoo. In this field, some products are exported. In terms of the lower-end optical devices, the chip production has beenlocalized; however, the chips used in the electron device are imported. The high-end optical devices are completelydepending on import.3.Network equipment (server, router Ethernet exchanger)Product sale: In 2005, the server market of China maintains a rapid growth trend with the total market reaching 17.389billion yuan, up 22.3%; the sales hits 447,200 sets. Of which, the sales value of PC servers accounts for 48.2% of the totalwith sales revenue reaching 8.389 billion yuan, up 17.16%; the sales volume reaches 427,000 sets, up 22.7%. The sales valueof RISC servers accounts for 51.8% of the total sales and the sales revenue hits 9 billion yuan, up 5.14%; totaling 20,200 setsare sold, up 13.48%. See Table 3 for data of the server market of China between 2004 and 2005.In 2005, totaling 353,000 sets of routers are sold, up 14.61%; the sales value reaches 7.86billion yuan, increased by12.13%. Although the growth speed has slowed down compared with that of 2004, the sector still maintains a double-digitgrowth. See Figure 2 for the distribution data of the router market of China between 2003 and 2005. See Figure 3 for thesales revenue of router market of China between 2003 and 2005.In 2005, the total sales volume of Ethernet exchangers hits 20.555 million ports, up 12.4% on a year-on-year basis; thesales value reaches 8.38 billion yuan, increased by 12.3%. See Figure 4 for the distribution data of Ethernet exchanger marketbetween 2003 and 2005. See Figure 5 for the sales growth of Ethernet exchanger of China between 2002 and 2005. SeeFigure 6 for the sales revenue of Ethernet exchangers between 2002 and 2005. See Figure 7 for the sales revenue growth ofEthernet exchanger of China between 2002 and 2005.Market development and features: First of all, the medium- and lower-end market demand drives the overall market togrow rapidly. In 2005, the network equipment market grows rapidly, especially the rapid growth of demand on the mediumandlower-end products, enabling the network equipment market a notable growth. Secondly, new products and newtechnologies emerge in endlessly. The fast popularization of 64-bit algorithm becomes a highlight of the network equipmentsector. Since 2004 IA trunking systems have been widely adopted in the commercial computer and information service field;the application of blade products which features performance of a server has kicked off. Thirdly, the market competitionamong the home and foreign brands are increasingly fierce. In 2005, the medium- and lower-end products regained the coreposition in the Chinese network equipment market and the international brands' market strategy is to extend the product linesfrom the high-end to the lower-end. Fourthly, the users tend to become reasonable on the product procurement and raisehigher requirements on the network equipment application. In 2005, the competition of network equipment market mainlyfocus on the service value and customizing network equipment for the clients become a trend. Fifthly, the distributionchannel is diversified.·38·

Electronics & Information(VI)Development trendIn 2006, the communication industry will enjoy a sound development environment and the communication equipmentmanufacturing industry will develop rapidly and harmoniously in a sustainable way.It is expected that the sales revenues of the communication equipment manufacturing industry will hits 827.8 billionyuan, up 35%; the industrial increment value increases by 30%, or reaching 191.4 billion yuan; the total pre-tax profits hits41.6 billion yuan, up 20%. The export value realizes 30% of growth, i.e. reaching US$56.3 billion. The development trends:first of all, the new technologies and new businesses will drive development of the manufacturing industry. The 3G systemwill enter into a start-up stage and the value-added business will play a critical role in the communication market. Thewireless data service will become a new momentum driving the communication market in 2006. The data communicationwill become a new growth point. In addition, NGN and WiMax will grow significantly. The complex competition structure ofChinese telecom players, the network security and terminals will confuse development of NGN. The soft exchange and NGNtechnologies are not mature yet in China. If developing the NGN in accordance with the actual situation of China, theoperators shall coordinate with the manufacturers to drive the whole market together. The year of 2006 will be a critical yearfor the NGN to develop in China. It is expected that China will witness a peak of building NGN network three years later.Compared with the wireless LAN, WiMax supports a wider coverage, higher speed and multimedia businesses. In terms ofthe technical development, WiMax and 3G system will supplement with each other: 3G system offers voice services andrelative lower speed data access while Mbit/s high-speed data access service is offered by WiMax. Secondly, the industryconcentration is becoming higher. Thirdly, the foreign-funded enterprises still will occupy half of the market. Fourthly, thestructural conflict will continuously upset the communication equipment manufacturing industry.【Statistics data】Table 1 Award-winning projects submitted by the Ministry of Information Industry in 2005Award-winning project Prize WinnerBroadband WirelessNetwork WAPI SecurityTechnologySecond grade of the NationalTechnological InventionAwardPractical TFF DWDMDeviceIPV6 Core RouterSecond grade of NationalScientific and TechnologicalProgress AwardSecond grade of NationalScientific and TechnologicalProgress AwardZhang Bianling, Wang Yumin, Huang Zhenhai, GuoHong, Tie Manxia, Li DaweiXu Yuanzhong, Hu Qianggao, Ma Kun, Xiao Qingming,Liu Jun, Li Chuanwen, Fang Luozhen, Liu Shuihua, XieJing, Liu QiuhuaWu Jianping, Xu Mingwei, Zhao Youjian, Xu Ke, FuLizheng, Yin Xia, Zhang Xiaoping, Bi Jun, Cui Yong, LiZhaoTable 2 Award-winning projects submitted by other units of the information industry in 2005Award-winning project Prize WinnerTime-Domain Synchronous- OrthogonalFrequency Division Multiplexing(TDS-OFDM)Second grade of the NationalTechnological Invention AwardYang Zhixing, TsinghuaUniversityTechnical Research on Preparing and MassProduction of Non-Zero Dispersion ShiftedSingle-Mode Optical Fiber with PCVA ProcessingSecond grade of NationalScientific and TechnologicalProgress AwardZhang Shuqiang et al,Yangtze Optical Fibre andCable CompanyU-SYS Technology with Soft Exchange as CoreSecond grade of NationalScientific and TechnologicalProgress AwardTable 3 Server market size of China between 2004 and 2005Zhang Hongbin, HuaweiTechnologies Co. Ltd.Item year 2004 2005 Growth rate(%)Sales volume (10,000sets) 36.58 44.72 22.25Sales value (100 million yuan) 157.22 173.89 10.60·39·

China Business GuideTable 4 Sales of electronic and communication products between 2003 and 20052003 2004 2005Product name Unit SalesvolumeGrowthrate(%)SalesvolumeGrowthrate(%)SalesvolumeGrowthrate(%)Handset (GSM, CDMA) 10,000 sets 18326 54.2 23345 27.4 30354 30.0PHS 10,000 sets 1412 2632 86.4 1633 -38.0Program controlled exchanger(excluding mobile exchanger)10,000 lines 5793 45.2 7629 32.0 7721 1.3Equipment of mobile base station 10,000 channels 307 -40.6 440 43.3 725 69.4Telephone set 10,000 sets 12316 35.6 13960 13.3 16954 21.4Fax machine 10,000 sets 1380 1068 -22.6Remarks: data from the Ministry of Information IndustryTable 5 Sales of the electronic and communication products between 2003 and 20052003 2004 2005Product Unit Sales Growth Sales Growth Sales Growthrevenue rate(%) revenue rate(%) revenue rate(%)Electronic andcommunication products10,000 yuan 3389.2 53.91 4727.6 39.48 6132.0 29.70Remarks: data from the Ministry of Information IndustryTable 6 Import & Export of main electronic and communication products between 2003 and 20052003 2004 2005Product Unit ExportvalueImportvalueExportvalueImportvalueExportvalueImportvalueTelephone set in total US$10,000 166575 2648 197681 4560 212496 5753Fax machine US$10,000 50972 17453.4 56002 17990 46479 15345Program controlled exchangers US$10,000 45288 6338 106237 3005 132642 7750Ethernet network exchanger US$10,000 23498 39925 33029 45319 52396 44725Handy (vehicle-board) wirelessphone setsUS$10,000 737703 281308 1416581 147400 2066233 119779Interphone US$10,000 26372 1496 31848 1604 28627 4097Mobile communication base station US$10,000 51185 18878 114976 9548 131733 3208Optical communication equipment US$10,000 11467 11268 19269 8828 40979 4833Remarks: data from China CustomsTable 7 Import of main electronic and communication products between 2003 and 20052003 2004 2005Product Unit ImportvolumeGrowthrate(%)ImportvolumeGrowthrate(%)ImportvolumeGrowthrate(%)Telephone set in total 10,000 sets 111.03 -7.4 150.67 35.7 166.60 10.6Fax machine 10,000 sets 138.99 76.3 166.57 19.8 158.38 -4.8Program controlled exchangers 10,000 sets 2.07 21.8 1.34 -35.3 1.57 17.2Ethernet network exchanger 10,000 sets 44.42 -5.9 49.39 11.2 66.64 34.8Handy (vehicle-board) wirelessphone sets10,000 sets 2206.61 28.3 1272.34 -42.3 1275.16 0.2Interphone 10,000 sets 14.80 213.6 27.58 86.4 25.25 -8.4Mobile communication base station 10,000 sets 1.37 57.5 0.71 -48.2 0.23 -67.6Optical communication equipment 10,000 sets 3.34 5.4 3.22 -3.5 14.20 341.0Remarks: data from China CustomsTable 8 Export of main electronic and communication products between 2003 and 20052003 2004 2005Product Unit ExportvolumeGrowthrate(%)ExportvolumeGrowthrate(%)ExportvolumeGrowthrate(%)Telephone set in total 10,000 sets 19323.70 14.5 19904.60 3.0 19845.1 -0.3Fax machine 10,000 sets 413.73 -1.9 551.29 33.4 548.6 -0.5·40·

Electronics & InformationProgram controlled exchangers 10,000 sets 14.72 279.4 19.05 29.4 16.9 -11.2Ethernet network exchanger 10,000 sets 312.08 151.6 613.52 96.5 757.4 23.5Handy (vehicle-board) wirelessphone sets10,000 sets 9534.31 50.6 14604.60 53.2 22830.0 56.3Interphone 10,000 sets 2653.40 33.5 2818.72 6.2 2376.7 -15.7Mobile communication basestation10,000 sets 1.93 3.2 3.73 93.3 5.8 55.5Optical communication equipment 10,000 sets 1.88 -23.6 16.44 769.1 13.2 -19.7Remarks: data from China CustomsTable 9 Completion of main economic indexes of communication product manufacturing industrybetween 2003 and 2005Project Unit 2003 2004 2005 Growth rate(%)Industrial increment value of all industries 100 million yuan 4000 5650 9004 50.0Inc.: Industrial increment value of the industry 100 million yuan 823 1074 1472 33.7Sales revenue of all industries 100 million yuan 18800 26531 38411 42.9Inc.: Sales revenue of the industry 100 million yuan 3389 4382 6132 34.5Pre-tax profits of all industries 100 million yuan 1038 1500 1742 29.5Inc.: pre-tax profits of the industry 100 million yuan 233 383 347 22.0Exports of all industries US$100 million 1421 2074 2681 37.4Inc.: export of the industry US$100 million 173 297 433 58.2Remarks: data from the Ministry of Information IndustryII. Radio & television equipment industry1.General introductionIn 2005, the radio & television equipment industry develops soundly and all economic indexes grow simultaneously inan all-round way. The year of 2005 is the last year of the 10 th Five Year Plan period. Comparing with the first year of the 10 thFive Year Plan period (2001), the radio & television equipment industry has realized 1.5 times of growth of the grossindustrial value (current price); the industrial increment value up 88%, the sales revenue increased by 1.6 times and thepre-tax profit up 37.4%. The radio & television equipment industry enjoys great development in the 10 th Five Year Planperiod and contributes to the undertaking of meeting the increasing material and spiritual living standards and developing thenational economy and social informatization.According to the economic statistics of China Radio & TV Equipment Industry Association, the net fixed assets of theradio & television equipment industry reaches 2,813,160,000 yuan in 2005, up 12.9% on a year-on-year basis; thepractitioners reaches 28,865 persons by the end of the year, reduced by 3.3%. China Radio & TV Equipment IndustryAssociation has 132 member enterprises. Of which, seven are medium wave broadcasting transmitter manufacturers, two areshort wave broadcasting transmitter manufacturers and 18 frequency modulation transmitter manufacturers; 11 enterprises are1kW and above meter wave TV transmitter manufacturers; 8 enterprises are lkW and above deci-meter wave TV transmittermanufacturers; 9 enterprises are meter wave TV transmitter and transposer manufacturers below 1kW; 8 enterprises aredeci-meter wave TV transmitter and transposer manufacturers below 1kW; 24 enterprises are manufacturers of cable TV andnetwork engineering equipment; 6 enterprises are application TV equipment manufacturers; 11 enterprises are audio andvideo program production, broadcasting control and lighting equipment manufacturers; 6 enterprises are satellite receivingequipment manufacturer and 17 radio and TV peripheral equipment manufacturers.2.Production and saleThe statistics of main economic indexes made by China Radio & TV Equipment Industry Association shows: in 2005,the gross industry output value (current price) hits 8,989,760,000 yuan, up 17.7%. Of which, the radio & TV equipmentindustry gross industry output value (current value) hits 4,137,870,000 yuan, up 39.7%; the export delivery value1,809,500,000 yuan, up 34.6%. Of which, the radio &TV equipment export delivery value is 919,710,000 yuan, up 85.3%;the industrial increment value is 2,347,100,000 yuan, up 18.3%. Of which, the radio &TV industrial increment value reaches·41·

China Business Guide765,150,000 yuan, up 31.2%; the sales revenue reaches 9,236,960,000 yuan, up 23.4%. Of which, the sales revenue of theradio & TV equipment is 4,277,920,000 yuan, up 45.5%; the gross pre-tax profits reach 269,270,000 yuan, up 4.7%; the totalprofits reach 678,120,000 yuan, up 15.4%. See Table 1 for completion of the main economic indexes of the radio &TVequipment industry between 2004 and 2005. See Table 2 for the output and sales of the radio and TV equipment in 2005.【Statistics data】Table 1 Completion of main economic indexes of the radio &TV equipment industry between 2004 and 2005SerialGrowthIndex Unit 2004 2005numberrate(%)1 Gross industry output value (current price) 10,000 yuan 763768.0 898976.0 17.7Inc.: gross industry output value of the industry (currentprice)10,000 yuan 296103.0 413787.0 39.72 Export delivery value 10,000 yuan 134418.0 180950.0 34.6Inc.: export delivery value of the industry 10,000 yuan 49634.0 91971.0 85.33 Industrial increment value 10,000 yuan 198458.0 234710.0 18.3Inc.: industrial increment value of the industry 10,000 yuan 58300.0 76515.0 31.24 Product sales revenue 10,000 yuan 748291.0 923696.0 23.4Inc.: product sales revenue of the industry 10,000 yuan 293952.0 427792.0 45.55 Total taxes 10,000 yuan 25723.0 26927.0 4.76 Total profits 10,000 yuan 58781.0 67812.0 15.4Remarks: "the industry" in the table means the radio &TV equipment industry. The number of manufacturerssubmitted to the Association is variable.Table 2 Product output and sales of the radio &TV equipment industry in 2005SerialOutput Growth Output Growth Sales revenue GrowthProduct namenumber(set) rate(%) (set) rate(%) (10,000 yuan) rate(%)1 Medium wave radio transmitter 537 14.5 561 2.0 4937 12.7Short wave radio transmitter 31 -20.5 31 -18.4 6318 -25.6Frequency modulation radiotransmitter3367 -2.7 3105 -18.3 6690 -20.32 VHF 1kW above TV transmitter 405 55.8 371 57.9 6342 51.1UHF 1kW above TV transmitter 268 -3.6 250 14.2 6517 2.9V1kW blow TV transmitter,transposer4978 390 4945 431.2 2146 78.5U1kW below TV transmitter,transposer117 36.1 114 54.1 1096 291.43 Cable TV equipment 241859 32.14 Application TV equipment 29750 27.75Audio & video program productionand broadcasting control andlighting equipment43334 51.5III. Consumable electronics industry(I)General introductionIn 2005, the consumable electronics industry (mainly referring to the home video and audio products) maintains a goodgrowth momentum and realizes a delightful profit growth of 357.1% on a year-on-year basis. The industry increment value ofthe home video and audio equipment manufacturing industry reaches 67.5 billion yuan, up 8.5% on a year-on-year basis; theproduct sales revenue reaches 374.9 billion yuan, up 7.1%; the total profits reaches 6.4 billion yuan, up 357.1%; the paid-intaxes reach 4.8 billion yuan, increased by 23.1%. According to the incomplete statistics, 2,617 enterprises involve in TV set,radio, radio-recorder, video recorder, camcorder, digital laser player and acoustics equipment manufacturing. Especially inthe flat panel TV set manufacturing sector, a number of new enterprises emerged.·42·

Electronics & Information(II)Production and sale1. TV set. In 2005, totaling 91.25 million TV sets are produced, up 5.9%; 90.70 million sets are distributed, up 6.4%. Ofwhich, 8.42 million black-and-white TV sets are produced, decreased by 34.4%; the sales volume is 8.83 million sets, down30.5%. The output of color TV set is 82.83 million sets, up 13.0%; 81.87 million sets are sold, up 12.8%. In terms of thecolor TV set production, sales and export beginning from 2000, the industry's growth rate started to decline from the year of2003 but still maintains a double-digit growth, outliving the industry adjustment. See Figure 1 for the TV set production ofChina between 2001 and 2005.In 2005, the annual output of 12 color TV manufacturers exceeds 1 million sets and the total production of theseenterprises reaches 77.93 million set, accounting for 94.1% of the total output of the industry; six manufacturers' annualoutput exceeds 5 million sets and the total output of them reaches 64.77 million sets, accounting for 78.2% of the total. Theproduction concentration and brand concentration of the industry are further enhanced. As of 2005, 600 million color TV setsare produced in China and 440 million sets are in service.In 2005, the flat panel TV sector develops rapidly and 10 million sets of PDP and LCD TVs are produced, accountingfor 12% of the total production of color TV; 860,000 sets of rear projection TV sets are produced, decreased by 23.9%; thesales volume reaches 980,000 sets.Unit:10,000sets1000080006000429754926923861391254000200002001 2002 2003 2004 2005Figure 1: TV production of China between 2001 and 2005With more than 20 years of development, China has become the largest manufacturer and seller of color TV of the world.In 2005, the color TV industry of China accounts for over 45% of the total output, and 54.6% of the total sales of the world.Currently the color TV industry has entered into a new historic revolution stage. The demand on the CRT color TV hasslowed down while the new type flat panel TV sector comes to an expansion period. Under such a situation, the color TVenterprises overcame the adverse factors such as the price rising of the raw materials, coal, electric power and petroleum,short supply of transport, reduced export tariff refund, rising labor costs and anti-dumping efforts of the overseas market,adjusted the product structure, reduced production and operation costs, and expanded new international and domestic markets.By doing so, the color TV sector maintains a stable growth momentum and makes great achievements.2. Digital laser player (including VCD, DVD player). In 2005, the VCD and DVD player output reaches 200.18 millionsets, up 3.4% on a year-on-year basis; 183.60 million sets are sold in the year. The DVD disc recorder output reaches 16.96million sets, up 77.4% while the output of optical heads of VCD player and DVD player reaches 587.55 million pieces,decreased by 5.2%; 587.55 million pieces are sold in the year, decreased by 5%. The output of VCD and DVD player coresreaches 200 million pieces, up 3%; 200 million pieces are sold, up 3%. See Figure 2 for the VCD and DVD player productionbetween 2003 and 2005.3. Acoustics products. In 2005, both the output and sales of the acoustics products are quite good. The output of radioreaches 284.60 million sets, reduced by 18.7%; 282.60 million sets are sold, down 19.3%. The output of recorders (includingradio-recorders) reaches 181.81 million sets, up 11.2%; 178.30 million sets are sold, up 9.1%. The output of set acousticsequipment reaches 86.03 million sets, up 5.9%; 81.03million sets are sold, basically equal to that of the previous year. Theoutput of home theaters (referring to the sound system of the home theater) reaches 26.23 million sets, up 234.1%; 24.73million sets are sold, up 215.0%. The output of CD players reaches 67.73 million sets, down 18.0%; 67.73 million sets aresold, reduced by 18.0%. The output of electronic organ reaches 5.50 million sets, up 13.2%; 5.50 million sets are sold, up·43·

China Business Guide13.2%. The output of vehicle acoustics equipment reaches 34.88 million sets; 34.88 million sets are sold. The output of MP3reaches 20.14 million sets; 20.14 million sets are sold.Unit: 10,000(III)Scientific research and new products19360 200182500020000115501500010000500002003 2004 2005Figure 2 Production of VCD and DVD equipmentbetween 2003 and 20051.Formulate standards with support from the governments and participation of enterprisesIn February 2005, the Ministry of Information Industry declared to make the new generation high definition red ray discdecoder standard (hereinafter referred to as EVD) as the recommended standards of the electronics industry. Currently someenterprises have released products with EVD standards to the market and some even release the digital film player meetingthe EVD technical standard, driving development of the digital film of China. Following the EVD standards, the universities,research institutes and enterprises that have the capability of development invested in the products with high capacity andbetter definition and made progresses in the aspect.In June 2005, the Intelligent Grouping Resource Sharing (i.e. IGRS) initiated by Lenovo Holdings Co. Ltd. and thePlatform of Home Network (i.e. E-home) initiated by Haier Group were nominated the recommended industry standards bythe Ministry of Information Industry. Although these two standards are not compatible with each other, the release of thesestandards will certainly enhance development of the digital network industry of China. The development of these standards issubject to the comprehensive strategies of them in the market competition.The digital audio and video compressing technology is the basic technology of the digital audio and video field.Therefore, formulating the digital coding compressing standards is of strategic significance. In June 2002, the researchinstitutes and relevant enterprises of China set up the AVS working team in Beijing. In December 2003, the working teamcompleted the draft of video section of AVS Standard for review. The relevant procedure of testing the standards and thestandard review and approval was gone through between 2004 and 2005. By the end of 2005, the Ministry of InformationIndustry has solicited opinions from the relevant departments and bureaus on the AVS standards and completed the replieddraft of the video section of AVS standards on the basis. In 2005, some IC designing companies have designed AVS decodingchips and have made delightful achievements. The AVS101 HD decoding chip won the title of Top 10 Technical InnovationProducts of Zhongguancun; while the AVS standard is formulating, the backbone enterprises and institutional units of theaudio and video sector set up the AVS Industry Alliance in May 2005. The establishment of the industry alliance indicates theformal launch of the AVS industrialization and the alliance members develop and employ AVS technical products to expandthe application fields.In 2005, the formulation of relevant standards of the digital TV receiving equipment, including the digital TV displayer,STB and machine-card separation, was under preparation and the application tests are conducted smoothly. Of which, 25electronics industry standards such as the Glossary of the Digital TV Receiving Equipment are completed for release.2.Color TV productsIncrease investment in the R&D. Under the situation of product homogeneity of domestic color TV manufacturers andfierce market competition, the set-equipment enterprises have followed up the international advanced technologies andenforce independent development of new products, speed up efforts of tackling the scientific difficulties and development ofnew products of HD TV and flat panel TV that meet the color TV development trend. Several major color TV manufacturersinvested more than 100 million yuan in the research and development.·44·

Electronics & InformationIn 2005, Hisense Group developed the Xinxin chip used for image processing. Now the chip has been widely used in theTV receivers such as the CRT TV, LCD TV and PDP TV and performed very well, ending the history that China completelydepended on import for the core chip used in the color TV production. Haier Group has stuck to development of MPEC-2 andsucceeded. In 2005, the sales volume of the chips exceeds 10 million pieces.3.Rear projection TV productIn 2005, the output and sales volume of rear projection color TV are reduced. The rear project color TV using projectionCRT has reduced sharply while the rear projection TV using LCD and DLP has increased slightly. Some backbone color TVmanufacturers of China gradually reduced investment in the rear projection color TV using projection CRT and turned to thedevelopment and production of rear projection color TV using the micro-display technologies such as LCD, DLP and LCOS.The enterprises and rear projection manufacturers enforced research and development of the projector using LCOStechnology and input big money and manpower in the micro-display technology. Of which, some enterprises set up opticalmicro-display technology research institute and some enterprises focus on development of the key component of the rearprojection TV, optical engine. Currently some enterprises have released three-chip and single-chip LCOS rear projection TVto the market.4.Front projection productIn 2005, the front projector market still maintains a relative high growth momentum. The group consumption demand ishot, especially the development of digital film leads to sharp increase of demand on the front projectors. Therefore, someenterprises turned to development of front projectors. Some enterprises have invested heavily in the development of keycomponents. They design the optical engine independently and produce the front projector with independent brandemploying the key components developed by them. The product is well received in the market and performs as good as theforeign brands that secured the leading position in the market for years.5.Digital TV industryIn 2005, the terrestrial transmission standards of digital TV have not been finalized yet and the backbone enterprises areengaging in development of digital TV products. First of all, they develop products according to the overseas market whilefollow up the formulation of standards of China. Secondly, they are preparing for the product development. Targeting at theATSC format of the US market and DVB format of the European market, they have developed digital TV receivers andexported to the overseas markets; thirdly, the Chinese enterprises developed various products according to different demandson the digital cable TV for the cable TV operators; fourthly, as the digital terrestrial TV standards are not finalized, theindustry is making preparation for development while following up the foreign technologies; fifthly, some enterprises havedeveloped IPTV application software, front-end products and STB for the IPTV industry. Currently, these products have beenemployed in the IPTV network of Hangzhou, Shanghai and Harbin etc.6.Digital laser player and key componentsIn 2005, the common DVD player market capacity home and abroad grows steadily. The Chinese enterprises enforceR&D of new generation of products while producing DVD players and DVD recorders. The enterprises, research institutesand universities continue research of disc products with higher capacity and definition using the red ray technology. Theyhave developed optical heads and small cores for the new generation products using the AVS chip design system developedindependently in China.Progresses have been made in the development and production of key components of the digital laser player. The opticalheads of DVD players have been put into mass production and the suction-in core with relative high technical performancehas also been put into mass production. The multi-dimensional torquer and photoelectric converter which are difficult todevelop are still under development.Following the DVD products employing the red ray technology, the blue-ray product becomes the developmentorientation of the disc industry. Currently the blue-ray products fall into two different formats, BD format and HD-DVDformat. Constrained by the capital and technical strength, the Chinese enterprises have not invested much in the blue-raytechnology and products.·45·

China Business Guide7.Acoustics productsThe acoustics product market home and abroad is still in a growth stage. In 2005, affected by the entertainmentrequirement individualization and outstanding performance/price ratio of portable acoustic entertainment consumableelectronic products such as the MP3, music handset and PMP, the performance of the domestic set acoustic product marketdeclined slightly. Facing the competition situation of the consumer group differentiation, the industry started to discuss howto combine the set acoustics equipment with the digital TV and develop TV theatre. In 2005, the industry has madeprogresses in the amplifier using the digital technology. Some research units developed the digital amplifier chip and put theproduct into mass production. And the digital amplifier products have been released to the market. In a word, with more than20 years of rapid development of the acoustics industry, an inflexion has occurred in the acoustics equipment market. Toshake off the recession, the digital technology must be employed to increase development of new products and rejuvenate theacoustics industry of China.(IV)International and domestic cooperation and foreign tradeProduct export. In 2005, 39.75 million sets of color TV are exported, up 43.4%; the export value reachesUS$5,050,845,200, up 57.6%. Of which, CRT color TV export reaches 25.64 million sets with export value reachingUS$2,230,162,000, decreased by 1.6%. The LCD color TV export volume reaches 7.29 million sets with export valuereaching US$2,102,793,000, increased by 238.0%; 240,000 sets of plasma LCD color TV are exported with export valuereaching US$287.04 million, up 91.8%. What needs to be pointed out is that the export volume of the flat panel TV accountsfor 19.0% of the total export while the export value accounts for 47.3% of the total export value. In 2005, exporting a flatpanel TV equals to exporting 3.6 sets of CRT color TV on the export value. That the export of color TV sector recoversquickly is the result of color TV enterprises' constant expansion of the international market. TCL Group has set updistribution companies or offices in over 10 countries and regions and established production bases of color TV in Vietnamand India, laying a foundation for its internationalization. Konka Group has exported the color TV to more than 60 countriesand regions such as Australia, India and Russia. The other enterprises expedited their paces of expanding the internationalmarket and set up factories or hold or participate in the international exhibitions in Russia, East Europe and Africa. All thesemeasures enforced exchange and cooperation between the Chinese color TV industry and the foreign counterpart and brokethe limitation of the new international trade protectionism to the color TV export of China.In 2005, the radio-recorder export volume reaches 180.73 million sets, decreased by 14.3%; the export value reachesUS$7,145,100,000. The laser player export volume reaches 173.14 million sets, equaling to that of the previous year whilethe export value reaching US$7,333,380,000. The export volume of radio reaches 272.60 million sets, decreased by 10.9%;the export value is US$423.64 million. The export of laser phonograph reaches 57.73 million sets with the export valuereaching US$670.55 million. The vehicle acoustic export volume is 29.27 million sets, up 8.2%; the export value reachesUS$1,074,870,000. The professional acoustics equipment export volume is 23.21 million sets with the export value reachingUS$661.87 million. The electronic organ export volume reaches 4.80 million sets while the export value reaches US$208.16million. The laser player core export volume reaches 20.88 million sets while the export value reaches US803.46million. TheMP3 player export volume reaches 13.92 million sets.International and domestic cooperation. In 2005, the color TV enterprises of China saw a new turn of competition andmerger. The color TV enterprises are looking for partners to develop fatherly. The domestic color TV enterprises engage inintensive cooperation with foreign multinational companies. The specific measures include: first of all, set up digital videotechnology development laboratory with foreign companies; secondly, establish strategic ties with multinational companies toexpand the three-chip LCD rear projection TV market; thirdly, cooperate with the large enterprises of the US and Japan onthe technology development. The strategy of cooperating with international technical powers is helpful for the Chinese colorTV enterprises to improve the technical strength.The cooperation among domestic backbone enterprises is accelerated. The Color TV Summit hosted by the VideoIndustry Association was convened in May 2005 in Beijing with participation of senior leaders of nine color TVmanufacturers, namely TCL Group, Changhong Electric Co. Ltd., Konka Group, Skyworth Group, Hisense Group, XiamenOverseas Chinese Electronic Co., Ltd., Haier Group, SVA Group and Panda Electronic Group. The total output of color TV of·46·

China Business Guideyuan; the second is the small-sized projection hall that can accommodate about 50-100 audiences; China has about 20,000such cinemas. The investment of each projection hall is about 300,000 yuan; the third is the electric cinema and China hasmore than 200,000 such cinemas. These cinemas are mainly located in the living quarters, institutional organs, schools, corpsand rural areas where have the audiences are small or the mobile projection sites. The average investment of each site isabout 50,000 yuan. Although the investment in such cinemas is only dozens of thousand yuan, such cinemas are expected tobecome the first market that the digital film equipment manufacturers enter into as they are large in quantity and easy to enter.The reason that the investment in these three kinds of cinemas is quite different is because the performance of the projectors,the acoustics equipment and players is different; so the price. The market of the digital cinema restructuring of China will beworth 26 billion yuan, said the experts of the industry.In recent years, the Chinese enterprises have developed different equipment with independent intellectual property rightsaccording to the market, e.g., the film player receiving films transmitted by the satellite and the film player for the filmsstored in the hard disc and compact disc; and the projectors with different specifications are also developed. The developmentand production of the equipment will drive development of the digital film industry of China.(VI)Existing problemsFirst of all, the structural contradiction is outstanding and the core foundation industry is weak. The Chinese electronicsand information core foundation industry is weak and affects independent development of the consumable electronic products.The core industries such as the IC, software, new type display device, electronic material, electric instrument and dedicatedequipment are the key deciding the independent development of the electronic information industry while these coreindustries of China are left behind. China depends on import of the critical and core electronic components, chip, operatingsystem and a great number of dedicated instrument and equipment, especially the display used by the flat panel TV, nearly allof which is imported. All these elements make development of the consumable electronics industry be constrained by theforeign enterprises and the industry is basically at a stage of passive imitation and tracking.Secondly, the independent innovation capability is weak and the situation that the Chinese enterprises depend on theforeign enterprises in terms of the technology has not been changed yet. The patents of information technologies in China aremostly applied by foreign enterprises. The patents applied by Chinese enterprises are mostly for the utility model and design.Few patents are for invention, let alone invention patent applied in the foreign countries. The pressure facing the Chineseenterprises from the intellectual property and patent fees is increasing; therefore the adverse influence to the production andoperation of the enterprises are outstanding. On the standard formulation, less than 2‰ of Chinese enterprises take part in theISO and IEC standard formulation. The independent innovation capability and awareness of Chinese enterprises are weak.The concept shall be clarified that the enterprises are the main force of technical innovation. As a matter of fact, the technicalinnovation system with the enterprises as the main force has not formed yet and the government does not offer sufficientsupport for the enterprise innovation and corresponding measures are not in place.Thirdly, China lacks of large enterprises and world famous brands with international competitiveness. In 2005, the totaloperation revenue of the Top 100 electronic and information companies is US$98.6 billion, slightly higher than that of IMB,which is US$96.5 billion in the same year. Compared with the multinational companies, the Chinese companies have a longway to go in terms of the company size. What's more, the Chinese companies lack of famous brands and have engaged inoperation without brand building. Their products have to be sold at a lower price in the international market and manycompanies become cheap manufacturers of world famous brands.Fourthly, the international trade protectionism prevails and the Chinese enterprises face challenges of anti-dumping andintellectual property right and enforced technical barriers from the multinational companies.Fifthly, the non-standard operation in the circulation field seriously squeezed benefits of the manufacturers and causedlittle profits of the manufacturers. This is one of the reasons that the Chinese enterprises lack of development momentum.Sixthly, although China has accessed to the WTO for four years, the Chinese enterprises did not study the WTO rules.Under the WTO principles, the government did not offer sufficient support to the enterprises and not formulate supportiveindustrial policies.·48·

Electronics & Information(VII)Development directionDuring the 11 th Five Year Plan period, the digital audio and video industry shall optimize the industrial developmentenvironment and advocate a development guideline of security, environmental protection and energy conservation so as torealize independent innovation, common development and resource sharing and grow bigger and stronger.【Statistics data】Table 1 Major development fields of audio and video industry of China during the 11th Five Year Plan periodMajor fieldFundamental commontechnologies and productsDigital TVDigital storage technologiesand relevant productsDigital audio fieldDigital film fieldDigital home technologiesand productsDevelopment contentDigital audio and video coding and decoding, digital interface, technologies andproducts, set product core critical components, key equipment, environmentalprotection, energy-saving technologies.Digital TV program production, program broadcasting, program transmissionequipment, digital TV receiving equipment (including fixed receiving equipment andmobile receiving equipment etc.), data broadcasting system equipment and network TVsystem equipment.Compact disc storage technologies and products, hard disc storage technologies andproducts, semi-conductor storage technologies and products.Digital audio broadcasting transmitter, receiving equipment, Hi-Fi acousticstechnologies and equipment.Digital film program production equipment, digital film satellite transmission andreceiving equipment, digital film system equipment meeting the public and homeentertainment requirements (including projection equipment, acoustics equipment,management, storage, playing and control system).Digital home network system technologies and productsTable 2 Production and sale of consumable electronic products between 2003 and 2005Unit: 10,000 sets2003 2004 2005Product nameSalesvolumeGrowth rate(%)SalesvolumeGrowth rate(%)SalesvolumeGrowth rate(%)Black-and-white TV 284 -9.2 1272 347.5 883 -30.6Color TV 6500 23.6 7256 11.6 8187 12.8Inc.: flat panel TV 934Radio 25525 17.1 35000 37.1 28260 -19.3Recorder 25525 35000 37.1 17830 -96.3Digital laser player 9780 8.1 19360 98.0 18360 -5.2Set acoustics equipment 1852 72.4 8120 338.4 8103 -0.2Home theatre 712.3 70.4 785 10.2 2473 215.0CD player 10000 61.6 8255 -17.5 6773 -18.0Electric organ 111.6 -2.1 486 20.1 550 13.2Vehicle acoustics equipment 3488VCD &DVD player core 9172 19361 111.0 20000 3.3MP3 player 2014Remarks: data from the Economic Operation Department of the Ministry of Information Industry, ChinaElectric Acoustics Industry Association and China Video Industry Association·49·

China Business GuideTable 3 Output of main consumable electronic products between 2003 and 2005Unit: 10,000 sets2004 2005Product name2003 outputGrowth rateOutput(%)Output Growth rate(%)Black-and-white TV 280 1284 358.6 842 -34.4Color TV 6522 7329 12.4 8283 13.0Inc.: flat panel TV 1000Radio 25525 35000 37.1 28460 -18.7Recorder 19041 16350 -14.1 18181 11.2Digital laser player 11550 19360 67.6 20018 3.4Set acoustics equipment 9200 61947 573.3 58755 -5.2Home theatre 1853 8120 338.2 8603 5.9CD player 712 785 10.3 2623 234.1Electric organ 10000 8255 -17.5 6773 18.0Vehicle acoustics equipment 111 486 337.8 550 13.2VCD &DVD player core 3488MP3 player 9200 19361 110.4 20000 3.3MP3 2014Remarks: data from the Economic Operation Department of the Ministry of Information Industry, ChinaElectric Acoustics Industry Association and China Video Industry AssociationTable 4 Export of main consumable electronic products between 2003 and 2005Unit: 10,000 sets2003 2004 2005Product nameGrowth rateGrowth rateGrowth rateOutputOutputOutput(%)(%)(%)Black-and-white TV 199.6 -13.2 270 35.0 783 190.0Color TV 2277.2 18.7 2772 21.7 3975 43.4Inc.: flat panel TV 754Radio 24625 17.3 35000 42.1 27260 -22.1Recorder 18441 -9.2 5353 23.0 24676 360.0Digital laser player 9780 29.6 17411 78.0 17314 -0.5Set acoustics equipment 1668 322.0 7042 0.5 6603 -6.2Home theatre 7600 24.0 7755 2.0 5773 -25.5CD player 375.2 275.2 445 18.5 480 7.9Electric organ 2228 2703 21.3 2927 8.2Vehicle acoustics equipmentVCD &DVD player coreMP3 playerMP3Remarks: data from the Economic Operation Department of the Ministry of Information Industry, ChinaElectric Acoustics Industry Association and China Video Industry AssociationIV. Computer industry(I)General introductionIn 2005, the computer industry of China maintains a rapid development and sees enlarging industry size, optimizedindustry structure, improved industry level, stable growth of import and export and rapid growth of the market. The favorablesituation is a result of the industrial restructuring and changes of the growth mode. The growth quality and benefit increaseare emphasized in the process.·50·

Electronics & Information(II)Production and sale1.ProductionIn 2005, the computer manufacturing industry of China reported sales revenue of 1,045.25 billion yuan, up 21.7% on ayear-on-year basis, accounting for 33% of the electronics manufacturing industry; the export delivery value is 798.93 billionyuan, up 27.8%, accounting for 43.4% of the electronic manufacturing industry; the industrial increment value reaches 201.5billion yuan, up 22.4%, accounting for 22.4% of the total of the electronics manufacturing industry; it has secured the firstposition for three years in a row.In the year 80.838 billion micro-computers are produced, up 35.3%. Of which, the laptop output is 45.649 million sets;3.18 million sets are servers; 160.576 million sets are displays; of which 130.764 million sets are LCD; and 35.558millionprinters.The industry clustering benefit is outstanding. Currently the computer industry of China has formed three productionbases tied by the industrial chain, namely the Pearl River Delta, Yangtze River Delta and Bohai Sea Rim. The aggregationeffect brought by the industry base consolidates the position of China as the global computer manufacturing center and drivesproduction and sales capability of the Chinese companies on the set machine, peripheral equipment and supportive productsand increases the influence of China in the global industry layout. In 2005, the micro-computers are mainly produced inJiangsu, Shanghai and Guangdong, totaling 68.364million sets, accounting for 84.6% of the total PC output. The regionaldistribution shows that the PC output in the eastern area of China is 80.665 million sets, accounting for 99.7% of the total PCoutput; the central and western area account for less than one percentage point in this aspect.Achievements made in the industrial restructuring. The proportion of high-end PC products is increasing while thedesktop PC development slows down; the proportion of laptop in the micro-computer is enlarging. The output of desktop PCincreases by 9.1% in the year, 26.2 percentage points lower than the average growth rate of the micro-computer. The laptopoutput is 45.649 million sets, an increase of 18.149 million sets on a year-on-year basis; accounting for 56.5% of the totaloutput, 11 percentage points higher than that of the previous year. The display output grows by 58.2%. The LCD outputgrows by 69.2%, higher than the display growth rate, accounting for 81.4% of the total display output of the year.2.SaleIn 2005, the sales of the Chinese computer market hits 476.22 billion yuan, up 16.6% on a year-on-year basis. Of which,the software sector grows by 17.9%; IT service grows by 20.1%. The market structure of the computer products hasexperienced large changes and the hardware products account for 70.9% of the market, or 0.6 percentage point lower than theprevious year; the shares of software and IT service are enlarging continuously; the software sector increased by 0.2percentage point while the IT service sector 0.4 percentage point. In the hardware equipment market, the growth of thecomputer system, peripheral equipment and the network equipment is slow and the growth of sales value is below 13%. Onthe contrary, the digital product market grows rapidly, up 59.3%, becoming an important force driving growth of thehardware market.Computer system market. In 2005, the sales of the Chinese computer system market grows by 18.8%. Because of theprice declining, the annual sales value only grows by 8.3%. With improving performance and sharp price declining, thelaptop becomes the prior choice of personal users. Totaling 3.007 million laptops are sold in the year, up 37.5%; the salesvalue grows by 17.3%. The laptop is the sector enjoying the most rapid growth rate in the computer system market.Peripheral equipment market. In 2005, the peripheral equipment market enjoys a stable growth. The sales of the discstorage system, multi-purpose flash (MPF) and the projectors grow by about 50% respectively, these sectors becoming themain force driving growth of the peripheral equipment market. Easy for carry and high capacity, the portable hard disc enjoyshot demand. The annual sales volume grows by 58.4% while the sales value grows by 50.8%; it becomes the product with thehighest growth speed in the peripheral equipment market.Network equipment market. In 2005, the network product market of China grows rapidly. The popularization of theWLAN and the consumers' increasing attentions to the network security, the WLAN and the network security equipmentbecome the products enjoying the highest growth speed. The sales value of WLAN equipment hits 1.16 billion yuan, up43.0%; the sales value of the network security equipment hits 1.94 billion yuan, up 31.3%.·51·

China Business GuideThe traditional network product market such as the hub, exchanger and router grows steadily. However, withpopularization of the broadband access means such as the ADSL, the traditional dial-up connection method will be replaced.The sales volume of Modem reduces by 45.8% in the year while the sales value reduces by 49.1%.Digital product market. With 3C technological integration and development of SOC and the embedded systemtechnology, the price of digital 3C products is declining and the multi-media processing function is enhanced. Themulti-media digital equipment market such as the MP3, MP4, digital camera and PDA grows rapidly. The digital productmarket grows by 59.3%, becoming the main force driving development of the hardware product market. The sales volume ofMP3 hits 6.154 million sets, up 43.7%; the digital camera sales volume hits 4.338 million set, up 64.8%; the PDA salesvolume reaches 4.935 million sets, up 38.4%.(III)International cooperation and foreign tradeIn 2005, the import and export of computers hit US$188.12 billion. Of which, the export value is US$124.78 billion, up27.5%; the import value is US$63.34 billion, up 24.0%.1.ExportIn 2005, except the export of the scanner, floppy driver and CRT display decreases slightly, the others realize growth ofdifferent extent. Of which, the laptop, hard disc driver, router and Modem grow by over 40%.The Top 5 export destinations are Hong Kong SAR, the US, Japan, the Netherlands and Germany, totaling accountingfor 73.7% of the total export of China. The export to Hong Kong SAR hit US$31.7 billion, surpassing the US's US$30.3billion, and Hong Kong SAR becomes the largest export destination of computers of China. The export of computer to India,Luxemburg, Ireland, Canada and Malaysia grow sharply.The computer export of China is still dominated by the foreign-funded enterprises. The foreign-funded enterprisesaccount for 92% of the total computer export of China. Of which, the export of the solely foreign-funded enterprises reachesUS$98.26 billion, accounting for 78%. The export of private enterprises grow rapidly, up 48.7%; the product export ofstate-owned enterprises grow slowly.2.ImportIn 2005, except the import of hard disk drivers grow by 56.74%, the other computer products grow relatively slow andmany products even negative growth. The products such as the hard disk driver, display and router which account for a largeproportion of the import maintain high growth and the computer product import grows by 23.98%. The import of solelyforeign-funded enterprises reaches US$45.1 billion, accounting for 71.2% of the total import of the computer products; theimport of the state-owned enterprises accounts for 12.3% of the total import of computer products.(IV)Analysis and anticipationIn 2005, the education market and government and enterprise informatization is the major force driving the desktop PCmarket growth. The demand from the mature IT technology application industries such as the finance and telecom industriesslow down. During the same term, the informatization of the traditional logistics and manufacturing industries become hotand the information system of the healthcare and the epidemic prevention system and clinic medical treatment informationsystem speed up informatization. The agriculture informatization is valued while the focus of the industry informatization ofChina has transferred from the key industries to the traditional industries.The small- and medium-sized enterprises become the highlight of the IT application market of China. The proportion ofthe informatization investment from the SMEs in the IT total investment is increasing. The building content has expandedfrom the simple basic network framework to the business application systems. The SME informatization has come to thegrowing stage and drive growth of the computer market of China.Facing the ever fierce competition in the computer market, the enterprises shall constantly adjust the competitionstrategies. The specific measures include: first of all, the enterprises constantly release individualized products to meetrequirements of different consumers in the maturing computer market; secondly, as the price competition is even intensive,most of the foreign brands in the Chinese market reduce prices to expand the market share, which squeeze the space of the·52·

Electronics & InformationChinese brands and small brands. Thus the brand concentration in the market is increased slightly; thirdly, some traditionalhome appliance manufacturers enter the laptop market and some of the enterprises are forced out of the market, constantlyadjusting of the computer market structure. The competition in the computer market of China has transferred from theall-directional competition to the differentiated dominant markets. The competition means have diversified from theproduction line to the core business strengthening and brand lift.The e-government and digital Olympic venue building will significantly enhance development of the market ofcomputing equipment, software and IT services; the informatization of the traditional industries such as the agriculture,medical service and construction industry will be deepened; the popularization of digital home will become a new drive ofthe rapid development of the market of consumable IT products. It is predicted that the computer market of China will growstably in 2006.(V)Industry development during the 11 th Five Year Plan periodDuring the 11 th Five Year Plan period, the computer industry of China will optimize the industry structure, improve theindustrial level and change the growth mode based on the scientific development with focus on independent innovation. Themain development thinking include: first, consolidate the industrial base and break the industrial bottleneck, optimize theindustrial structure and enhance the industrial cluster building; secondly, form a technical innovation system with theenterprises as the main force quickly and enhance the independent innovation capability; thirdly, guide the enterprises togrow bigger and stronger and improve their capability on the capital operation and the brand operation; fourthly, give equalattention to the "introducing in" and "going global" and speed up the paces of internationalization.During the 11 th Five Year Plan period, China will give priority to and underpin development of seven sectors such as thecomputer system, network and information security equipment, digitalization 3C, mainly improve the independent designcapability of enterprises on the complete set and system structure and quicken up formation of the technologies and productswith independent intellectual property rights so as to enhance the industry scalization and increase the market share home andabroad. The major projects of the seven sectors include: first of all, the emphasis will be placed on the high-performancecomputer system, high-end server, PC, portable computer, industrial control computer and embedded computer in thecomputing system sector. Secondly, in the network equipment and product sector, the emphasis will be placed on thehigh-performance exchange equipment, high-end router, broadband mobile wireless access equipment and terminal, digitalhome network and terminals, new type high-performance network card and next generation Internet equipment. Thirdly, inthe information security equipment and product sector, emphasis will be placed on the network security protection system,encrypted product and system, network isolation and exchange system, trusted computer system, security identification andcertificating product, safety storage, backup and recovery equipment and system, information product security loophole testand risk assessment system. Fourthly, in the digital 3C product sector, emphasis will be placed on the mobile multi-mediainformation terminals (including the PDA and multi-media handset with the functions of wireless communication and mobileTV), IT home appliance products (including the digital home appliance, IP STB, network video player, intellect-beneficialrecreation and game products), digital video and audio products (including digital camera, digital vidicon, MP3 player andMP4 player), digital video monitor product and system, and positioning and navigation service products and system. Fifthly,in the peripheral equipment sector, the emphasis will be placed on the new type display (including digital projector, OLEDdisplay, flat panel display, high-luminance and high-resolution display), printers (including the multi-functional printer, inkjetprinter, laser printer, mini-printer etc.), storage equipment (including new type high-density micro hard disk, mass datastorage system and product, electromagnetic storage product and optical storage product etc.), voice combination andrecognition product and other new type input and output products. Sixthly, in the computer component, peripheralcomponents and consumable sector, the emphasis will be placed on the mainboard and functional boards, key spare parts andcomponents of peripheral equipment (stylus print head, inkjet print head, laser printer engine, laser engine of the project,optical spare parts and components, magnetic head component, optical head component, substrate, and various micro motors),high-performance UPS and various printing materials (inkjet head, ink, ink cartridge, selenium drum, laser ink powder andcolor photo inkjet paper etc.). Seventhly, in the dedicated computing equipment and application sector, emphasis will beplaced on the electronic system and dedicated equipment of the finance, commerce and fiscal and taxation, IC card and·53·

China Business Guidereading and writing equipment and system, RFID and electronic mark products, digital safety production monitor and controlsystem, digital medical equipment and system, intelligent traffic product and system, biometric identification product andapplication system.【Statistics data】Table 1 Production volume of main computer products of China between 2003 -2005Unit:10,000 setsProduct 2003 2004 2005 Growth rate(%)Desktop PC 2585.7 3224.8 3518.9 9.1Laptop 630.3 2750.0 4564.9 66.0Router 168.3 318.0 89.3Display 7326.0 10148.9 16057.6 58.2Inc.: LCD 7726.0 13076.4 69.3Printer 1716.8 2754.0 3555.8 29.1Remarks: data from the Ministry of Information IndustryProductTable 2 Sales volume and sales value of computer system products of China between 2003 -2005Salesvolume(10,000 sets)2003 2004 2005Sales value Sales Sales valueGrowthSales volume(100 million volume (100 millionrate(10,000 sets)yuan) (10,000 sets) yuan)(%)Sales value(100 millionyuan)Desktop PC 1239.5 739.9 1421.6 767.7 1646.3 15.8 805.1 4.9Laptop 156.1 215.8 218.6 274.4 300.7 37.6 322.0 17.4PC server 27.7 64.5 34.8 71.6 42.7 22.7 83.9 17.2NT workstation 2.7 83.1 3.2 85.6 3.8 18.8 90.0 5.1RISC server 1.6 19.9 1.8 20.5 2.0 11.1 20.9 2.0UNIX workstation 1.4 6.1 1.5 6.5 1.7 13.3 6.9 6.2UPS 91.2 20.4 100.1 22.3 114.1 14.0 24.1 8.1Disk storage system6871.2 28.6 9963.3 31.8 14970.8 50.3 37.3 17.3Growthrate(%)(TB)Printer 520.7 106.0 598.1 91.8 686.6 14.8 95.8 4.4Multi-function machine 50.0 13.5 78.8 20.0 121.3 53.9 26.8 34.3Optical storage 1540.7 48.2 1680.4 54.8Scanner 105.5 6.9 97.7 5.9 91.3 -6.6 5.2 -11.9Projector 16.3 36.5 24.3 42.7 35.8 47.3 54.2 26.0Display 1406.6 198.4 1638.8 229.1 1889.3 15.3 250.3 9.3Portable hard drive 61.4 8.2 70.4 9.4 111.6 58.5 14.1 50.8Router 23.5 54.1 30.8 70.1 35.3 14.6 78.6 12.1Exchanger (10,0001789.0 69.5 1829.0 74.6 2055.5 12.4 83.3 12.3ports)Modem 356.0 3.0 389.7 3.2 211.3 -45.8 1.6 -50.0ADSL 2135.7 68.7 2333.4 51.7 2768.0 18.6 53.8 4.1Network card 1016.0 4.9 1146.0 5.3 1395.0 21.7 5.4 1.9MP3 player 177.3 15.6 428.4 34.8 615.4 43.7 45.5 30.8Flash storage 420.7 10.7 594.6 17.3 772.8 30.0 21.8 26.0Digital camera 135.4 29.3 263.2 54.7 433.8 64.8 85.7 56.7PDA 218.5 58.6 356.7 90.5 493.5 38.4 161.3 78.2Remarks: data from CCID Consulting. The sales volume of exchanger in 2004 is the revised value.Table 3 Import and export of computer products between 2003 and 20052003 2004 2005ItemSum (US$100million)Growth rate(%)Sum (US$100million)Growth rate(%)Sum (US$100million)Growth rate(%)Import value 344.5 102.0 510.9 48.3 633.4 24.0Export value 663.4 85.5 979.0 47.6 1247.8 27.5Total import &exportvalue1007.9 91.0 1489.9 47.8 1881.2 26.3Remarks: data from the General Administration of Customs·54·

Electronics & InformationTable 4 Import and export value of main computer products between 2003 and 2005Unit: US$10,000Item2003 2004 2005Export value Import value Export value Import value Export value Import valueMicro computer 220383.1 4708.0 274647.4 6391.8 370648.2 6324.5Laptop 1131412.9 52356.0 2077445.9 73625.7 2990203.4 65411.4Calculator 94144.5 3730.9 80514.0 3456.9 81640.6 3947.0Printer 431666.5 84225.2 614497.5 86827.3 688673.6 76621.5Inc.: Stylus printer 9399.5 20058.4 10440.3 13449.4 12622.2 9989.0Laser printer 282400.3 33919.9 395284.4 36406.9 418615.0 36461.2Inkjet printer 129506.2 24758.0 188306.1 29516.9 227269.8 21090.5Scanner 44175.6 8024.4 36534.6 6581.4 411076.9 6593.8Hard disk driver 205532.2 303484.9 271031.3 461025.4 19144.5 722.605.3Floppy driver 38124.5 24994.9 30412.1 14059.5 380710.5 8037.8CD driver 276221.3 221160.5 369583.7 271640.7 1614798.2 323607.4Display 957241.1 60230.2 1473016.7 88807.9 1453864.8 97514.8Inc.:LCD 680207.3 44266.1 1185986.8 76567.1 159046.3 86625.9CRT display 255973.9 13151.0 271613.4 9876.9 16299.0 10224.0ATM 7014.7 8749.7 11386.3 10127.9 42867.9 8226.6UPS 25950.8 8034.8 33456.5 8677.4 19502.4 9269.4Hub 8990.6 1012.7 22288.6 1514.7 88031.3 506.9Router 16286.7 25953.8 56384.7 29387.4 160948.4 36115.6Modem 49288.7 35184.6 110750.1 19211.3 553530.0 17543.4Digital camera 485586.4 88188.0 411076.9 100444.7Remarks: data from the General Administration of CustomsV. Software industry(I)GeneralIn 2005, China’s software industry development environment was improved and the industry continued rapid growthand obtained great progresses. The industry scale reached 390bil yuan for the whole year, increasing by 40.3% year on year,having a share of 10.2% of national electronic information industry, 2.1% of national GDP and 5.9% of global softwareindustry.The sales amount of domestic software market rose from 254.8bil yuan of 2004 to 360.3bil yuan of 2005, up 41.4%, andthe export amount reaching 3.6bil USD, up 28.6%, having a share of 1.3% of national electronic information industry exporttotal and an industry population of above 0.9 mil persons in the whole year.Software industry structure. The growth of software services is obviously faster than that of soft products, resulting in abigger share in the industry. The software sales amount hit 193.2bil yuan for the whole year, 49.5% of the total amount of thesoftware industry, up 26.4%. The sales amount of software for system integration reached 167.1bil yuan, 42.9% of softwareindustry total amount, up 63.8%. The software export amount was 3.6bil USD, 7.6% of software industry total amount.Software enterprise development. By the end of 2005, the accumulated number of appraised software reached 13194,and 30992 software products had been registered, including 2587 software enterprises appraised and 7916 software productsregistered in 2005. Currently, above 60 software enterprises have 1000 employees, 29 enterprises achieve incomes above 1bil yuan, 37 enterprises have income between 500mil to 1 billion yuan and 262 enterprises between 100mil-500mil yuan. Inaddition, about 1000 software outsourcing enterprises exist.In 2005, there were 157 key software enterprises in China’s national plan. By the end of 2005, 237 software enterpriseshave qualified CMM3 certification and above, including 40 qualifying CMM4 and 29 qualifying CMM5 and CMMI5.Totally 1738 enterprises obtain the system integrator qualification certification across China, including 81 enterprisesacquiring A-level qualification certification, 330 acquiring B-level qualification certification, 900 acquiring C-level·55·

China Business Guidequalification certification, and 427 acquiring D-level qualification certification. Software enterprises make progresses inestablishing and improving technical innovation system and promoting innovation capabilities etc.(II)Scientific research and new productsIn 2005, China made new progresses in software technology and product innovation. The market share of domesticsoftware continuously increased and the application was wider than before.The sales amount (only referring to software, excluding hardware, system integration and service cost) of Linux of thewhole year reached 175 mil yuan, 9.8% of domestic operation system. The sales amount of Open Office packages andtrans-platform office package (e.g. Evermore Office) hit 160mil yuan. The performance, quality, stability and reliability ofRedflag-Linux, CS2C-Linux, Co-Create-Linux and other Linux operation systems and Evermore Office, Red Office andother office software were greatly improved and widely applied in electronic government affairs and genuine softwarepromotion of city-level people’s government etc.Local database system development made great progresses. Wuhan Huagong Dameng Database Co.,Ltd., Basesoft andother IT companies’ database management system software were widely applied in multiple large application systems.Middleware technology and products developed quickly. Along with the gradual increase of platform products,components and coroutine packages also attains development. New products include VSP of Tongtech Co., Ltd. and tablingsoftware of CVIC Software Engineering Co., Ltd. Domestic middleware companies started to launch independent“development standard” and form new technical alliance and established BOA concept through restructuring product lineswith middleware supplier Tongtech Co., Ltd. as a representative.Local management software has entered into the stage of popularization with rapid increasing of competitiveness andindustry integration. UFIDA Software CO.LTD., Inspur Group and Kingdee International Software Group Company Limitedand other domestic dominant management software enterprises jointly issue mobile business strategy and new productsactively, such as UFIDA’s launch of UFmobile series, Inspur’s release of Enterprise Mobile Business Platform and Kingdee’slaunch of mobile product lines.In the field of information security, Rising Corp. Ltd., Kingsoft Corp., Jiangmin SciTech and local antivirus softwarehave captured 70% of the market. Domestic firewall products march forward to the high-end market. NGFW4000 series ofBeijing TOPSEC Ltd., NetEye series of Neusoft Group Ltd. and Secwold Series of Secworld Ltd. have become brandproducts in the sector.Embedded software system and integration service develop well. Local embedded system with independent intellectualproperty makes obvious progress. Hopen embedded operation system of Hopen Software Engineering Co., Ltd., DeltaOS ofCoreTek Systems Incorporated, Linous of Yulong Computer Telecommunication Scientific (Shenzhen) Co., Ltd. andembedded Linux of ZTE Corporation are widely applied in mobile phones, PDA, network computers and PMP productsetc.In 2005, the network game software industry market achieved a value of 4.12bil yuan, up 17.8%. A Swordman’s Love2,QQ Imagination, Heroes in Three Kingdoms Online and a lot of independently developed network game software reached50% network game market share.(III)Scientific and research achievement during the 10 th five-year plan periodProgresses are made in the development of operation system, database management system, middleware software andoffice software and other basic core software.Redflag-Linux, CS2C-Linux, Co-Create-Linux and other Linux operation systems were launched. Kingsoft WPS,Evermore Office, Red Office and other domestic office software and Kylin operation system with independently-developedcore were released.In the sector of database, Neusoft OpenBASE, Wuhan Huagong Dameng Database Co.,Ltd.’s DM series, BJSASC’sOSCAR objective relation database, Basesoft’s Kingbase ES and other local database products were launched.In the sector of middleware, a group of professional companies like Tongtech Co., Ltd., Kingdee International SoftwareGroup Company Limited, CVIC Software Engineering Co., Ltd. and Intervision Co.Ltd. have emerged and a series ofhigher-level middleware products were launched.·56·

Electronics & InformationEnterprise management software witnessed a quick development. UFIDA Software CO.LTD., Kingdee InternationalSoftware Group Company Limited,NEWGRAND Software Co., Ltd.,Inspur Group and Digital China Management SystemsLimited(DCMS) had developed and launched brand products with wide applications, such as UFIDA’s ERP-NC, ERP-U8,Kingdee’s EAS and K/3, Newgrand’s URP i6 series, Inspur’s ERP/myGS and DCMS’s Yifei ERP etc. Above products aredominant in middle- and low-end markets and developing towards high-end market.Information security developed fast. Currently, a domestic firewall product system with NetEye series, Secwold V Seriesand TOPSEC series and other brand products as the major part has formed. Particularly, Rising Corp. Ltd., Kingsoft Corp.and other companies also specially launched local-made antivirus software. These products have a big share in domesticinformation security market and often win the bids for governmental purchase.Great progresses were made in the R & D and application of embedded software. As for operation system, mainproducts include Hopen developed by Hopen Software Engineering Co., Ltd., Delta by CoreTek Systems Incorporated andSmart by Zhejiang University etc. As for supporting software, main products include Hopen SDK developed by HopenSoftware Engineering Co., Ltd., Lambdatool by CoreTek Systems Incorporated and OpenBASEMini by Neusoft Corporation.In the aspect of key application and platform, main products include HMAP intelligent mobile phone software platformdeveloped by Hopen Software Engineering Co., Ltd., Hanwang handwriting identification system by Hanwang Corporationetc. In the aspect of application software, main products include Haier Group’s LCD TV embedded software and airconditioner optimization and energy-saving control system by South China University of Technology etc.Great development were also made in the industrialization of multi-media software, coordination software, educationsoftware, geography information system, network tools, Tibetan and other minority language software.(IV)Key projects and itemsIn 2005, Ministry of Information Industry utilized electronic information industry development fund to support thedevelopment and industrialization of new-generation safe BIOS, the development of network game monitor software,network game development platform, the development of digital TV receiving software, the development andindustrialization of large database management system and the development and industrialization of major products,encouraged the government of all levels and all walks of life to invest in software industry and continued to support theconstruction of national software and IC public service platform to provide common and basic technical supports andservices for the development of software industry.In the field of electronic government affair, the Phase I standardization project branched out in 2005. The standardformulation stably moved forward, resulting in the formulation of a group of standard drafts including StandardizationGuidance, government information resource catalog and exchange catalog. In the aspect of agriculture informatization,Golden Agriculture Project was officially approved and initiated and “three electrics gather one” agriculture informationservice pilot project was kicked off by the Ministry of Agriculture. In the aspect of education software, Ministry of Educationinitiated “digitalized study harbor and life-long learning society construction and demonstration” education reform programat the end of 2005, and funded higher education scientific and technological innovation project and 44 major programs. Inearly 2005, National 863 Plan initiated 123 projects in IT sector, added 65 projects in September and another 83 projects atthe year end.In 2005, hi-tech middle and small technical innovation fund totally supported 1552 programs. National Natural ScienceFoundation of China accepted 1417 project applications with 270 applications approved. On Oct. 10, 2005, a small satelliteBeijing No. 1, a major project of Beijing Digital Project, was successfully launched in Russia.(V)International cooperation and foreign tradeIn 2005, Channelsoft (Beijing) Technology Co., Ltd. won venture capital of 31.5mil USD from Soft Bank AIF, Waldeninternational and China Science & Merchants Investment (fund)Management Co., Ltd. Eabax Software (Group) Co.,Ltd.won the capital infusion of 7.6mil USD from Union Fortune Investment Co., Ltd, UK. In Aug. 2005, Microsoft Corporationand Inspur Group inked a contract for a 25mil USD infusion to the latter. In Oct., 2005, Microsoft Corporation invested 20mil·57·

China Business GuideUSD to Chinasoft International for a joint establishment of Chinasoft-Microsoft Online Lab. As for enterprise merge andacquisition and integration, Hinge Software Co., Ltd. acquired Warburg Pincus’ shares in Shanghai Huateng SoftwareSystems Co., Ltd. and AsiaInfo’s HR resource management and business intelligence software businesses with 15mil yuan.The merger of hiSoft Technology International Ltd., Ensemble International Limited and Kesen IT (Asia) Co.,Ltd. resulted ina hiSoft Corporation.In 2005, China achieved software export amount of 3.6bil USD, up 28.2% year on year, mainly exporting to Japan, US,Europe and Southeast Asia etc. The export to Japan was overwhelming, reaching 59% of total, followed by Europe and USAwith a share of 40%, up 4% year on year. The export of software with independent intellectual property made breakthroughs.Guangzhou Zhongwang’s CAD entered into the markets of South Africa, Southeast Asia and US. Evermore’s integratedOffice products accessed into Japan, North America and Africa. UFIDA’s ERP software entered into Southeast Asian market.Antivirus software of Rising Corp. Ltd. and Jiangmin SciTech started expansion in Japanese market.In 2005, MII teamed up with NDRC, MOST and Beijing Municipal People’s Government successfully held theInternational Soft China 2005, building an interactive platform for displaying the main results of the latest development ofdomestic software and information service industry, the progress of new products, IT technology and informatization. MIIhas continued to support the building of Linux public service platform, direct the Software and IC Promotion Center to holdIP China 2005 OSS and IP Annual Conference, established China Linux Industry Strategy Union together with China OSSPromotion Union and Linux enterprises and released OSS China Community to the industry.(VII)Existing problemsFirst, industry policies for embedding software and risk investment need to be carried out. The legislation for industrypolicies shall be accelerated. In addition, industry public service system requires further improvement.Second, the industry scale is small and has low concentration and poor general innovation capability. The industry lackslarge enterprises capable for international competitiveness and independently innovative technologies and products. Themarket share of local software products needs to be continuously increased.Third, the structural contradiction and supply and demand contradiction of software talents are still keen. The lack ofhigh quality innovative software talents cannot meet the demands of the industry development and the application andinformatization of IT.Fourth, the lack of fund for industry development restricts the core technology research and development, enterprisescale enlargement and strength intensification.Fifth, low software output, low outsourcing service capability and internationalization level, low brand recognition andpoor comprehensive competitiveness.Sixth, the software piracy rate is still high. Vicious competition among enterprises tends to seriousness. Order ofsoftware industry needs to be standardized urgently.(VIII)Development plan for the 11 th Five-year Plan PeriodThe development plan of China’s software industry during the 11 th Five-year Plan Period mainly includes:Speed up the development of operation system and core basic software, promote application of Service-OrientedArchitecture, software components and multiplexing technologies, and master the basic software technology withindependent intellectual properties.The whole industry will continue driving embedding software technology and product independent innovation.The whole computer industry will work out corresponding polices and measures to improve the capability ofindependent innovation, enhance the R & D and application of software technologies and products concerning reliablecomputers, network monitoring, disaster tolerance and emergency response etc., accelerate the development of informationsecurity software and the industry to build an independent and controllable information security system.Grasp the development trend and characteristics of software service and outsourcing, encourage and support softwareenterprises to improve software service and outsourcing capability and quality, transfer business mode, broaden businesschannel and market, and accelerate software service and outsourcing business.·58·

Electronics & InformationDevelop industry application software by means of the opportunities in modern service industries including electronicgovernment electronic business, electronic logistics, electronic medical care, electronic manufacture and remote educationetc.Speed up the development of digital industry with effective measures.Develop intelligent Chinese information process software.(IX)Market analysis and forecastIn 2005, China’s software industry value hit 390 bil yuan, 5.9% of global software industry.The market segmentation of China’s software products shows: system software has a sales amount of 10.2 bil yuan, up7.3% and 5.3% of total; support software has a sales amount of 19.6 bil yuan, up 13.9% and 10.1% of total; applicationsoftware has a sales amount of 163.4bil yuan, up 29.6% and 84.6% of total, higher than the other two kinds.In 2005, the value of domestic software service and system integration market hit 167.1 bil yuan, 42.9% of the totalamount of software industry, up 63.8%, higher than the growth of software products. With the progress of softwaregovernmental purchase and electronic government project and the continuous increase of the share of industry dedicatedsoftware to the applications, the enterprise management informatization software promotes the growth of industry generalsoftware market. Rapid increase of network applications, security and anti-virus software and game software will become thehigh light of general software market.The year of 2006 will witness the continuous rapid growth of China’s software industry. The maturity and continuousexpansion of China’s software market, the promotion of the government’s intellectual property protection and thetransnational software enterprise’s recognition to China’s market will surely drive the entry of foreign investment to China’ssoftware market and fuel the development of China’s software enterprises. With the boost of China’s strategy of promotingindustrialization with informatization, the informatization for traditional enterprises, especially the informatization market ofmiddle and small-sized enterprises, will be the key parts of China’s software industry in 2006.It is estimated more software enterprises will explore the network game industry to fully expand the market space andpotentials in 2006.In 2006, the market of mobile software will be expanded to meet the demand of computer platform’s transfer. With theincreasingly complication of end-user’s application system and network environment, comprehensive network securityproducts compliant with user’s demands will be the focus of the development of software industry. In addition, theInternet-based software service industry will also make development.【Statistics data】YearSoftwareindustry scale(100milyuan)Table 1 Software industry’s share in three indexes before 2004 and 2005National electronicsand informationindustry scale(100milyuan)Share in nationalelectronics andinformationindustry(%)NationalGDP(100milyuan)Share innationalGDP (%)Nationalsoftwareindustry scale(100mil USD)2004 2780 30700 9.0 159000 1.7 7826 4.32005 3900 38400 10.2 182000 2.1 8239 5.9Increase rate(%)40.3 25.1 13.3 14.5 23.5 5.3 37.2Remark: Data source: China Software Industry AssociationTable 2 National software market breakdowns in 2004-2005Share innationalsoftwareindustry (%)Unit: 100mil yuanYear Software products Software services Total2004 1528 1020 25482005 1932 1671 3603Increase rate(%) 26.4 63.8 41.4Remark: Data source: China Software Industry Association·59·

China Business GuideTable 3 China software exports in 2003-2005Unit: 100mil USDYearValue ofValue of electronics and Share in value of electronics andIncrease rate(%)software exportsinformation industry exports information industry exports(%)2003 20 33.3 1410 1.42004 28 40.0 2075 1.42005 36 28.6 2682 1.3Remark: Data source: China Software Industry AssociationYearSoftwareindustry scaleSoftwareproductsTable 4 National software industry breakdowns in 2004-2005Software serviceShare in softwareand systemindustry total(%)integrationShare in software Softwareindustry total(%) export2004 2780 1528 55 1020 36.7 232 8.32005 3900 1932 49.5 1671 42.9 297 7.6Remark: Data source: China Software Industry AssociationUnit: 100mil yuanShare in softwareindustry total(%)Table 5 National software industry breakdowns in 2004-2005Unit: 100mil yuanYear System software Support software Application software Total2004 95 172 1261 15282005 102 196 1634 1932Increase rate(%) 7.4 14.0 29.6 26.4Remark: Data source: China Software Industry Association(X)Supplemental notes to statistics on software industry in the articleAccording to the report of the first national economic census in Dec. 2004, China GDP value reached 15.9tril yuan,2.3tril yuan higher than 13.6tril yuan, the statistic value of 2006.According to MII’s all-society statistics after the economic census, China’s electronic information industry scale of 2004achieved 3.07tril yuan, 0.42tril yuan increase comparing with original statistics. In 2004, national software industry scale hit278bil yuan, an increase of 48bil yuan comparing with original statistics and software export value achieved 2.8bil USD,200mil USD up.Report.Supplemental notes originate from the “Special Explanation” of 2006 China Software Industry Development ResearchVI. Electronic special equipment sector(I)OverviewIn 2006, totally 85 enterprises and institutions were engaged in the electronic special equipment production and researchand development in China. There were 29162 persons including 5965 technicians, 5.8% reduction from 2004, serving in theindustry in 2006, decreasing by 2.1% comparing with in 2004. In 2005, the enterprise classification situation in electronicspecial equipment sector continued the trend in 2004. There were 41 state-owned and state holding enterprises, same levelwith the number in 2004. The number of private enterprises hit 33, up 17.8%. The fixed assets net value of the whole industryreached 2285.56mil yuan, 0.2% up, including 2078.53mil yuan of equipment manufacturers, 12.7% up.(II)Production and distributionIn 2005, China’s market scale for electronic special equipment was about 5bil USD, including above 4bil USD forsemiconducting equipment (inclusive of solar cell equipment) and surface mount device. The market share of home-made·60·

Electronics & Informationelectronic special equipment is about 10%. The market share of magnetic material equipment reached 90% in China, and thesale of solar cells and LCDs also dramatically increased.The gross production value, sales income, total profit and realized profit of China’s electronic special equipment sectorcontinued growth in 2005. But the growth speed of economy profit is still slower than the expansion of economy scale. Theshare of electronic special equipment in China’s information product manufacture industry was still very low, which cannotmeet the development demand of the electronic information product manufacture industry.In 2005, the total output of electronic special equipment was 55658 sets, decreasing by 5% year on year, and theproduction distribution rate reached 96.2%, achieving 16.5% growth, reflecting the prosperous market demand. The salesvolume of electronic special equipment increased by 14.9%, having a share of 68% of sales volume of all equipment,increasing slightly comparing with that in 2004. The sales volume of electronic tools and moulds was 45% of the total salesvolume of the production unit, 10% up.Upon product breakdown analysis, electronic assembling wiring equipment grew fastest in 2005 with a sales volumegrowth of 305.7% and a sales amount explosion of 112.2%. The reasons are the low statistics base due to the sector slide in2004, the continuous increase of electronic assembling sector and the periodical features of the product development.Semiconducting and integrated circuit equipment continued rapid growth with a sales volume growth of 57.6% and asales amount explosion of 58.6% and became no. 1 of China’s electronic special equipment. The main reason was that therobust solar battery equipment (incl. battery plate production equipment and battery material production equipment) marketboosted the growth the whole semiconducting equipment market. In 2005, the sales volume of solar grade siliconmono-crystal furnaces was about 300 sets, and the sales amount doubled comparing in that of 2004. The sales amount of theequipment for producing solar cell plates exceeded 100mil yuan, increasing by 100%.In 2005, the sales amount of China’s electronic general equipment increased by 45.8%, the sales amount of purificationequipment rose by 29.4% and the sales amount of environment and reliability experimental equipment grew by 22.3%.In 2005, the sales volume and sales amount of electronic vacuum apparatus and photoelectric apparatus reduced by46.7% and 15.7% respectively, ranking down to No. 5 in the industry. The main reason was that the boom of flat displaycomponents seriously pinched the market space of traditional CPT and CDT color television kinescopes and glass tubes andfurther influenced the equipment for color television kinescope and glass tube production lines.In 2005, the sales volume and sales amount of electronic components and electromechanical equipment decreased by37.6% and 13.6% respectively.In 2005, electronic special tool and mould industry dramatically revived according to industry association statistics. Thesales volume increased by 67.8% year on year. The sales volume of electronic special tools was 7.48 mil pcs, productiondistribution rate of 92.5%, sales amount of 68.28mil yuan, increasing by 64.9%. The sales quantity of special electronicmould achieved 1680 sets, production distribution rate of 98.6%,,sales amount of 201.52mil yuan, increasing by 194.8%.In 2005, the gross sales volume of top 10 enterprises in electronic special equipment sector was 2666.87mil yuan, 59.4%of industry total, increasing by 33.6% year on year. The fulfilled pre-tax profit total was 332.31mil yuan, decreasing by 3%,49.8% of industry total. The profit achieved was 209.40mil yuan, growing by 12.1%, 56.1% of industry total. The salesincome of top 10 industry enterprises exceeded 100mil yuan.In 2005, 16 enterprises in electronic special equipment sector suffered loss, the same with that in 2004. The total losswas 47.34mil yuan, reducing by 27.3% comparing with the previous year.(III)Scientific research and new productsIn 2005, the whole industry’s completed new product projects in total reached 533, increasing by 27.2% year on year.449 of which were electronic special equipment and electronic special mould. The successive production of these newproducts will explore new markets for China’s electronic special equipment. Semi-conducting equipment and the expansion,development and application based on it have become the focus of the new product development in the industry, which willplay an important role to the development of the whole electronic special equipment.Following projects were listed into China Electronic Information Industry Development Fund Project Catalogue:PECVD (plasma chemical vapor deposition) in Solar Cell Special Equipment, silicon wafer multi-wire cutting equipment·61·

China Business Guidedevelopment and industrialization project and COG assembly equipment development and industrialization projects. PECVDdevelopment and industrialization by China Electronics Technology Group Corporation No.48 Research Institute, 8-inchsilicon wafer multi-wire cutting equipment development and industrialization by China Electronics Technology GroupCorporation No.45 Research Institute and COG assembly equipment development and industrialization by China ElectronicsTechnology Group Corporation No.2 Research Institute were listed in the schedule. The development of some 8-inch siliconwafer machining equipment sponsored with the electronic information industry development fund and semiconductingequipment independently planned by the enterprises had qualified acceptance, and some were to enter into the acceptancestage.New type vacuum annealing furnace developed by Beijing Sevenstar Electronics Co., Ltd. has high automation degreeand stable performance. The product technical indexes have reached the technical level of international products of the sametype and won the recognition of the industry. Since its access into the secondary (rechargeable) battery equipmentmanufacture industry in 1997, the company has been a market leader in China with gradual expansion of market share yearand an annual sales amount growth above 100% over the past five years. It has become the largest secondary batteryequipment manufacturer with most complete product series and highest assembly capability in China.Jiangsu Suzhou Purification Group Co.,Ltd. and its branch companies had developed 32 new products, completed 13new product appraisal projects including one state-level project, nine province-level and three city-level projects, launched 16projects with mass-production capability during 2004 and 2005.BG-706 exposure machine, BD-601 integrated circuit taping machine and key equipment for glaze potentiometer lineand other six equipment developed by China Electronics Technology Group Corporation No.45 Research Institute havequalified the scientific and technical result appraisals of Ministry of Information Industry. Production line assessment formegasonic cleaner, probe station and other equipment is started. “Scientific research on 100nm CMP (Chemical MachinePolishing) equipment core technology” undertaken by the Institute has made progress. Centering on CMP equipmentnecessary for 90nm-100nm integrated circuit, the research has made important breakthroughs in polishing headmicro-pressure self-adjustment technology, polishing end-point examination technology, kinematic control technology ofpolishing head and polishing table and other aspects. It has achieved multiple proprietary technology, laying a foundation forproducing CMP equipment with independent intellectual property in China.A major project of “MOCVD(6x2 in.) Production Equipment for GaN” in new material field listed in the National 863Plan undertaken by China Electronics Technology Group Corporation No.48 Research Institute has qualified acceptance andwon high praise. The success of the project enabled China to become one of the few countries with the development andproduction capability for GaN-MOCVD equipment, contributing a lot to release China’s semi-conducting lighting projectfrom the technical bottleneck.Silicon wafer polishing and cleaning machines, chemical wet benches and plasma cleaners developed by ChinaElectronics Technology Group Corporation No.2 Research Institute have been applied in semi-conducting chip manufactureand post encapsulation lines and expanded to solar cell and electronic component production fields. PT-21 polaroidplacement machines developed by the institute solved the technical difficulties of alignment placement, static elimination andcolor speck control. The institute, teamed up with Changchun Guanghua Micro-Electronics Equipment Engineering Centre,Co.,Ltd., successfully developed COG bonding machines, key equipment for TFT-LCD module production line. Based onthis, Taiyuan Fenghua Information Equipment Co.,Ltd. succeeded in the development of SBD-50 dual-position major andpre-pressure integrated bonding machine.The Northwest Machine Co., Ltd. independently developed silicon aluminum minuteness wire drawing machines,potential forming machines and other five new products and qualified provincial appraisal.Lanzhou Rapid Corporation developed X61 1572B-1(24B)digital-control precision grinding machines and X07 105-1multi-wire saw cutting machines to meet the grinding, polishing and cutting demands of 8-12in. large-sized material. X07320-1 silicon bar cutters and X07 700-1 multi-blade slicers developed for solar cell industry were delivered to users forapplication.Shanghai Nissin Machine Tool Co.,Ltd. independently developed NWS6X2 and NWS270 silicon multi-wire cutters forthe application of solar cell industry to be launched into the market in 2006.·62·

Electronics & InformationZhaoqing New Baohua Electronics Equipment Co.,Ltd., in cooperation with South China University of Technology, hastackled a series of technical difficulties and developed middle- and high-speed placement machines with eight placementheads. In addition, the company also developed some assembly equipment necessary for SMT lines.Since its entry into integrated circuit post encapsulation equipment market in 2003, Grand-tech (Shenzhen) Co., Ltd. hasdeveloped six types of post encapsulation equipment including plastic packaging presses.(IV)Major works and key projectsThe operation test of several sophisticated integrated circuit key equipment was completed based on the β samplemachine built in 2004. These equipment, among other China’s national hi-tech projects, are on the way to industrializationproduction.In 2005, five new products in China’s electronics special equipment industry were listed into the key new product planof Ministry of Science and Technology, namely, DQX-206 plasma cleaner, DHJ-500 multi-blade glass scriber and DWT-122full automatic alignment placement machine applied by China Electronics Technology Group Corporation No.2 ResearchInstitute, AFYJ special air-conditioner for clean operation room applied by Jiangsu Suzhou Purification Group Co.,Ltd. andmultiply injection heads plastic encapsulation mould applied by Tongling Suntech Apicyamada Technical Co.,Ltd.In 2005, the project “shadow mask PDP (SM-PDP) assembly, sealing and exhaust automatic production line” in nationalhigh-tech development plan (863 Plan) assumed by Beijing Sevenstar Electronics Co., Ltd. passed the acceptance of theMinistry of Science and Technology. The project consists of an SMPDP (shadow mask PDP) alignment assembly machine,an exhaust furnace and a board sintering furnace. The main technical parameters of the sample machine satisfied the contractdemands. It was the initial equipment in China receiving praises of acceptance expert panel and applied in the DisplayTechnology Labor of Southeast University. In addition, the first vertical diffusion/oxidation oven applied in 8-inch IC processlines in China undertaken by the company passed the acceptance of electronics production and development fund group. Thesuccessful development of the equipment fills the vacancy of the 8-inch vertical furnace manufacture in China.In Apr. 2005, national key project “special appliance double-faced lithography” undertaken by China ElectronicsTechnology Group Corporation No.45 Research Institute passed acceptance and design confirmation at the meeting ofexperts from equipment industry and application unit. This equipment is the first practical 6-inch double-faced lithography inChina, successfully applying multiple key technologies like big area exposure system, BSA and wedge error compensationtechnologies etc. and filling the domestic vacant field with leading technologies. In Oct. 2005, the research of full automaticbonder/full automatic dicing saw listed in National 863 Plan passed the acceptance in Shenzhen after above one year efforts.The appraisal panel argued a 14 line/sec full automatic boner and an 8-inch full automatic dicing saw with independentintellectual properties were developed, the main technical indexes qualified the requirements in the contract and nine patentapplications were reported, performing the tasks regulated in the contract.In March 2005, the foundation ceremony of Beijing Zhongkexin Electronics Equipment Co.,Ltd.’s ion implanter R & Dand industrialization base was held in Beijing Tongzhou District Light Mechanical and Electrical Integration Base, which is amilestone for China’s ion implanter toward industrialization development.The R & D and Production Building for the Industrialization of Key Production Equipment for New Electronic ChipComponents, a hi-tech industrialization model project and a Shanxi 1311 Industry Structure Adjustment Project performed byTaiyuan Fenghua Information Equipment Co.,Ltd. was built for production, covering a total area of 8294m 2 . On Sept. 15,2005, the project of New Type Electronic Components Special Production Equipment Assembly Line assumed by TaiyuanFenghua Information Equipment Co.,Ltd. was listed in NDRC 2005 Information Industry Enterprises Technical Progress andIndustry Upgrading Projects. With a gross investment of 52mil yuan, the project aims to produce chip components, filmcapacitors, LCD and liquid display modules and other special equipment with global leading quality.On May 18, the project of Environment and Reliability Technology and Equipment State Engineering Center broke earthin Suzhou Testing Instrument Factory. The Center, jointly prepared by Suzhou Testing Instrument Factory, BeihangUniversity, Zhejiang University, Quanta USA, is planned to be completed in three years with budgeted investment of 50milyuan, floor space of 12000 m 2 and building area of 5000 m 2 . The main task is to provide conditions for the development ofclimate, environment and reliability test equipment and reliability test service for products from users·63·

China Business GuideEntrusted by NDRC, Anhui NDRC organizes experts to accept a project with an annual capacity of 200 Sets of PlasticEncapsulation Mould Industrialization Model Project undertaken by Tongling Suntech Technical Co., Ltd. The project waslisted in state key hi-tech industrialization projects in 2000 and the key national debt-funded project of Tongling in 2001.After above one year trial run, manufacture and test upon the completion, effective technical upgrading was made in manyaspects. And multi-injection heads plastic encapsulation mould, tantalum capacitor plastic encapsulation mould and other 10new products were successively developed, contributing a lot to China’s plastic encapsulation technology.The electronics production and development project of IC Production Line Equipment-IC Automatic EncapsulationSystem R & D and Industrialization Project undertaken by Tongling Suntech Apicyamada Technical Co., Ltd. passed theacceptance organized by the Electronics and Information Industry Development Fund Management Office affiliated toMinistry of Information Industry.(V)International cooperation and foreign tradeIn 2005, the export delivery value of the whole industry hit 313mil yuan, increasing by 30.6% including 16.1% growthfrom equipment units.By the end of May 2005, Beijing Sevenstar Electronics Co., Ltd. performed the export of flowmeters valued 480thdEuros. An export of 1mil Euros is expected for the whole year. The Second Research Institute of China ElectronicsTechnology Group Corporation mass-exported glass scribers, removing bubbles machines of liquid crystal polaroid and other12 TFT-LCD production equipment to Sharp, Malaysia. The equipment qualified the acceptance and was delivered to use.Export of the equipment is another breakthrough after LCD placement machine, highlighting this kind of Chinese productscapable to compete in international market.Fenglei electronic special equipment produced by Lanzhou Rapid Corporation has won favors of a score of countriesincluding USA, Japan, Iran, Romania, India, Taiwan, Hong Kong, Southeast Asian countries. By the end of May 2005, theexport order amount exceeded 10mil yuan. Currently, the company established a sales company in Japan. The company plansto set up sales companies in USA, India and other countries in 2006 upon expectation.In 2005, the soldering pin and wafer testing card production lines in the Suzhou-based plants of K&S, one of globallargest semi-conductor encapsulation and testing equipment manufacturers, came into operation. Before the end of 2005,other two production procedures for slices and testing clips will also be moved to Suzhou. And an R & D center is planned tobe built in Suzhou with a local software development team.In Mar. 2005, SEMICON China 2005 was held in Shanghai New International Expo Centre with an exhibition area of31000m 2 and above 870 semiconducting equipment and material manufacturers from home and abroad. More than 150persons from units/enterprises with years of engagement in semiconducting equipment R & D participated in technicalseminars and other activities. In July 2005, China Electronic Production Equipment Industry Association (CEPEA) organizeda delegation to participate in SEMICON West and relevant seminars for the 3 rd time and visited related equipment and partsmanufacture companies upon the invitation of SEMI.In 2005, CEPEA established a liaison office in Tokyo, Japan. It is the first overseas office of CEPEA. The organizationalso sponsored electronic special equipment-related international technical exchanges in China, such as FPD China 2005, theSMT-related 2005 China International Forum and the 4 th Lead-free Manufacture Process, Fault Detection and Reliability etc.(VI)Market analysis and outlookThe year of 2006 is the first year of China’s 11 th Five-year Plan period. China will strive to improve the independentinnovation capability, accelerate economy increase mode transformation and promote the development of advancedmanufacture industry and hi-tech industry with electronic industry as the representatives. Electronic special equipmentindustry should speed up structure adjustment and enhance independent innovation to ensure the continuous and rapiddevelopment of the industry.In 2005, the output of solar cell-related equipment and testing instrument exceeded 6000 sets with sales volume above1bil USD. The sales amount of China local-made semiconducting equipment reached 670mil yuan, up 58.6%, with solar cellproduction equipment as the main contributor. Currently, most equipment for solar cell production lines can be produced in·64·

Electronics & InformationChina, resulting in an accumulate foreign exchange saving of 100 mil USD over the past several years and an investmentsaving for users of 800 mil yuan. In the same year, totally 330 sets of relevant equipment were sold in domestic market,reaching a sales amount of 250mil yuan. Some equipment was exported. It is expected that the solar cell equipment marketwill keep a high growth rate in 2006. Before 2010, the photovoltaic industry will keep a 30% annual growth rate. On Jan. 1,2006, Renewable Energy Law will be officially implemented. The PV industry will become an important growth point inChina’s semiconducting industry.It is estimated that domestic high-level IC equipment will achieve industrialization breakthrough and domestic ICequipment renovation market will boom in 2006.Upon estimation, China’s semiconducting and IC industry will sustain prosperity due to the pulling effect of China’sentire electronic equipment market to the IC market, the continuance of the global semiconducting industry’s shift to Chinesemainland and the big gap between supply and demand of semiconductors and IC in China etc. Semiconducting equipmentwill still be the biggest highlight in electronic special equipment in 2006.The CRT market goes into the depression period, and no large-scale investment to production lines will appear. So,various equipment for flat display component production lines will gradually dominate the market. With the acceleration offorging a China’s TFT-LCD industry chain in 2006 and the growth of high brightness LED market sales scale, the demands toLCD-related equipment and LED production equipment will rise and further push forward the development of China’selectronic special equipment industry.Currently, the market share of local-made magnetic material equipment reaches 90%. In the 11 th five-year plan period,China will strive to grow into a powerful magnetic material production country. Magnetic material production enterprises willenlarge investment to develop high-end magnetic material products, increase the capacity for high-level products, develophigh-level magnetic material production equipment as well as highly accurate and intelligent equipment with high efficiencyand low energy consumption. Magnetic material production equipment in 2006 will have a leap growth in China, becoming amajor force driving the development of electronic component equipment.Presently, only 30% of Chinese cables can participate in international competition, and quality and technical levelrequires urgent improvement for the remainder. Therefore, the gross market demand will not increase greatly in the comingperiod while the type and quality demands are the market focus. Enterprises producing wire and cable special equipmentshall timely adjust product structure, adapt to market demand and actively develop high-end cable equipment.According to statistics from the Customs, China imported 8992 sets of placement machines valued 1.478bil USD.Import will still be dominant in 2006 since middle and high-level automatic placement machines are not available indomestic market currently. It is worthwhile to point out that China develops fast in lead-free soldering equipmentmanufacture and has made progress in AOI testing equipment, hopefully increasing the domestic market share of local madeequipment. Lead-free technology development of the electronic whole product industry has become a necessary trend in theinternational information industry development. Measures for the Control of Pollution from Electronic Information Productspromulgated by seven ministries and commissions of China will come into force from March 1, 2007. Thousands ofelectronic whole product lines will confront lead-free renovation. So, lead-free equipment will develop in 2006.As for SMT equipment, higher demands are required to the testing process in assembly with the trend of smallencapsulation and high-density assembly. AOI (automatic optical inspection) and AXI (automatic X-ray inspection)equipment are necessary tools for improving PCB assembly quality. The sale of AXI and AOI will grow slightly in 2006. Inaddition, soldering equipment, inspecting equipment, printing equipment and loading/unloading machines are dominant inChina’s SMT equipment industry currently, but the product structure will surely change and placement machines will growfast with the transfer of international placement machine production to China and the gradual industrialization of middle andlow-end placement machines.To sum up, the industry gross value, sales revenue and gross profit before tax of the industry will continuously keep asynchronous growth at a rate above 10% in 2006.·65·

China Business Guide【Statistics data】Table 1. Scale of electronic special equipment industry in 2005NatureNumber of Number of Headcounts Incl.:techniciansinstitutes enterprises (persons) (persons)SOE and state holding dominant shares 4 41 21101 4640Private 33 3820 687Stock 7 2573 460Three types of foreign-funded enterprises 4 1668 178Total 4 85 29162 5965Table 2. Product sales volume of electronic special equipment industry between 2003 and 20052003 2004 2005Product Unit Sales Growth Sales Growth Sales Growthvolume rate(%) volume rate(%) volume rate(%)Semiconducting and IC equipment Set 1174 -28.8 2580 119.8 4065 57.6Electronic component equipment Set 10953 205.6 4381 -60.0 2733 -37.6Electric and photoelectric equipment Set 1295 54.7 5044 289.5 2688 -46.7Environment and reliability testequipmentSet 2153 14.6 2496 15.9 2943 17.9Purification equipment Set 94858 14.7 14885 -84.3 17033 14.4Whole electronic machine assemblyequipmentSet 1261 128.9 471 -62.6 1911 305.7Electronics general equipment Set 23904 46.7 16743 -30.0 26791 60.0Electronics special tool 10,000pcs 489 17.7 141 -71.3 748 430.5Electronics special mould Set 930 2.9 890 -4.3 1680 88.8Table 3. Product sales amount of electronic special equipment industry between 2003 and 20052003 2004 2005Product Unit SalesamountGrowthrate(%)SalesamountSalesamountSemiconducting and IC equipment 10,000yuan 25361 51.3 42353 67.0 67184 58.6Electronic component equipment 10,000yuan 39401 -0.3 64283 63.2 55561 -13.6Electric and photoelectric equipment 10,000yuan 24536 35.2 31365 27.8 26445 -15.7Environment and reliability testequipment10,000yuan 17887 15.9 18665 4.3 22832 22.3Purification equipment 10,000yuan 49582 20.0 45032 -9.2 58294 29.5Whole electronic machine assemblyequipment10,000yuan 10912 196.2 3514 -67.8 7458 112.2Electronics general equipment 10,000yuan 35640 161.6 27833 21.9 40571 45.8Electronics special tool 10,000yuan 5871 21.5 4140 -29.5 6828 64.9Electronics special mould 10,000yuan 13426 -15.4 6835 -49.1 20152 194.8Table 4. Top 10 companies of in sales amount of electronic special equipment industry in 2005Rank Company Sales amount(10,000yuan)1 Jiangsu Suzhou Purification Group Co.,Ltd. 545532 Beijing Sevenstar Electronics Co., Ltd. 406003 Tongling Suntech Technical Co., Ltd. 324614 Northwest Machine Co., Ltd. 265535 Sichuan DanFu Compressor Co.Ltd. 252476 Lanxin Rapid Industrial Group Co.,Ltd. 220637China Electronics Technology Group Corporation No.45Research Institute167458China Electronics Technology Group Corporation No.2 ResearchInstitute165589 Grand-tech (Shenzhen) Co., Ltd. 1622210China Electronics Technology Group Corporation No.48Research Institute15685·66·

Electronics & InformationTable 5. Product export value of electronic special equipment industry between 2003 and 2005Category Unit 2003 2004 2005Electronics special equipment 10,000yuan 4830 10486 12177Electronics special tools and moulds 10,000yuan 1927 197 5838Others 10,000yuan 11181 13247 13242Total 10,000yuan 17938 23930 31257Table 6. Main economy indexes of electronic special equipment industry between 2003 and 2005Item Unit 2003 2004 2005 Growth rate(%)Gross value of industrial output of the whole industry 10,000yuan 363288 408228 473879 16.1Incl.:industrial output value of this sector 10,000yuan 245257 282322 327269 15.9Industrial value added of the whole industry 10,000yuan 115585 132020 141099 6.9Incl. :value added of this sector 10,000yuan 74867 76604 88742 15.9Sales income of the whole industry 10,000yuan 342159 390751 449063 14.9Incl.:product sales income of this sector 10,000yuan 222616 249119 285274 14.5Pre-tax profit of the whole industry 10,000yuan 54475 61308 66679 8.8Gross profit of the total industry 10,000yuan 28852 33962 37305 9.8Note: Data of Table 1 to Table 6 are sourced from China Electronic Production Equipment Industry Association(CEPEA).VII. Electronic measurement instrument industry(I)GeneralIn 2005, the gross industrial value of the whole industry in China hit 7446.9mil yuan, up 35% year-on-year, the salesincome reached 7702.5mil yuan, increasing by 36% year-on-year, the output achieved 8.33mil sets, growing by 18% and thesales volume hit 8.64mil sets, up 225. Moreover, a group of electronic measurement products with international advancedlevel were developed, which fills the domestic vacancies, satisfied the urgent demands of some industry and improved thecompetitiveness at domestic and international markets. The statistics to oscillographs and other 15 products show the exportgrowth rate of 11% with value of 322.71mil USD, which is higher than the import growth rate of 1% with value of1775.81mil USD. In addition, key enterprises kept simultaneously continuous increases in domestic and foreign markets.Liaoning No. 2 Radio Plant (Group) was ranked No. 88 in 2006 Top 100 Electronic Information Enterprises in China with thesales amount of 1685mil yuan, up 7.6%, the export amount of 990.15mil yuan, up 21% and reaching 59% of the total salesamount. Ningbo Zhongce Electronics Co., Ltd. achieved the sales amount increase of 21%, export amount increase of 33%and reaching 56% of the total sales amount. Jiangsu Luyang Electronic Instrument Group Co., Ltd. achieved the sales amountincrease of 34%, export amount increase of 100% and reaching 15% of the total sales amount. China Electronics TechnologyGroup Corporation No.41 Research Institute achieved the sales amount increase of 36%, including electronic measurementinstrument export of 30 sets of spectrum analyzers valued 1.2mil yuan. Rigol Technologies Inc. achieved the sales amountincrease of 127%, export amount increase of 586% and reaching 50% of the total sales amount. And finally, the research onmeasurement instrument for national Digital Television Project made progresses.(II)Production and saleThe production and sale of electronic measurement instrument industry made a comparatively big growth in 2005. Theoutput of electronic measurement instrument totaled 8.33mil sets, up 18% or 1.27mil sets. Totally 36 kinds of products madegreat increases, including frequency measurement instrument growing by 33% and stabilized voltage power supplyincreasing by 135%. The sales total of electronic measurement instrument hit 8.64mil sets, rising by 22% or 1.53mil sets.Totally 35 kinds of products made great increases, including frequency measurement instrument growing by 27% andstabilized voltage power supply increasing by 86%. The output of medical instrument reached 7,349,373 sets, rising by 74%or 2,187,341 sets. The medical microwave electronic instrument hit output of 67,744 sets and sales volume of 93,866 sets.·67·

China Business Guide(III)Scientific research and new products developmentIn 2005, the focuses of scientific research and new products development of this sector are adjusting product structure,improve the proportion of middle and high level products and develop new products with independent intellectual properties.Digital storage oscilloscope-It is a product segment with widest application and fastest technical development currently.After about two-year-long efforts, especially the successful development of digital storage oscilloscopes with independentintellectual property in 2005 broke the market monopoly of foreign products and improved the competitiveness of domesticproducts, resulting in the expansion of domestic market share and the export of considerate products. YB54500(500MHz)broadband digital storage oscilloscopes mass-produced by Jiangsu Luyang Electronic Instrument Group Co., Ltd. wasdelivered to customers for application. DS100 series digital storage oscilloscopes mass-produced by Rigol Technologies Inc.contain logic analysis modules and abundant triggering functions. AV4446(500MHz)broadband digital storage oscilloscopesmade by China Electronics Technology Group Corporation No. 41 Research Institute have qualified appraisals. The product’smaximum sampling rates are 1GSa/s (simultaneous operation of two channels) and 2GSa/s (one channel only).Other products:KH39 series EMC disturbance field strength test receivers and KH3025 series active antennas developed by KaiHongInstruments Research & Development Center, Beijing Computer Factory No.1 has been produced in small batches. Thefrequency spectrum range is 9KHz to 30MHz and the resolution is 1Hz. The price is only 1/5 of similar foreign products. TheKH4137 full automatic digital low-distortion measurement instruments have leading technical indexes in China and achieveinternational level, being widely applied in the sectors of national defense, measurement, production lines and schools. Thefrequency scope are 10Hz-150KHz(unbalanced situation) and 10Hz-100KHz(balanced situation).AV3639/3629/3629A high performance integrated vector network analyzers developed by China Electronics TechnologyGroup Corporation No. 41 Research Institute have features of high measurement speed, high test accuracy, big dynamicrange, friendly human-machine interface, high intelligence and stability and good reliability and repeatability. They are newgeneration products of local-made vector network analyzers with frequency spectrum range of 300KHz-60GGHz andfrequency resolution of 1Hz. DT series digital TV code stream real time monitoring analyzers by the Institute are applicablefor the monitoring and feature analysis to errors occurred in all links of MPEG-2DVB digital TV transmission field. Inaddition, the Institute also developed CATV testers, AV high power amplifiers, AV high power attenuators, AV directionalcouplers, AV portable field strength testers, AV communication equipment comprehensive testers, AV random signal testingand analyzing systems, AV portable thermal CAMs, AV site electromagnetic frequency spectrum monitoring systems,AV6496 optical fiber welding machines, AV4061/4062 frequency spectrum analyzers, AV5282 portable PCM comprehensivetesters and other high-level products.DSA1000 real time triggering radio frequency spectrum analyzers with frequency measurement range of 9KHz-3GHzdeveloped by Rigol Technologies Inc. apply digital signal process chips and large-scale high-speed programmable logiccomponents. Products of all levels can be produced by means of changing the hardware and software configuration.Reconfiguration of programmable logic components and digital signal process systems along with multiple USB/LAN portsand system upgrading software shall be applied to enable the products with good scalability.SA1000 series full digital frequency feature tester developed by Shijiazhuang The Fourth Radio Factory, applyingfrequency-sweeping signal source direct digital synthesis technology and MPU control and built-in cymoscopes, can performthe measurement of frequency-amplitude and frequency-phase features at any frequency section between 20Hz-300MHzwithout demodulation probes. ST1010 digital frequency long stability testers, having built-in frequency difference multipliersand high-accuracy gap-free measurement, can fully replace analog phase comparators.CD433 series portable UHF millivoltmeters/power meters developed by Sichuan Chuanjia Electronics Co.,Ltd. canmeasure various complicated waveforms like CDMA, GSM, PHS and I/Q modulation in addition to normal measurements.CD33 series portable digital TV field intensity instruments/true power meters can be applied in the measurement of digitalTV signals. CD-OPM533 series optical power meters can be used in digital TV and communication fields.TianJin Xince Electronics Apparatus Technology Co.,Ltd. also developed XC4010 frequency response feature testers,XC6531 aviation accumulator testing systems and other new products.·68·

Electronics & Information(IV)Major and key projectsIn 2005, China-made microwave and millimetre wave antenna general test platform was completed and passed theacceptance. Major achievements were made in broadband electromagnetic information leakage test system. Satisfied resultswere obtained for field trial application of the low frequency time-code timing signal test receiving system.Digitalized electronic and communication measurement instrument research and development production conditionrenovation undertaken by Jiangsu Luyang Electronic Instrument Group Co., Ltd. was officially initiated by NDRC in the “FaGai Ban Gao Ji [2005] No. 1944” document. The main contents are improving the level of design and development,measurement inspection and production and manufacture and enlarging production scale. The objective is to build acapability of annual production of 40,000 sets of digitalized products and reach international advanced technical level.Digital TV Dedicated Signal Source Research & Development and Promotion and Application undertaken by ChinaElectronics Technology Group Corporation No.41 Research Institute is under the trial manufacture of sample machines.The Digital TV Signal Generators and Testing Instrument Industrialization Project for Digital TV Project under taken bySichuan Chuanjia Electronics Co.,Ltd. made some progress. The project has a total investment of 40mil yuan to forge annualcapacity of 255 sets of digital TV concentrated signal sources and 25 sets of digital TV signal generation analyzers. Currently,DTVG channel analog signal generators for the project were performed and started for sale. In addition, products for TVstations of all levels, network centers and quality inspection department, stores, household appliances and other consumersare under research and development. As for digital TV testing instruments, the researches of multi-channel signal testers,MPEG-2 code stream generators, digital TV signal recorders/players and Audio/video frequency measurement instrumentswere performed.(V)International cooperation and foreign tradeOn Jan. 28, 2005, Agilent Qianfeng Electronic Technologies Co., Ltd. was established with gross investment of 50milUSD (about 400mil RMB). The first phase investment was 29.98mil USD with registration capital of 25mil USD. Thecompany, mainly specializing in the R & D, production and sale of precision instruments for education, communication,aviation and aerospace sectors, aims at providing electronic measurement products and services with high performance priceratio to domestic and international markets. Establishment of the company will further enlarge Agilent’s market share (70%currently) in China and strengthen the competition among domestic enterprises to drive them to the way of independentinnovation and development for globally advanced products for the purpose of improve their competitiveness in internationalmarket.China Customs statistics on oscillographs and other 15 products show the export growth of electronic measurementinstruments was higher than the import growth in 2005.Liaoning No. 2 Radio Plant sold 1750 sets of AV meter testers (automobile stereo testing instrument) to abroad,achieving 100% export; 1700 sets of oscillographs including 600 sets for export, achieving 35% export.Ningbo Zhongce Electronics Co., Ltd. achieved export amount of 75.56mil yuan, reaching 56% of the total sales amount,up 33%, including instrument export amount of 38.87mil yuan, 51% of total export, up 29%.Jiangsu Luyang Electronic Instrument Group Co., Ltd. exported 24,370 sets of oscillographs, up 35%, achieving anexport amount of 20mil yuan, an increase of 100%.China Electronics Technology Group Corporation No.41 Research Institute exported 30 sets of spectrum analyzersvalued 1.2mil yuan. The export is limited, but it shows the increase of export kinds of China-made hi-tech products.Rigol Technologies Inc. achieved an export value of 4.7mil USD for digital storage oscillographs, up 570%.KaiHong Instruments Research & Development Center, Beijing Computer Factory No.1 exported two sets of fullautomatic digital low-distortion measurement instruments which have independent intelligent property and reachinternational level, showing a development trend that China-made high-level products will continuously enter into globalmarket.(VI)Market outlook·69·

China Business GuideChina’s electronic measurement instrument market will continue a rapid growth thanks to the boom of China’s nationaleconomy and the hi-tech development trend of all industries of national economy. However, a big gap exists between thesupply of local-made electronic measurement instruments and the demand of local industries. The key to improve the marketshare oflocal-made electronic measurement instruments is to “upgrade product structure” and develop globally-leadingproducts with independent intelligent property. Aiming at “upgrading product structure”, the local market shares ofoscillographs, frequency spectrum analyzers, frequency spectrum measurement instruments, network analyzers, disturbancefield intensity measurement instruments, stabilized power supplies, synthetic signal sources and other general measurementinstrument will be continuously enlarged. The market share of broadcasting and TV measurement instruments, especially thedigital TV measurement instrument, will be improved after completing Digital TV Special Project. However, the markershare increase of local digital TV measurement instruments depends on the development of more globally-leading productsdue to the gaps in varieties and technologies. As for communication measurement instruments, especially mobilecommunication measurement instruments, the development of local products are still under the starting period. Due to therestriction of development technology, the market share of local IC measurement instrument will have no big changes. Localelectronic appliances and instruments will have more market shares in medical electronic instruments, medical microwaveelectronic apparatus, coal electronic appliances and mine and metallurgy electronic appliances.【Statistics data】Table 1 Products with big output growth of electronic measurement instrument industry between 2004 and 2005Product Unit 2004 2005 Growth rate(%)Frequency measurement instrument set 1700656 2255264 32.6Digital pulse frequency measurement instrument set 1696705 2156695 27.1Analog frequency measurement instrument set 3868 5749 48.6Counter set 845 3316338 3924.7timesTime measurement instrument set 83 116 39.8Frequency standard instrument set 92704DC digital voltmeter set 168 2558 15.2timesOscillograph set 31076 107691 3.5timesDigital storage oscillograph set 6000 16000 2.7timesGeneral oscillograph set 25032 83139 2.3timesSampling memory oscillograph set 20 52 2.6timesDedicated oscillograph set 24 8500 354.2timesComponent parameter measurement instrument set 1467 29604 20.2timesIC measurement instrument set 98 192 2timesFrequency spectrum waveform analyzer set 1690 2265 1.3timesFrequency-sweeping instrument set 1430 1845 29.0Frequency spectrum analyzer set 110 270 2.5timesVector network analyzer set 115 210 82.6Scalar network analyzer set 40 76 90.0Parts for microwave measurement instrument set 21466 35496 65.4Microwave power meter set 175 310 77.1Broadcasting and TV measurement instrument set 11742 14701 25.3Ultra low frequency measurement instrument set 25 155 6.2timesFrequency response analyzer set 25 73 2.9timesAcoustics measurement instrument set 4759 6746 41.8Sound-level meter set 1156 1409 21.9Noise statistics and analysis instrument set 513 1173 2.3timesNoise frequency spectrum analyzer set 110 195 77.3Acoustics calibration device set 226 369 63.3Ambient vibration analyzer set 70 150 2.1timesOther acoustics instrument set 2754 3600 30.7Disturbance field strength measurement instrument set 2 2990 1495timesDigital full automatic disturbance field strength testingreceiverset 2 10 5timesStabilized power supply set 1721015 40455635 23.5times·70·

Electronics & InformationDC stabilized power supply set 248312 996624 4timesAC stabilized power supply set 83446 97085 16.3Constant-current stabilized power supply set 746357 1362714 82.6Power inverter set 556056 1312112 2.4timesLaser power supply set 1020 1300 27.5Recording and displaying instrument set 659 18339 27.8timesRecorder set 254 2500 9.8timesDisplay set 405 15839 39.1timesPower signal source set 800 1050 31.3Synthetic signal source set 180 385 2.1timesMedical electronic appliance set 4218849 7349373 74.2Medical supersonic electronic appliance set 1740 2175 25.0Medical laser electronic appliance set 107 740 6.9timesMedical bio-chemical electronic appliance set 230 4610 20timesMedical HF microwave ray electronic appliance set 87 67905 780.5timesMedical microwave electronic appliance set 67744Coal industry electronic appliance set 12956 34777 2.7timesWater and power industry electronic appliance set 86048 91446 6.3Mining and metallurgy industry electronic appliance set 48 205 4.3timesGas industry electronic appliance set 373 561 50.4Table 2 Products with big sales volume growth of electronic measurement instrument industry between 2004 and 2005Product Unit 2004 2005 Growth rate(%)Frequency measurement instrument set 1701309 2174573 27.8Digital pulse frequency measurement instrument set 1696978 2076700 22.4Analog frequency measurement instrument set 3472 5196 49.7Counter set 806 3275977 4064.5timesTime measurement instrument set 53 112 111.3Frequency standard instrument set 92704DC digital voltmeter set 183 2268 12.4timesOscillograph set 24232 104691 332.0Digital storage oscillograph set 6000 16000 166.7General oscillograph set 24064 80354 233.9Dedicated oscillograph set 29 8300 286.2timesComponent parameter measurement instrument set 1471 30060 20.4timesIC measurement instrument set 83 153 84.3Frequency spectrum analyzer set 170 285 67.6Vector network analyzer set 115 205 78.3Scalar network analyzer set 40 80 100.0Parts for microwave measurement instrument set 19411 29483 51.9Microwave power meter set 175 310 77.1Optical communication testing instrument set 415 570 37.4Broadcasting and TV measurement instrument set 11706 14665 5.3Ultra low frequency measurement instrument set 127 181 42.5Ultra low frequency voltmeter set 24 27 12.5Acoustics measurement instrument set 4776 6127 28.3Sound-level meter set 1138 1340 17.8Noise statistics and analysis instrument set 719 986 37.1Noise frequency spectrum analyzer set 150 186 24.0Acoustics calibration device set 233 283 21.5Ambient vibration analyzer set 75 140 86.7Disturbance field strength measurement instrument set 1 3091 3090Digital full automatic disturbance field strength testing receiver set 1 3 200Stabilized power supply set 1676569 3114065 85.7DC stabilized power supply set 241802 993248 310.8Constant-current stabilized power supply set 726593 1076593 48.2Power inverter set 542355 951659 75.5Laser power supply set 1010 1305 29.2·71·

China Business GuideRecording and displaying instrument set 678 20118 29.7Recorder set 244 2250 9.2timesDisplay set 434 17868 41.2timesPower signal source set 780 1036 32.8Synthetic signal source set 180 350 94.4Digital signal generator set 2424Meteorological electronic appliance set 49130 54250 10.4Medical electronic appliance set 9550 2187341 229timesMedical supersonic electronic appliance set 1715 2110 23.0Medical laser electronic appliance set 86 696 8.1timesMedical bio-chemical electronic appliance set 228 4634 20.3timesMedical HF microwave ray electronic appliance set 80 94120 1176.5timesMedical microwave electronic appliance set 93866Textile industry electronic appliance set 3210 3575 11.4Coal industry electronic appliance set 9951 32679 228.4Water and power industry electronic appliance set 83731 91098 8.8Mining and metallurgy industry electronic appliance set 48 203 4.2timesGas industry electronic appliance set 468 555 18.6IC card intelligent ammeter set 2160000 14660000 6.8timesIC card intelligent heat meter set 10000 70000 7timesTable 3 Product output of electronic measurement instrument industry between 2003 and 2005Unit: set2005Product 2003 2004Growth rateOutput(%)Frequency measurement instrument 1700656225526433.0(excluding counters)Frequency measurement instrument 1696705 2156695 27.1Digital pulse frequency measurement instrument 3868 5749 49.0Counter 381 845 3316338 3924.7timesTime measurement instrument 103 83 116 39.8Frequency standard instrument 92704DC digital voltmeter 57 168 2558 15.3timesIncl.:Digital HF voltmeter 396Digital multimeter 1256930 2204241 458150 -79.2Analog voltmeter 3960 3076 2692 -12.5Digital panel meter 78851 130613Voltage and power standard equipment 194Others 22341Oscillograph 31076 107691 3.5timesDigital storage oscillograph 6000 16000 2.7timesGeneral oscillograph 17442 25032 83139 3.3timesSampling, storage and memory oscillograph 67 20 52 2.6timesDedicated oscillograph 139 24 8500 354.2Component parameter measurement instrument 1467 29604 1918IC measurement instrument 63 98 192 99Component parameter measurement instrument 1164 527 392 -25.6Frequency spectrum waveform analyzer 1690 2265 34.0Scanner 1430 1845 29.0Frequency spectrum analyzer 110 270 2.5timesFull automatic digital distortion measurement instrument 150 150Microwave measurement instrument·72·7309(excludingparts)1869(excluding parts)Vector network analyzer 115 210 82.6Scalar network analyzer 40 76 90.0Other microwave instrument 47585 6979 1269 -81.8-74.4

Electronics & InformationParts for microwave measurement instrument 21466 35496 65.4Microwave power meter 175 310 77.1Communication testing instrument 10708 2832 -73.6Carrier wave communication testing instrument 167 8003 231 -97.1Analog/digital mobile communication testing instrument 10354 2090 2021 -3.3Optical communication testing instrument 615 580 -5.7Broadcasting and TV measurement instrument 10085 11742 14701 25.2Ultra low frequency measurement instrument 25 155 6.2timesFrequency response analyzer 69 25 73 2.9timesUltra low frequency signal source 80 30Ultra low frequency voltmeter 18 52Acoustics measurement instrument 4759 6746 41.8Sound-level meter 1156 1409 22Noise statistics and analysis instrument 579 513 1173 2.3timesNoise frequency spectrum analyzer 110 195 1.8timesAcoustics calibration device 486 226 369 63.3Ambient vibration analyzer 70 150 2.1timesOther acoustics instrument 2379 2754 3600 30.7Disturbance field strength measurement instrument 4 3000Disturbance field strength measurement meter 2 2990 1494Digital full automatic disturbance field strength testingreceiver2 10 400Stabilized power supply 1721015 4045635 2.4timesDC stabilized power supply 286139 248312 996624 4timesAC stabilized power supply 77167 83446 97085 16.3Constant-current stabilized power supply 660331 746357 1362714 82.6Power inverter 394229 556056 1312112 2.4timesLaser power supply 900 1020 1300 27.5Other power supply 32076 85789 5800 -93.2Recording and displaying instrument 659 18339 27.8timesRecorder 5098 254 2500 9.8timesDisplay 522 405 15839 39.1timesSignal source 1168137 1258379 7.7LF signal source 5352 4580 3040 -33.6HF signal source 550 1055 960 -9.0Power signal generator 700 800 1050 31.3Synthetic signal generator 180 385 2.1timesPower amplifier 18000 12700 13900 9.5Digital signal generator 2255Other signal source 307 1148822 1236789 7.7Other measurement instrument 6171887952(Excluding crystal 42.5oscillator)Puncture device 773 857 832 -2.9Atomic ray instrument 9826 11661 7224 -38.0Meteorological instrument 110972 49200 49000 -0.4Crystal oscillator 17662191Standard inductor, capacitor and resistor 30896Medical electronic instrument and equipmentMedical electronic appliance 471819 4218849 7349373 74.2Medical supersonic instrument 25443 1740 2175 1.3timesMedical laser instrument 107 740 6.9timesMedical bio-chemical instrument 3706 230 4610 600Medical HF, microwave and ray instruments 87 67905Medical HF instrument 87 85Medical microwave instrument 67744Medical ray instrument 76TCM diagnosistic instrument 1662 736 -55.7·73·

China Business GuidePubic traffic electronic appliance 555426 438483 -21.1Textile industry electronic appliance 3597 3632 3358 -7.5Coal industry electronic appliance 735 12956 34777 2.7timesPetro-chemical industry electronic appliance 1202 2728 1793 -34.3Water and power industry electronic appliance 221055 86048 91446 6.3Mining and metallurgy industry electronic appliance 226 48 205 4.3timesGas industry electronic appliance 68 373 561 50.4Traffica and transportation industry electronic appliance 116549 449641 306343 -31.7Culture and education industry electronic appliance 454810 393266 15200Other electronic appliance 405798 919007 1722569 87.4DC ammeter and voltmeter 383900 440000AC ammeter and voltmeter 584000 220000 160000 -27.3Power meter 360000 120000 -66.7Electronics dedicated ammeter 24500000 20880000 -14.7Special purpose ammeter 186100 500000 390000 -22.0IC card intelligent ammeter 46619200 2060000 14580000 7.1timesIC card intelligent water meter 20963000 30000 20000 -33.3IC card intelligent coal gas meter 214200 140000 70000 -50.0IC card intelligent heat meter 203300 90000 70000 -22.0Others 1400000 21690000 5750000 -73.0Table 4. Product sales volume of electronic measurement instrument industry between 2003 and 2005ProductSales volume(set)Frequency measurement instrument 17013092003 2004 2005Growth Sales volume Sales volume Sales volumerate(%) (set) (set) (set)2174573(excludingcounters)Sales volume(set)Digital pulse frequency measurementinstrument1696978 2076700 22.4Analog frequency measurement instrument 3472 5196 49.7Counter 473 22 806 70.0 3275977 4064.5timesFrequency standard instrument 92704Voltage measurement instrument 2404708 607376 -74.7DC digital voltmeter 48 -90 3.8times 2268 12.4timesIncl.:digital HF voltmeter 380Digital multimeter 1266513 208 2271160 79.3 578789 -74.5Voltage and power standard equipment 193Analog voltmeter 3635 18 3581 -1.5 2759 -23.0Digital panel meter 80181 129784 62.0Others 23367Oscillograph 24232 104691 4.3timesDigital storage oscillograph 6000 16000 2.7timesGeneral oscillograph 16340 -35 24064 47.3 80354 3.3timesSampling, storage and memoryoscillograph85 -13 97 14.1 37 -61.9Dedicated oscillograph 154 -21 29 -81.0 8300 286.2timesComponent parameter measurementinstrument1471 30060 20.4timesIC measurement instrument 63 83 31.8 153 84.3Component parameter measurementinstrument1115 -12 565 -49.3 238 -57.9Frequency spectrum waveform analyzer 703 449 -36.1Scanner 352 19 393 11.6 107 -72.8Frequency spectrum analyzer 170 255 50Distortion measurement instrument 794 16 432 -45.6 235 -46.0FM deviation modulation measurementinstrument131 59 -55.027.4·74·

Electronics & InformationOthers 140Microwave measurement instrument8995(excluding1554(excluding -82.7parts)parts)Vector network analyzer 115 205 78.3Scalar network analyzer 40 80 100.0Microwave power meter 175 310 77.1Other microwave instrument 46893 104 8840 -81.2 1269 -85.6Parts for microwave measurementinstrument14134542 19411 29483 51.9Communication testing instrument 9792 2245 -77.1Carrier wave communication testinginstrument178 -30 7875 44.2times 360 -95.4Analog/digital mobile communicationtesting instrument8290 125 1917 -77.0 1885 -1.7Optical communication testing instrument 415 570 37.3Broadcasting and TV measurementinstrument10379 11706 12.8 14665 25.3Ultra low frequency measurementinstrument127 181 42.5Ultra low frequency signal analyzer 2 1 -50.0Frequency response analyzer 28 47 67.9 42 -10.6Ultra low frequency signal source 31 51 64.5 44 -13.7Ultra low frequency voltmeter 34 24 -29.4 27 12.5Filter, amplifier 744 4 4Others 64Acoustics measurement instrument 5476 6127 11.9Sound-level meter 1138 1340 17.8Noise statistics and analysis instrument 719 986 37.1Noise frequency spectrum analyzer 150 186 24.0Ambient vibration analyzer 75 140 86.7Noise vibration calibration device 233 283 21.5Other acoustics instrument 2141 -30 3161 47.6 3192 1.0Disturbance field strength measurementinstrumentDisturbance field strength measurementmeter1 3091 3091timesDigital full automatic disturbance fieldstrength testing receiver1 3 3timesStabilized power supply 1676569 3114065 85.7DC stabilized power supply 303290 61 241802 -20.3 993248 4.1timesAC stabilized power supply 77980 -74 82100 5.3 85360 4.0Constant-current stabilized power supply 651034 60 726593 11.6 1076593 48.2Power inverter 391710 23 542355 38.5 951659 75.5Laser power supply 896 281 1010 12.7 1305 29.2Emergency power supply 25Other power supply 32974 -85 82684 2.5times 5900 -92.9Recording and displaying instrument 678 20118 29.7timesRecorder 4982 244 2250 9.2timesDisplay 347 434 25.1 17868 41.2timesSignal source 1225543 1245097 1.6LF signal source 5362 21 4893 -8.7 2569 -47.5HF signal source 723 182 1033 42.9 951 -7.9Power signal generator 705 143 780 11.0 1036 32.8Synthetic signal generator 180 350 94Power amplifier 18400 12100 -34.0 12000 -0.8Digital signal generator 2424Other signal source 298 1184561 1226117 3.5·75·

China Business Guide93190Other measurement instrument(excludingcrystaloscillators)Puncture device 789 4 898 14.0 772 -14.0Atomic ray instrument 10287 213 11680 14.0 7274 -37.7Meteorological instrument 110972 13 49130 -56.0 54250 10.4Crystal oscillator 17582191Standard inductor, capacitor and resistor 30894Medical electronic instrumentMedical electronic appliance 6833 -54 9550 40.0 2187341 229timesMedical supersonic instrument 1940 -35 1715 -12.0 2110 23.0Medical laser instrument 86 696 8.1timesMedical bio-chemical instrument 3079 228 -92.6 4634 20.3timesMedical HF, microwave, ray and nuclideinstruments80 94120 1176.5timesMedical HF instrument 80 78Medical microwave instrument 93966Medical ray instrument 76TCM diagnosistic instrument 1692 753 -55.5Pubic traffic electronic appliance 631598 415199 -34.3Textile industry electronic appliance 3355 381 3210 -4.0 3575 11.4Coal industry electronic appliance 735 -91 9951 13.5times 32679 3.3timesPetro-chemical industry electronicappliance938 16 2631 2.8times 1874 -28.8Water and power industry electronicappliance219969 311 83731 -62.0 91098 8.8Mining and metallurgy industryelectronic appliance48 203 4.3timesGas industry electronic appliance 75 468 6.2times 555 18.6Traffic and transportation industryelectronic appliance113162 4.7times 531559 370 285215 -46.3Culture and education industry electronic415335appliance0.3 416465 0.3 13000 -96.9Other electronic appliance 399677 2.2times 883983 121 1743079 97.2Electronic ammeter 940000 280000 -70.2DC ammeter and voltmeter 378800 430000 13.5AC ammeter and voltmeter 647600 210000 -67.6 160000 -23.8Power meter 300000 120000 -60.0Electronics dedicated ammeter 25080000 21040000 -16.1Special purpose ammeter 184000 590000 3.2times 380000 -35.6IC card intelligent ammeter 42416700 2160000 -95.0 14660000 6.8timesIC card intelligent water meter 8022000 30000 -99.6 20000 -33.3IC card intelligent coal gas meter 220100 130000 -41.0 70000 -46.2IC card intelligent heat meter 203300 10000 -95.0 70000 7timesOthers 1363000 22170000 16.3 5850000 -73.6·76·

Electronics & InformationTable 5. Product export of electronic measurement instrument industry between 2004 and 20052004 2005ProductExport volume(set)Growthrate(%)Export volume(set)Growth rate(%)Digital pulse frequency measurement instrument 168204 1855670 10.3Analog frequency measurement instrument 40Counter 941400Frequency standard instrument 889Digital multimeter 1833773 14.5 397332 -78.3Digital storage oscillograph 1000 8000 700General oscillograph 10377 378 17689 70.5Dedicated oscillograph 1300Microwave filter 28541791Broadcasting and TV measurement instrument 6624 33 12545 89.4DC stabilized power supply 196985 4.9 10565405 53.6timesPower inverter 1000 -99.7 6322551 6322.6timesLF signal source 749 -21.0 530 -29.2Other signal source 1175356 1222186 4.0Crystal oscillator 11311991Blood testing apparatus 1981000Electronic thermometer and pressure meter 95597 -79.9 4520000 47.3timesSupersonic diagnostic instrument 38 -2.1 235 6.2timesSupersonic treatment instrument 11 111.0Laser treatment instrument 44Medical microwave instrument 30Other medical electronic instrument 6747518Water and power electronic appliance 4464 5.7times 7002 56.9Traffic electronic appliance 610 472.0 1810 197Other electronic appliance 118946 610 207023 74.0DC ammeter and voltmeter 10000 110IC card intelligent ammeter 10000 -100 1630000 163timesOther electronic special power meters 1820000Table 6. Main economy indexes of electronic measurement instrument industry between 2003 and 2005Item Unit 2003 2004 2005 Growth rate(%)Gross value of the whole industry(current price) 10,000yuan 430957 551625 744690 35.5Industrial value added of the whole industry 10,000yuan 137832 168155 218502 29.9Sales income of the whole industry 10,000yuan 435665 566365 770250 36.0Pre-tax profit of the whole industry 10,000yuan 46812 60163 75203 25.0Gross profit of the total industry 10,000yuan 29772 35726 42871 20.0Remark: data source: Electronic Production Equipment Industry Association (CEPEA).VIII.Integrated circuit (IC) and semiconductor device industries(I)OverviewIn 2005, China’s IC and semiconductor device industries maintained the rapid and stable development and made betterachievements. The targets of the 10th Five Year Plan were realized a year early.The rapid growth of national economy and social informatizing course offered the growing opportunities for the sounddevelopment of IC and semiconductor device industries. With five-year growth, the achievements were notable.In 2000, the issuance of No 18 document Some Policies for Encouraging the Development of the Software Industry andthe Integrated Circuit Industry by the State Council promoted the simultaneous development of China’s IC industry andsemiconductor device industry and brought them in the best growth period.·77·

China Business GuideIn 2005, the investment in IC and semiconductor device industries continued expanding. The capacity increased steadily.The product structure was optimized greatly. The Technical level also improved a lot. The mass production technology in ICindustry reached the international advanced level. China can produce 12-inch and 0.11µm IC products. The chip design levelreached the multi-million-gate grade. The gap between China and foreign in chip design level was narrowed increasingly. ICdesign, manufacture, package and test developed harmoniously. IC industrial chain had taken initial shape. Parts of keymaterials, special equipment and instruments had put into mass production. China’s IC industry possessed the primarysupport capacity. The industry cluster effect became increasingly obvious. China’s Yangtze River Delta, Beijing-Tianjin-Bohai Bay and Pearl River Delta had become the major regions where China’s IC industry clustered. The salesrevenue of these three regions accounted for over 95% of the total sales revenue of China’s IC industry. Till November 2005when Beijing-based Vimicro Corporation and Zhuhai-based Actions Semiconductor Co.,Ltd. were successful listed on theNASDAQ Stock Market in the US, there were ten listed enterprises engaged in semiconductor device industry in China.These listed enterprises were as follows: Semiconductor Manufacturing International Corporation (SMIC), CSMCTechnologies Corporation, Shanghai Belling Co.,Ltd., Shanghai Fudan Microelectronics Co.,Ltd., Grinm SemiconductorMaterials Co.,Ltd., Hangzhou Silan Microelectronics Co.,Ltd., Jiangsu Changjiang Electronics Technology Co.,Ltd. (JCET),Jilin Sino-Microelectronics Co.,Ltd. (JSMC), Vimicro Corporation and Actions Semiconductor Co.,Ltd..In 2005, the growth rate of global semiconductor market dropped a lot compared to 28% in 2004. The sales of wholeyear reached US$ 197.298 billion, a 6.8% increase on a year-on-year basis. The sales from IC market hit US$ 227.484 billion.The sales from discrete devices (including photoelectronic devices) hit US$ 34.686 billion. Impacted by the rapiddevelopment of global semiconductor market, China’s IC and semiconductor device industries maintained the fast growth inthe second half of the year after the turndown in the first half of the year. The sales of whole year reached 131.53 billion yuan,an increase of 32%, accounting for 3.8% of domestic sales of the electronic information products manufacturing industry and7.1% of global sales of semiconductor devices. The number of employees in the industry as a whole reached 277,000, ofwhich technical stuff were around 60,000, accounting for 21.69% of the total number. The talents worked in fields of design,processing technique, sales, investment, management, trade and technical service.(II)Manufacture and sales1. IC industryICIn 2005, China’s IC chip production lines were full of capacity. The productivity of 6-inch, 8-inch and 12-inchproduction lines was expanded steadily. The number of the enterprises, which sales revenue of IC design industry exceeded100 million yuan, was 25, increasing eight enterprises compared with last year. The packaging industry had made notableachievements in technical level and output and replaced the development mode dominated by low-level redundantdevelopment and simple production-scale expansion step by step. The national guidance and support played an increasingimportant role in the product research and development. The IC industry had come into the best growth period.For five years, the investment in IC industry rapidly developed. From 2001 to 2005, the investment amount hit US$ 16billion, four times of the total investment in the past 30 years. The average growth rate reached 45%. In 2005, the output ofIC reached 26.11 billion pieces, an increase of 23.5% and 4.1 times of that in 2001. The average growth rate hit 41.3% forfive years. The sales reached 70.21 billion yuan, an increase of 28.8% and 3.7 times of that in 2001. The average growth ratehit 41.0% for five years. This figure accounted for 4.5% of the total sales of global IC products in 2005, compared to nearly1% in 2001. It increased 0.8 percentage points compared to 2004.IC design, chip manufacturing and packaging test industries developed simultaneously. In 2005, the sales revenue ofchip manufacturing industry reached 23.29 billion yuan, a 28.5% increase. The sales revenue of IC design industry reached12.43 billion yuan, an increase of 52.5%. The sales revenue of the packaging industry reached 34.49 billion yuan, an increaseof 22.1%.The output of ancillary IC used for investment-type machine increased quickly. Its proportion also increased a lot. Theproportion of ancillary IC used for consumption products was ranked the second. IC card chip, ASIC curcuit and SOC-systemchip developed fast and became the highlighting of the industry.·78·

Electronics & InformationIC design industryAccording to incomplete statistics, till the end of 2005, the number of IC design units had reached 479, which mainlydistributed Beijing-centered Beijing-Tianjing Bohai Bay areas, Shanghai-centered Yangtze River Delta, Shenzhen-centeredPearl River Delta and Xi’an, Chengdu and Wuhan-centered central and western areas. The IC design teams become more andmore huge. The number of team members had reached over 20,000 in 2005 from less than 5,000 in 2000. The sales revenueof IC design industry reached 12.43 billion yuan, an increase of 52.5% and accounting for 17.7% of the total sales revenue ofIC industry in China. The number of enterprises with sales revenue of IC design industry over 100 million yuan, were 18, ofwhich five enterprises’ sales revenue surpassed 500 million yuan. The enterprises with sales revenue over 1 billion yuanappeared in China for the first time. From 2001 to 2005, the average annual growth rate of IC design industry hit 68%. Withthe fast growth of IC design industry and chip manufacturing industry, the professional design and service companies wereestablished to provide IC design companies with new product development, IP core, application service, MPW andafter-design service and give chip manufacturers diverse forms of ancillary services including database establishment and IPcore development.In 2000, the sale revenue of IC design industry (excluding the Hong Kong SAR, the Macao and Taiwan) reached 980million yuan. In 2005, the sales revenue reached 12.43 billion yuan. The number of enterprises with sales revenue over 100million yuan was 18. The sales revenue of top ten IC design enterprise accounted for 41.6% of sales revenue of IC designindustry. From 2001 to 2005, the average growth rate hit 67.8%, higher than that of the IC industry-31.18%,that of themanufacturing industry-57.2% and that of the packaging industry-22.1%. The proportion of the IC design industry increasedfrom 5.3% of the whole industry in 2000 to 17.7% in 2005.Chip manufacturing industryChina has made the chip manufacturing industry become the investment focus of the IC industry in recent years. Untilthe end of 2005, the Chinese mainland had put ten 8-inch chip production lines and one 12-inch chip production line intooperation. During the 10th Five Year Plan, the total investment in chip manufacture reached around US$ 16 billion yuan. Theproduction lines were mainly established in form of standard processing line (Foundry). At present, the total capacity of thechip production lines put into operation reached around 650 thousand pieces/per month.Shanghai-based SMIC has been one of the fastest developed enterprises in recent years. SMIC has established plants inShanghai, Tianjin and Beijing and possessed four 8-inch chip production lines including one production line applying 0.13µmstandard copper wiring manufacture processing. Beijing-based SMIC has put 12-inch production line into operation. Thehighest processing level of the production line reached 0.11µm. The capacity hit 20,000-piece/per month. The production hasreached full load. The rate of finished products has increased steadily. SMIC provides Infineon Technologies (Wuxi) Co.,Ltd.,ELPIDA Memory and other companies with memory products and undertakes the processing order of the chip designcompanies. Chengdu-based chip packaging test plant has been put into operation. This plant is ranked the third place in theWorld Top Ten in semiconductor foundry enterprises.Shanghai Hua Hong NEC Electronics Co.,Ltd. is the first enterprises possessing 8-inch IC production lines in China.Shanghai Hua Hong NEC Electronics Co.,Ltd. has been put into operation since 2000. Since then, it has transferred itsoperation mode from memory products manufacture to standard processing production lines (foundry). Its processing leveldeveloped by its own efforts reached 0.25-0.18µm. Its production lines possess multi-kinds of processing modules. Theproduction capacity has increased from 20,000 pieces to 50,000 pieces monthly. The comprehensive quality rate of the entireproduction lines reached the international advanced level. On basis of bring in advanced technologies, it depends on its ownforce to establish the technical improvement department and talents team. In 2005, the sales revenue reached 2.4 billion yuan,an increase of 9%. The foreign exchange reached US$ 240 million. It has been ranked the seventh place among the WorldTop Ten in semiconductor foundry enterprises for three consecutive years.HeJian Technolgy (Suzhou) Co.,Ltd. was an 8-inch IC foundry enterprise, which was put into operation in 2004. In 2005,its production capacity reached 50,000 pieces per month. It undertook the processing businesses of some chip designcompanies at home and abroad. The domestic business accounted for 15% of the total businesses. In 2005, the 8-inchproduction line of TSMC (Shanghai) was put into mass production. Its production capacity reached 40,000 pieces per month.IC packaging and testing industry·79·

China Business GuideThe packaging industry needed by China’s IC industry developed relatively steadily and was the lead in domestic ICindustry. In 2005, the sales revenue of the packaging and testing industry reached 34.49 billion yuan, an increase of 22.1%and accounting for 49% of the total sales revenue of the IC industry. At present, China’s IC packaging and testing industryhas become a large-scale production base located mainly in Shanghai, Tianjin, Beijing, Jiangsu and Guangdong. Some largeinternational IC manufacturers have established IC packaging plants, which are joint ventures or solely foreign-ownedenterprises. In order to improve the level of IC packaging technology and change the growth mode merely depended onexpanding the production scale, many enterprises developed the new products on basis of the market demand. The newpackaging modes that had been put into operation included BGA, MCP, SSOP/TSSOP, TPQFP, COF and none-touching ICcard chip module. The technical content and added value of the products were increased continuously.2. Discrete semiconductor device industryAt present, China’s discrete semiconductor device industry has possessed certain industrial scale. There are 200enterprises engaged in the production of discrete devices in China. The employed persons are around 80,000, of which20,000 are technical personnel. Until the end of 2005, there were 21 above 4-inch discrete semiconductor device and chipproduction lines completed or under establishment. The production capacity of discrete device chip production line reached30,000 pieces per month. In 2005, there were over 20 enterprises with output of discrete devices above 1 billion pieces. Thesales revenue of domestic largest semiconductor triode manufacturer-Jiangsu Xinchao Technology Group Co.,Ltd.-reached1.468 billion yuan. The sales revenue of the domestic largest semiconductor diode manufacturer-Leshan-PhoenixSemiconductor Co.,Ltd.-reached 1.336 billion yuan. The sales revenue of the domestic largest discrete semiconductor devicetriode manufacturer-Jilin Sino-Microelectronics Group Co.,Ltd.-reached 521 million yuan. In 2005, the output of China’sdiscrete semiconductor devices hit 129.49 billion pieces, an increase of 23.4%. The sales revenue reached 61.32 billion yuan,an increase of 35.9% and accounting for 21.8% of total sales revenue of global discrete devices (including photo electronicdevices and sensing devices).The power electronic device is an important part of semiconductor devices. In 2005, China’s power electronic deviceindustry still maintained rapid development. The production scale was further expanded. The production structure wasadjusted accordingly. The new product development quickened its steps. The quality management level was improved a lot.The economic operation was in sound situation and developed steadily. The China’s power electronic device industry madebetter economic return. The output of the power electronic devices produced by 31 enterprises taking part in the annualindustrial statistics reached 557.54 million pieces, of which 564.21 million pieces were sold and 20 thousand pieces wereexported. The sales revenue reached 1.54 billion yuan, an increase of 24.8%. The export turnover hit 96.51 million yuan, anincrease of 20%.(III)Scientific development and new productsIn 2005, China made great achievement by self-innovation in IC industry. Some new products had entered into domesticand foreign markets and yielded sound economic returns. The enterprises engaged in new technology development poured in.By giving top priority to complete machine products, enterprises integrated the market demand, core technology developmentand application together in order to do well work in market accession. On basis of the encouragement of industrial policiesand the support of technological innovation projects, the Xingguang series of digital multimedia chips developed by VimicroCorporation was awarded the National Science and Technology Advanced Prize (first prize). X-wall-a kind of kilomegaline-speed firewall chip- developed by Sichuan-based Nan Shan Bridge Co.,Ltd. and the digital TV receiver channel codingand decoding chip developed by Hangzhou Guoxin Science& Technology Co.,Ltd. are awarded the Prize of the Ministry ofInformation Industry for Key Technical Invention respectively in 2005.In 2005, China Resources Microelectronics limited developed 156 types of IC and semiconductor devices, of which 95types of products had been put into operation. China Resources Microelectronics limited had won 92 prizes ofprovincial–level science & technology advance prizes. The processing includes bipolar, CMOS, BiCMOS and othertechniques. The line width of processing techniques was improved a lot. 300---500A/600---2500V high power fast recovery·80·

Electronics & Informationdiode developed by Beijing Jing Yi Chunshu Rectifier Co.,Ltd. had passed the authentication of Beijing Municipal Science&Technology Commission.(IV)Important engineering and key projectsSemiconductor lighting engineeringIn June 2003, Ministry of Information Industry actively promoted the development of semiconductor lighting industryafter the startup of “national semiconductor lighting engineering”. In 2005 when distributing the development projects,Ministry of Information Industry encouraged enterprises to research and develop the key packaging technologies andproducts in LED used for semiconductor lighting. Xiamen Hualian Electronic Co.,Ltd. , Zhenjiang-based WenrunOptoelectronic Co.,Ltd. and Shijiazhuang Lide Technology Co.,Ltd. received the capital support.In November 2005, “Semiconductor Lighting Technology Working Group” of Ministry of Information Industry wasestablished in Beijing. The secretariat was located in China Electronics Standardization Institute of Ministry of InformationIndustry. The working group was composed of Ministry of Information Industry, Ministry of Science and Technology,Luminescent Device Branch of COEMA, enterprises, institutes and institute of higher learning. There were 45 members inLuminescent Device Branch of COEMA. In accordance with the need of national industrial development, the working groupmade the recent and future working plan.Mobile CommunicationsIn 2005, among the mobile communication research and development projects, the TD-SCDMA baseband chips used forcellphone developed by Spreadtrum Communications (Shanghai) Inc had been put into mass production and yield notableeconomic returns.(V)Industrial managementCompilation of special planningUnder the general disposition of National Development and Reform Commission and in accordance with the generalrequirements of Ministry of Information Industry as well as on basis of the suggestions of experts and enterprises, thecompilation work of the 11th Five Year IC Industry Special Planning (approval copy) and “the 11th Five Year” IC IndustryInvestment Guide had been completed in December 2005.Implementation of industrial policiesUnder organization of National Development and Reform Commission, Ministry of Information Industry actively tookpart in the compilation work of Some Policies on Further Encouraging Software and IC Industry Development and thefirst-phase preparations on the legal system of industrial policies. It also carried out No 18 document issued by State Counciland the authentication work of IC-related enterprises. Until the end of 2005, Ministry of Information Industry had finishedthree batches of authentication work on 209 IC design enterprises. In order to improve the self-innovation ability of ICenterprises, the state established the special fund on IC research and development. This special fund was used for support thetechnological innovation work of IC enterprises.The auxiliary work on industrial supporting mechanismMinistry of Information Industry supported the relevant work made by China Software and Integrated Circuit Promotion(CSIP) Center. The CSIP Center of Ministry of Information Industry actively promoted the application of IC IP core andquickened the step of international cooperation as well as improved the research and service in IC intellectual property rights.The CSIP Center also supported the work of China Semiconductor Industry Association, China Electronics MaterialsIndustry Association and China Optics and Optoelectronics Manufactures Association. The CSIP Center also gave support tothe third session of China International IC Industry Expo & Conference, which is held by China Semiconductor IndustryAssociation in Beijing in August 2005.(VII)International cooperation and foreign trade·81·

China Business GuideChip was the basis of the IC industry. In order to develop and possess the key technology of IC chip manufactureprocessing and change the situation that the industrial technology depended on import, domestic relevant enterprises began todevelop the key scientific and technological projects with the relevant departments. For example, in 2000, Shanghai HuahongGroup Co.,Ltd. started the “Deep Submicron Digital CMOS Technological Development” Project in open R&D manner.Shanghai Huahong Group Co.,Ltd. developed the processing and enjoyed the intellectual rights jointly with IMEC ofCatholic University of Louvain. The 0.25µm and 0.18µm key processing techniques developed by them jointly had been usedfor the 8-inch production line of Shanghai Hua Hong NEC Electronics Co.,Ltd.. This project had won 34 international patens.China Patent Office had accepted 102 applications for patent. The projects had won 26 patent sin China.With the rapid development of China semiconductor industry, internationally-known semiconductor enterpriseintensified their business in China. In 2005, Lixin Semiconductor Company established 8-inch and 0.25µm chip productionline applying BCD processing in Shanghai Zizhu Science-Based Industrial Park. Its production capacity reached 20, 000pieces/per month. The IC Packaging Plant established by SMIC in Chengdu had been put into operation. In Wuxi, SouthKorea’s Hynix and Europe’s ST jointly invested in the construction of 8-inch and 0.25µm IC production line used to produceall kinds of memory products. This production line was still under construction. Micron Semiconductor Technology investedUS$ 250 million to establish semiconductor memory packaging plant in Xi’an. In addition, many 8-in and 12-inch IC chipproduction lines were under preparation.IC import and export tradeIn 2005, the imported IC reached 75.37 billion pieces, an increase of 20%. The import value reached US$ 81.02 billion,an increase of 34.9%. The exported IC reached 21.61 pieces, an increase of 33.2%. The export value reached US$ 13.75billion, an increase of 30.7%. The trade deficit of China’s IC industry hit US$ 67.27 billion, an increase of 50.8%.In view of the area distribution of import trade, in 2005, Taiwan became the largest IC imported region. The importvalue reached US$ 18.55 billion, accounting for 22.9% of the total import value of that year. South Korea became the secondlargest IC imported countries. The import value reached US$ 14.34 billion, accounting for 17.7% of total IC import value.Malaysia became the third largest IC imported countries. The import value reached US$ 9.56 billion, accounting for 11.8% oftotal IC import value. Japan was the forth-largest IC imported country. Its import value reached US$ 9.24 billion, accountingfor 11.4% of total IC import value. Hong Kong SAR became the largest IC exported region. Its export value reached US$4.84 billion, accounting for 35.2% of the total IC export value. Singapore was the second largest IC exported country. Itsexport value reached US$ 1.53 billion, accounting for 11.1% of the total IC export value. South Korea was the third largestIC exported country. Its export value reached US$ 1.49 billion, accounting for 10.8% of the total IC export value. The USwas the fourth largest IC exported country. Its export value reached US$ 1.4 billion, accounting for 10.2% of the total ICexport value.Import and export trade of semiconductor discrete devicesIn 2005, China’s import and export trade in semiconductor discrete devices had increased a lot. The imported discretedevices reached 205.43 pieces, an increase of 18.6%. Import value reached US$ 11.02 billion, an increase of 48.5%. Theexported discrete devices reached 178.69 pieces, an increase of 24.9%. The export value hit US$ 4.18 billion, an increase of72%. In 2005, the China’s trade deficit in semiconductor discrete devices hit US$ 6.84 billion, an increase of 37.1%.Japan and Taiwan have always been the largest import sources of semiconductor discrete devices of China. In 2005,Japan was the largest imported country of semiconductor discrete devices. Its import value reached US$ 3.02 billion,accounting for 27.4% of total import value of semiconductor discrete devices. Taiwan was the second largest imported regionof China of semiconductor discrete devices. Its import value reached US$ 1.79 billion, accounting for 16.3% of total importvalue of semiconductor discrete devices. South Korea was the third largest imported country of semiconductor discretedevices. Its import value reached US$ 870 million, accounting for 7.9% of total import value of semiconductor discretedevices. Malaysia was the fourth largest imported country of semiconductor discrete devices. Its import value reached US$740 million, accounting for 6.8% of total import value of semiconductor discrete devices. The import value ofabovementioned four countries and regions hit US$ 6.42 billion, accounting for 86.5% of total domestic import value ofsemiconductor discrete devices.The domestic export of semiconductor discrete devices mainly relied on Hong Kong SAR’s entrepot trade. In 2005,Hong Kong became the largest exported region of semiconductor discrete devices. Its export value accounted for 47.7% of·82·

Electronics & Informationtotal export volume of semiconductor discrete devices and 34.6% of the total export value of semiconductor discrete devices.Then were Taiwan region, Germany, South Korea, Japan and Singapore.(VIII)Market analysis and forecastingBy a push of the rapid growth of demand and supply of global complete machine products such as computer, network,mobile communication and digital home appliance, in 2005, the market need of China’s IC and semiconductor devicesincreased quickly. The market scale reached 473.7 billion yuan, an increase of 26%. The market scale of IC reached 380billion yuan. The market scale of semiconductor devices reached US$ 93.7 billion. Compared with 2004, although the growthrate became a little slow, the total volume and growth rate still maintained the momentum of increase. In 2005, IC andsemiconductor devices accounted for 25.7% of the global market share, a 3.6 percentage point increase on a year-on-yearbasis, and became the third largest IC market just behind the US and Japan. In 2005, both China’s IC market demand andsupply thrived. The export volume increased rapidly. The import volume and import value increased especially fast.It was estimated that the development of China’s IC industry would show the following characteristics: SOC wouldbecome the main growth field; four application fields such as digital TV, mobile communication, computer, network andinformation security would drive the rapid growth of IC market and bring new development opportunities to IC industry; ICcard, electronic label, semiconductor lighting and power electronic devices would become the new economic growth point.The coming five years will become the best development period for IC and semiconductor device industry. Domesticmarket will still maintain the rapid growth. The average annual increase will be maintained around 30%. In 2006, the marketscale of China’s IC market would increase 31% to 450 billion yuan. The market demand would be around 80 billion pieces.Till 2010, the market scale will hit 1, 000 yuan, of which market scale of IC will reach 830 billion yuan and semiconductordevices will reached 170 billion yuan. Then, China will become the second largest IC market in the world.【Statistical data】Table 1 Industrial scale of IC and semiconductor devices industry in 2005TypeNumber of enterprisesTotal number Including: Ratio of technical staff toof personnel technical staff total number of personnelIC 899 197808 40000 20.22Semiconductor devices 728 79637 20000 25.11Total 1627 277445 60000 21.63Table 2 Actual performance of main economic parameters of IC and semiconductor devices industry from 2003 to 2005Name of items Units Year 2003 Year 2004 Year 2005Growthrate(%)Sales revenue of IC 100,000,000 yuan 351.4 545.3 702.1 28.8Output of IC 100,000,000 pieces 124.1 211.5 261.1 23.5Sales revenue of semiconductor devices 100,000,000 yuan 336 451.2 613.2 35.9Output of semiconductor devices 100,000,000 pieces 777.3 1049.4 1294.9 23.4Table 3 Sales revenue of China Top Ten IC Design Enterprises in 20052005 ranking Name of enterprisesSales revenue Growth 2005(10, 000 yuan) rate(%) ranking1 Actions Semiconductor Co.,Ltd. 125750 173.4 32 Vimicro Corporation 76822 82.9 53 China Huada Integrated Circuit Design (Group) Co.,Ltd. 64075 41.0 44 Hangzhou Silan Microelectronics Co.,Ltd. 60577 19.1 25 Datang Microelectronics Technology Co.,Ltd. 57234 -23.7 16 Shanghai Hua Hong NEC Electronics Co.,Ltd. 37330 95.4 97 Hangzhou Youwang Electronic Co.,Ltd. 25061 1.6 78 Shaoxing Silicore Technology Co.,Ltd. 23397 -7.4 69 Beijing Tongfang Microelectronics Co.,Ltd. 2321410 Wuxi China Resources Semico Co.,Ltd. 22830 Even 8Total 516290·83·

China Business GuideTable 4 Sales revenue of Chinese major enterprises engaged in IC chip manufacture in 2005No Name of enterprises Sales revenue(10, 000 yuan)1 SMIC 11714002 Shanghai Hua Hong NEC Electronics Co.,Ltd. 2412173 HeJian Technolgy (Suzhou) Co.,Ltd. 2170004 SGNEC 1100515 Advanced Semiconductor Manufacturing Corporation Limited 896006 Grace Semiconductor Manufacturing Corporation 853757 Wuxi China Resources Huajing Micro Electronics Co.,Ltd. 836228 CSMC Technologies Corporation 603009 JSMC* 5214710 Suzhou Good-Ark Electronics Co.,Ltd. * 37771Total 2148483Remarks: * refers to discrete device enterprisesTable 5 Sales revenue of China Top Ten Enterprises engaged in chip packaging and testing in 2005No Name of enterprises Sales revenue (10, 000 yuan1 Freescale Semiconductor (China) Limited 6262382 RFMD (Beijing) 2927143 STS Microelectronics (Shenzhen) 2890804 Intel Products (Shanghai) Co.,Ltd. 1821005 Shanghai Matsushita Semiconductor Co.,Ltd. 1788296 Nantong Fujitsu Microelectronics Co.,Ltd. 1762247 Infineon Technologies Suzhou Co.,Ltd. 1594818 Renesas Semiconductor (Beijing) Co.,Ltd. 1562699 JCET 14680010 Leshan-Phoenix Semiconductor Co.,Ltd. * 133584Total 2341319Remarks: * refers to discrete device enterprises.Table 6 Actual performance of main economic parameters of China’ s IC industry from 2000 to 2005Name of parametersYear Year Year Year Year Year2000 2001 2002 2003 2004 2005Sales revenue of IC industry(100,000,000 yuan) 186.2 203.6 268.5 351.4 545.3 702.1Sales revenue of IC design industry(100,000,000 yuan) 9.8 14.8 21.6 44.9 81.8 124.3Sales revenue of IC manufacturing industry(100,000,000 yuan) 48.0 27.7 33.6 60.5 180.0 232.9Sales revenue of IC packaging and testing industry(100,000,000yuan)128.4 161.1 213.3 246.0 283.5 344.9Growth rate of IC design industry(%) 227 51.0 46.0 107.9 82.2 52.0Ratio of sales revenue of IC design industry to that of IC industry(%)5.3 7.3 8.0 12.8 15.0 17.7Growth rate of manufacturing industry(%) 114.0 -42.3 21.3 80.1 197.5 29.4Ratio of sales revenue of manufacturing industry to that of ICindustry(%)25.8 13.6 12.5 17.2 33.0 33.2Growth rate of IC packaging and testing industry(%) 155.0 25.5 32.4 15.3 15.2 21.7Ratio of sales revenue of IC packaging and testing industry to that ofIC industry(%)69.0 79.1 79.4 70.0 52.0 49.1Output of IC(100,000,000 pieces) 58.8 63.6 96.3 124.1 211.5 261.1Growth rate of sales revenue of IC industry(%) 133.8 9.1 31.9 30.9 55.2 28.8Ratio of IC industry to electronic information product manufacturingindustry(%)3.2 2.3 1.92 1.87 2.1 2.1Ratio of market share of China’s IC industry to that of global ICmarket(%)1.2 1.9 2.68 3.0 3.7 4.4·84·

Electronics & InformationTable 7 Top Ten Enterprises in sales revenue of power electronic devices in 2005NoName of enterprisesSales revenue Growth rate(10, 000 yuan) (%)1 Beijing AriTime Intelligent Control Co.,Ltd. 30042 64.62 Xi’an Jieli Electric Technology Co.,Ltd. 22840 245.53 Yangzhou Jinglai Semiconductor (group) Co.,Ltd. 21936 4.84 Tianjin Huan-ou Semiconductor Material Technology Co.,Ltd. 14097 84.05 Xi’an XD Power Rectifier Company Limited 13800 0.76 Power Electronics Department of Zhuzhou CSR Times Electric Co.,Ltd. 13336 1.37 Jiujiang Rectifier Factory 5027 2.78 Beijing Jing Yi Chunshu Rectifier Co.,Ltd. 4605 26.39 Qingdao Semiconductor Research Institute 2396 60.710 Hebei Huazheng Industry Co.,Ltd. 2079 27.3NoTable 8 Top Ten Enterprises of electric and electronic products in 2005Name of enterprisesOutput(10,000 pieces)Domestic salesvolume(10, 000 pieces)1 Yangzhou Jinglai Semiconductor (group) Co.,Ltd. 55106.7 55742.4 13.12 Yangzhou Siling Electronics Co.,Ltd. 353.8 396.23 Danyang Thyristor Factory 63.3 67.34 Kunshan Transistor Second Factory 62.2 59.95 Zhejiang Guidu Power Electronics Co.,Ltd. 44.9 29.66 Danyang Weisite Rectifier Co.,Ltd. 34.9 34.87 Yixing Shunda Ceramic Tube Package Co.,Ltd. 34.5 30.3 4.28Power Electronics Department of Zhuzhou CSRTimes Electric Co.,Ltd.14.9 13.9 0.59 Xi’an Jieli Electric Technology Co.,Ltd. 6.2 6.410 Qingdao Semiconductor Research Institute 4.8 4.0Table 9 Import and export trade of IC and semiconductor devices products from 2003 to 2005Foreign salesvolume(10, 000 pieces)Year 2003 Year 2004 Year 2005Name of enterprises Unit ExportvalueImportvalueExportvalueImportvalueExportvalueImportvalueIC100, 000, 000 dollars 57.0 404.0 100.0 546.2 137.5 810.2Growth rate(%) 26.8 58.3 75.4 35.2 37.5 48.3Semiconductor devices100, 000, 000 dollars 17.0 57.0 24.3 74.2 41.8 110.2Growth rate(%) 25.8 21.2 42.9 30.2 72.0 48.5Remarks: * Date Source: China Customs.Table 10 Import and export volume of IC and semiconductor device products from 2003 to 2005Year 2003 Year 2004 Year 2005Name of enterprises Unit ExportvalueImportvalueExportvalueImportvalueExportvalueImportvalueIC100, 000, 000 pieces 135 419 137.5 583.7 216.1 753.7Growth rate(%) 28.3 39.7 1.9 39.4 56.5 29.1Semiconductor devices100, 000, 000 pieces 1033 1353 1430.3 1731.7 1786.9 2045.3Growth rate(%) 16.7 26.9 38.4 28.0 25.0 18.1Remarks: * Date Source: China Customs.Table 11 Import and export of domestic IC in 2005Name of items Import and export scale Import scale Export scale Deficit valueVolume(100, 000, 000 pieces) 969.8 753.7 216.1 537.6Growth rate(%) 20.0 33.1Amount(100, 000, 000 dollars) 947.7 810.2 137.5 672.7Growth rate(%) 34.9 30.7 50.8Remarks: * Date Source: China Customs.·85·

China Business GuideTable 12 Import and export scale of domestic discrete devices in 2005Name of items Import and export scale Import scale Export scale Deficit valueVolume(100, 000, 000 pieces) 3832.2 2045.3 1786.9 258.4Growth rate(%) 18.6 24.9Amount(100, 000, 000 dollars) 152 110.2 41.8 68.4Growth rate(%) 48.5 72 37.1Remarks: * Date Source: China Customs.Table 13 Global IC market forecasting from 2005 to 2010Monetary unit: 100, 000, 000 dollarsYear 2004 2005 2006 2007 2008 2009 2010Predicted market amount 1781.3 1941 1918 2070 2450 3000 3450Growth rate(%) 27.3 8.0 -1.2 8.0 18.0 22.0 15.0Remarks: growth rate from 2005 to 2006 is the predicted data of WSTS. Data from 2007-2010 are predicted dataof CCID Microelectronics Consulting Group.IX. Vacuum electron device industry(I)OverviewIn 2005, China’s vacuum electron device industry first showed industry-wide losses in its history. The reason is that, onone hand, the maturity of the technology of flat panel display, lower costs and lower prices narrowed the development spaceof color picture tube; On the other hand, the excess production capacity of the color picture tube and the lowering prices forcompetition have caused the total industrial output value of more than 80% large enterprises engaging in color picture tubeand auxiliaries showed a decline or losses, leading to overall fall of the industry-wide major economic indicators.By the end of 2005, the enterprise structure of China's vacuum electron device industry showed little change, still 83enterprises. However, with the deterioration of the business environment, and the growing number of loss-making enterprises,the personnel structure has changed a lot. There were 123,539 employees in the vacuum electron device industry thoughoutthe year, a year-on-year decrease of 7%. 17,264 of which were technical staff, cutting 5.4 percent; 10,227 managements,cutting 6.1 percent; 96,048 workers, cutting 7.4 percent. It is obvious that except the retirement, each unit tries to maintain itsstrength of the development team as far as possible and to reduce management staff appropriately. The reduction extent forwork force is relatively larger.In 2005, the gross industrical output value of the vacuum electron device industry reached 64.26571 billion yuan, ayear-on-year decrease of 24.1 percent; the sales income reached 63.81183 billion yuan, a decrease of 18.7 percent; the profitand tax were 2.32361 billion yuan; the loss of loss-making enterprises was 1.35105 billion yuan; the profit payments and taxturnover were 972.56 million yuan after set-off of profits and losses, a drop of 85.8 percent; the total taxes achieved 1.13623billion yuan, a drop of 43.6%, and the total profit was 1.24806 billion billion yuan of profits.The whole industry was in thedifficulties of losses.(II)Production and salesIn 2005, China's total output of vacuum electron devices was 271.62 million, a increase of 4.4 percent compared with260.2 million of the previous year; the output of tubes accessories (glass bulb, aperture mask) was 196.38 million, a decreaseof 3.1 percent; light sources was 157.93 million, a drop of 10.5 percent; the output of Color Picture Tube (CPT) was 65.45million, a 1.2% decrease; Color Display tube (CDT) was 20.72 million, a 35.4% decrease; CPT glass bulb was 84.68 millionunits, a 9.9 percent decrease; CPT aperture mask was 87.22 million, a 5.8% decrease.In terms of the production of CPT and its supported products, in 2005, the profit and tax of many enterprises declinedgreatly due to the price fall and the price soaring of raw materials, and the industry-wide losses appeared. However, somejoint venture enterprises and aperture mask enterprises with strong technical reserves, wide variety and greater international·86·

Electronics & Informationmarket still made profit despite of narrowed profit margins. According to the statistics from the Ministry of InformationIndustry, the sales volume of China's color TV was 81.87 million sets in 2005, of which, the sale volume of CRT color TVwas 75.98 million sets, accounting for 92.8% of the total TV sales; the sales volume of PDP color TV was 700,000 sets,accounting for 0.9 percent of the total TV sales; the sales volume of LCD color TV was 4.21 million sets, accounting for 5.1percent of the total TV sales; the sales volume of projection color TV was 980,000 units, accounting for 1.2%. It is obviouslythat the CRT color TV still occupies a dominant position in China's color TV market is still the dominant position. For thisreason, CPT enterprises must adjust the product structure, enhance technological development and launch bettercost-performance products to meet the market demand.In terms of the production of black and white picture tube, the production and sales volume of the industry declinedgreatly in 2005. The output of black and white picture tube was 7.39 million, a 50.3 percent decrease; black-and-white glassbulb was 24.48 million sets, up 53.0%; black-and-white electron gun was 17.07 million, a 15.2 percent decrease.From what has been mentioned above, we can come to the conclusion that the profit of this industry in 2005 was verysmall and the operation was under difficult conditions. The total industrial output value was 310 million Yuan and the salesincome was 320,000 million Yuan. The tax and profit were 16.02 million Yuan and the export was 25.16 million US dollars.The largest scale enterprise was Tianjin Jin-jing Glass Bulb Co., Ltd. and the electron gun branch factory of ChangshaShuguang Electronics Group Co., Ltd.In terms of the production of vacuum switch tube, in recent years, China's vacuum switch tube industry has shown rapidgrowth. According to the statistics for 20 enterprises from the industry association, the output of vacuum switch tube was1.89 million in 2005, an increase of 26.0%; the sales volume was 1.75 million, up 18.2 percent; the production and sales ratereached 92.6%. Among the enterprises producing above 6 kV high-voltage vacuum switch tube in China, Shaanxi BaoguangVacuum Electric Device Co., Ltd. ranked the first place with the output of 200,000, followed by the Chengdu XuguangElectronics Co. Ltd. with the output of 156,000; and the third one is China Zhenhua (Group) Science & Technology Co., Ltd.Yuguang Branch with the output of 145,000, the fourth one is Jinzhou Huaguang Electric Power & Electron (group)Company with the output of 115,000. Among enterprises producing low-pressure vacuum switch tubes, Wenzhou StarElectronics Co., Ltd. ranked the first place with the output of 530,000, followed by Zhejiang Baoguang Electric Co., Ltd.with the output of 165,000; and the third one is Kunshan Guoli Vacuum Electric Co., Ltd. with the output of 163,000.In terms of the production of vacuum switch tube and its auxiliaries, the large-scale ceramic enterprises includeGuangdong Tai Po special Ceramics Co., Ltd., Jinzhou metal ceramics factory and Sichuan Yibin Jinyang Ceramics Factory;the large-scale enterprises engaged in supply of corrugate pipe include TianHua Bellows Co. Ltd and Shaan'xi SiruiIndustries Co., Ltd. with the supply of various contact materials accounting for more than 70 percent of the whole industry. In2005, the gross industrial output value of switch tube and auxiliaries production enterprises achieved 2.51 billion, a decreaseof 13.4%; the sales income achieved 2.03 billion yuan, up 8.6 percent; the profit and tax were 210 million yuan, reflecting a30 percent decrease. Clearly, as the development of the market, the production and sales volume both showed substantialgrowth, and the sales revenue increased slightly. However, due to the price fall and the soaring price of raw materials, theprofits declined greatly which was not conducive to the sustainable development of enterprises. Therefore, the entire industryshould regulate the market so as to avoid disorderly competition, expand the market of high voltage and ultrahigh voltage topromote the development of vacuum switch industry.In terms of the production of vacuum tube, China’s production of vacuum tube mainly includes the production ofreceiving amplifier tube, transmitting tube and UHF electronic tube, etc. In 2005, the output of China’s vacuum tube reached18.82 million, an increase of 2.3 percent; the sales volume reached 19.08 million, an increase of 8.0%; the rate of productionand marketing reached 101.4 percent. The output of receiving amplifier tube reached 1.06 million, an increase of 55.9%; thesales volume was 1.01 million, an increase of 17.4 percent, and rate of production and marketing reached 95.3%. The radiotransmitting tube of the radio and television market is relatively stable. The transmitting tube used for industrial heatingmedium promoted the sales growth of the transmitting tube with sales volume increase of 100 percent over the previous year;the UHF electronic tube (also called microwave tube) is the high-end product in the vacuum electron devices with advancedtechnical content, which is mainly used for the microwave stove but a small amount of which are used for the state's key·87·

China Business Guideprojects. In 2005, the output of continued-wave magnetron was 17.56 million, the same as last year; the sales volume was17.89 million, an increase of 7%.In terms of the production of ironic tube, China's ironic tube is mainly used for the production of overvoltageprotection luminous discharge tube of telecommunications industry. In 2005, China's output of the ironic tube was 100.59million, an increase of 61.8%; the sales volume was 96.39 million, an increase of 59.2%. A few years ago, it was predictedthat the ironic tube would be replaced by solid device, which once caused a market decline. Several years later, the practicehas proved that it has not been totally replaced, but also showed upward trends.In terms of the production of Vacuum Fluorescent Display (VFD), the output of China’s VFD was 56.72 million, a12.5% decrease; the sales volume was 56.07 million, a 11.3 percent decrease, and the rate of production and marketingreached 98.9%. At present, there are a dozen enterprises engaging in the production of vacuum display. Of which, BeijingOrient Vacuum Electronic Co., Ltd. ranks the first place with the output of 19.9 million, a 17.1 percent decrease; and the salesvolume was 19.3 million, a 16.1 percent decrease. followed by the Shanghai Samsung Vacuum Electronic Devices Co., Ltd.with the output of 28.97 million, an increase of 2.4 percent; the sales volume was 29.62 million, an increase of 5.8%; and therate of production and marketing reached 102.2 percent. In addition, the production and sales volume of Changsha ShuguangElectronics Group and Changzhou Yidali Electronics Co., Ltd. both reached 3 million. In recent years, as the marketcompetition of other types of flat-panel display, the VFD market also faces challenges, resulting in the decline of productionand sales volume of VFD in 2005.In terms of the production of electric light source, there are many enterprises engaging in the production of electric lightsource in China, mainly distributed in all regions and departments, but only enterprises specializing in the production ofspecial electric light source products are brought into the statistics ofhe Ministry of Information Industry. In 2005, the outputof electric light source was 157.93 million, a 10.5 percent decrease; the sales volume was 149.52 million, a 7.3 percentdecrease; and the rate of production and marketing reached 94.7%. Among them, the output of high-pressure sodium lampwas 2.27 million, a 61.7 percent decrease; the sales was 2.09 million, a 61.0 percent decrease; and the rate of production andmarketing reached 92 percent. The output of automotive lamp was 7.75 million, an increase of 13.0%; the sales volume was8.18 million, up 37.9 percent; and the rate of production and marketing reached 105.6 percent. The output of energy-savinglamps was 61.64 million, a 6.9% decrease; the sales volume was 58.97 million, a 5.8% decrease; and the rate of productionand marketing reached 95.7%. The output of fluorescent light was 86.27 million, a 11.5 percent decrease; the sales volumewas 80.82 million, a 7.5 percent decrease; and the rate of production and marketing reached 93.7%. It was obviously thatonly the output of automotive lamp increased considerably, and other light sources have different degrees of decline.(III)Scientific research and new products developmentIn 2005, 50 scientific research and new product development projects of China's vacuum electronics industry passed theidentification at provincial and ministerial levels, a decrease of 10.7 percent. Among which, 24 projects in the microwave(UHF tube) 24, a decrease of 4 percent, accounting for 48 percent of the total projects; 5 projects in vacuum switch tube, adrop of 58.3%, accounting for 10% of the total projects; 3 projects in flat panel display, a 57.1% decrease, accounting for 10percent of the total; 3 projects in CPT, the same with last year; 2 projects in electric light sources, and 8 projects of othertypes of products.The electronic microwave tube mainly includes magnetron, TWT, klystron and duplexer tube, which belongs to thehigh-tech industry in the vacuum electronics industry, and occupies an extremely important position in the national keyprojects. In 2005, in addition to the continuous wave magnetron had achieved large scale production, other type of tubes arestill in preparation stage. 24 scientific research results have passed provincial and ministerial identification, accounting for 48percent of the total projects of new products development. The technology of vacuum switch tube within the scope below40.5 kV is relatively mature and have already entered the industrialization stage, and gradually reduce the projects, completedin 2005, five new product development projects, and 58.3% decrease. At present, the development of new products mainlyconcentrated in the high voltage vacuum switch tube above 72.5 kV. For example: Wenzhou Baoguang Electric Group isdeveloping 72.5 kV vacuum switch tubes and circuit breakers, Shaanxi Baoguang Electric Group and Wenling Ziguang·88·

Electronics & InformationElectrical Co. Ltd. have developed 126 kV vacuum switch tubes, the detection parameters are qualified and are still in thepilot phaseIn 2005, China has 5 development items of vacuum tube. The main development object was photomultiplier tubes,which were still in the research preparation stage and had not yet entered mass production; there were 3 development items offlat panel display research, a 57.1% decrease.(IV)International cooperation and foreign tradeAccording to the statistics from China Chamber of Commerce for Import and Export of Machinery and ElectronicProducts, China's import and export trade volume of the vacuum electronics industry was 5.96 billion US dollars in 2005, a9.8% decrease. The imports amounted to 2.7 billion US dollars, a 25.6 percent decrease; and the exports amounted to 3.25billion US dollars, an increase of 9.1%. Although China's foreign trade volume decreased in the vacuum electronics industry,but the exports continued to grow, and achieved trade surplus for the first time, with the surplus value of 550 million USdollars.In terms of the CPT, in 2005, the import volume of CPT was 18.38 million, a 23.4 percent decrease; imports amountedto 650 million US dollars, a decrease of 36.3%. The export volume was 19.52 million, a decrease of 7.6%; the exportsamounted to 800 million US dollars, a decrease of 7.6%. Its import volume and imports both declined greatly, but the exportvolume increased and the exports declined slightly, indicating that the international market prices continue to decline.In terms of the color display tube, in 2005, the import volume of the color display tube was 15.30 million, a 38.2 percentdecrease; the imports amounted to 600 million US dollars, a decrease of 48.3 percent. The export volume was 5.98 million, adecrease of 14.2%; the exports amounted to 250 million US dollars, a decrease of 24.2%. Its import and export volume andimports and exports declined dramatically, indicating that the market of color display tube began to go downward.In terms of the black and white picture tube, in 2005, the import volume of the black and white picture tube was 2.64million, a 32.3 percent decrease; the imports amounted to 10.79 million US dollars, a decrease of 62.7 percent. The exportvolume was 4.05 million, a decrease of 5.8 percent; the exports amounted to 25.16 million US dollars, an increase of 51.4%.Its import volume and imports both declined dramatically, indicating that the market of black and white display tube willcontinue to shrink. The reason why the export volume declined slightly and the exports increased greatly is that Chinesegovernment restricted the use of the regenerated glass bulb, which caused the rise of cost. Some enterprises had to stopproduction or reduce production for the high cost, thus the export prices rose.In terms of the black and white display tube, in 2005, the import volume of the black and white display tube was 3.03million, an increase of 278.8%; the imports amounted to 4.63 million US dollars, a decrease of 32.5 percent. The exportvolume was 530,000, a decrease of 24.3 percent; the exports amounted to 5.12 million US dollars, a decrease of 33.9%. Itsexport volume and exports both declined dramatically, indicating that the supply exceeds the demand in the internationalmarket of black and white display tube and the price goes down significantly.In terms of the vacuum tube, in 2005, the import volume of the vacuum tube was 52.91 million, a decrease of 19.6%; theimports amounted to 118.49 million US dollars, a decrease of 37.6 percent. The export volume was 71.43 million, an increaseof 17.9 percent; the exports amounted to 100.54 million US dollars, an increase of 17.7%. China’s vacuum tube has strongcompetitiveness in the international market, showing the development trend of decreasing in import year by year and thegrowth in export year by year. However, the bulb tube and ultra-high-power radio tube (higher than 300 kW) and highvoltage vacuum switch tube above 72.5kV, which are used on the CT machine, are still a blank spot in China, and are totallydependent on imports.In terms of parts of picture tubes, in 2005, the imports of the parts of picture tubes were 268.56 million, a decrease of35.2%; the exports amounted to 324.41 million US dollars, a decrease of 3.2 percent. The dramatic decrease of imports andslight decrease of imports showed that China’s supporting ability in the parts of picture tubes has increased gradually. Theimport volume of other parts of Cathode Ray Tube (CRT) was 150 million US dollars, a decrease of 46.6 percent; the exportvolume was 61.25 million US dollars, the same with that of 2004. The imports of the parts of vacuum tubes amounted to51.67 million US dollars, an increase of 12.5%; the exports amounted to 5.17 million US dollars, a decrease of 20.5 percent.·89·

China Business GuideIn terms of special light source, China's production of special light source mainly includes halogen tungsten lamp,fluorescent lamps, metal halide lamps and gas discharge lamp of four types of products. In 2005, the import volume ofspecial light source was 834.12 million, an increase of 131.7 percent; the imports amounted to 839.68 million US dollars, anincrease of 86.1 percent. The export volume was 3742.18 million, an increase of 8.2%; the exports amounted to 1688.74million US dollars, an increase of 32.2%. The trade surplus achieved 850 million US dollars in 2005, an increase of 2.6percent, indicating that export and import trade of China’s special light source has maintained steady development and keepsthe slight rise of the trade surplus for successive years.(V)Main enterprisesFor the top 100 electronics enterprises, 5 enterprises of China’s vacuum electronics industry were listed in the 20thChina’s Top 100 China Electronics & Information Enterprises, namely Boe Technology Group Co., Ltd, Dalian DaxianGroup Co., Ltd, Huadong Electronics Group Company, Irico Group Electronics Company Limited and Henan Anyang CPTGlass Bulb Group Co., Ltd. BOE Technology Group Co., Ltd. ranked No. 3 in China's top 100 electronics and informationenterprises and its revenues reached 54.8 billion yuan. The remaining four enterprises have always among the top 100electronics and information enterprises over the past 20 years. The total business income of the above five enterprises reached78.17 billion yuan, accounting for 8.1% of the total revenue of the 20th session top 100 electronics and informationenterprises.In recent years, with the development of the grouplization in enterprises, the industry boundaries have been broken.Many vacuum tube plants did not maintain the single production mode of vacuum electronic products, and began to getinvolved in video, communications, and other new technology areas; some larger vacuum electronic enterprises wereincorporate into holdings groups through reform. For example: SVA Electronic Co., Ltd., Shanghai Yongxin Color PictureTube Co., Ltd. and Shanghai Electronic Glass Co., Ltd. were incorporated into SVA (Group) Co., Ltd.; Nanjing Huafei ColorDisplay System Co., Ltd. and Nanjing Electronic Shadow Mask Co., Ltd. were incorporated into Huadong Electronics GroupCompany; Beijing Matsushita Color Picture Tube Co., Ltd. were incorporated into Boe Technology Group Co., Ltd.; andShenzhen Seg-hitachi Colour Display Devices Co., Ltd. were incorporated into Shenzhen Electronics Group Co., Ltd., etc.For enterprises engaging in the production of color picture tube and its parts and components, there enterprises adjustedindustrial and products structure timely to respond to market changes in the face of the rapid development of flat paneldisplay technology and fierce competition inside the industry. The CPT production and sales volume basically maintained theprevious year's level. However, the state-owned enterprises or joint ventures with fewer varieties of products showed losses.Although some joint ventures did not show a deficit relying on their technology development strength and channeladvantages in the international market, the profits showed different degrees of decline.Irico Group is China's oversized electronics industry enterprise. The group has carried out six large-scale expansiontransformations since completion of production in 1982. At present, the company has nine CPT production lines, and its mainproducts range from 37cm to 92cm horizontal CPT of more than 10 varieties, with the annual production capacity of 14million pieces, taking first place in China’s industry rank and fourth in the world. In addition, the company also producesglass envelope, aperture mask, electron gun, fluorescent powder, deflector coil, low melting point glass powder, convergencemagnet and other components, is China's CPT production base and export base with the strongest self-distribution capacity.In 2005, the total industrial output value of the company was 8.15 billion yuan, the sales income was 5.1 billion yuan, thepaid taxes was 12.43 million yuan, and the total profit loss was 870 million yuan.The yearly sales of color picture tubes of Shanghai Yongxin Color Picture Tube Co., Ltd. reached 5.16 million pieces,the total industrial output value achieved 2.32 billion yuan, and the sales income achieved 2.24 billion Yuan. It showed adeficit of 470 million yuan due to price rise of raw materials, increase in the cost of management and fall in market price.The yearly sales of CPT of Nanjing Huafei Color Display System Co., Ltd. reached 6.71 million pieces, the CDTreached 2.11 million pieces, the sales income achieved 3.64 billion yuan, the profit and tax achieved 290 million yuan, andexports amounted to 150 million US dollars.·90·

Electronics & InformationThe yearly sales of CPT of Tianjin Samsung. SDI Co., Ltd. reached 3.10 million pieces, the CDT reached 3.25 millionpieces, the sales income achieved 3.05 billion yuan, the profit and tax achieved 190 million yuan, and exports amounted to100 million US dollars.The yearly sales of CPT of Beijing Matsushita Color Picture Tube Co., Ltd. were 8.55 million pieces, and the projectivetube reached 3.25 million pieces, the sales income achieved 3.44 billion yuan, the profit and tax achieved 110 million yuan,and exports amounted to 150 million US dollars.In 2005, all enterprises engaging in the production of CPT bulb showed different degree of losses affected by CPTmarket changes. Henan Anyang CPT Glass Bulb Group Co., Ltd. is China's leading enterprise owning the biggest productioncapacity of CPT bulb, with the annual production of CPT of 27.29 million units, a 19.2 percent decrease; sales of 25.69million units, a decrease of 19.5%; the sales income achieved 4.08 billion yuan, a 47.4 percent decrease.In 2005, the enterprises engaging in the production of CPT shadow mask did not show the industry-wide losses affectedby the market changes in the color picture tube, but the corporate profits declined substantially. Yantai Zhenghai ElectronicMask Co., Ltd. is the largest enterprise producing CPT shadow mask. The annual production of shadow mask was 31 millionpieces, an increase of 10.6%; the sales volume was 28.55 million, an increase of 4.7 percent; the sales income achieved 1.21billion yuan, up 17.5 percent; the profit and tax achieved 55.51 million yuan, a 64.0 percent decrease. The sales of NanjingElectronic Shadow Mask Co., Ltd. was 24.01 million pieces, a 8.6% decrease; the sales income achieved 470 million yuan, a51.0 percent decrease; he profit and tax achieved 82.6 million Yuan, a 34.4 percent decrease. Clearly, the production and salesvolume of CPT shadow mask had little change compared with the previous year, but the price rise in raw materials led to theincrease in manufacturing cost, and the price fall of shadow mask led to the significant deduction of the profits of enterprises.In terms of passive vacuum device, in recent years, China's passive vacuum device has maintained a sustained and stabledevelopment trend. Shaanxi Baoguang Vacuum Electric Device Co., Ltd. is the largest enterprise in the passive vacuumdevice industry. It produced 202,000 pieces of high-pressure vacuum switch tubes in 2005, an increase of 6.3%; the salesvolume was 195,000 pieces, an increase of 8.3%; total industrial output value achieved 5.8 billion, a 3.3 percent decrease;sales income achieved 460 million yuan, up 35.3 percent; the profit and tax achieved 27.57 million yuan, a 46.9 percentdecrease; the exports realized 3.96 million US dollars, an increase of 424.5 percent. Its main features are: substantial growthin sales income but significant decline in profit.Jinzhou Huaguang Electric Power & Electron (group) Company is China's first enterprise introducing foreigntechnology and equipment. Its annual production of vacuum switch tubes was 114,900 pieces, a decrease of 4.3%; the salesvolume was 108,700, a 4.7% decrease; the total industrial output value was 270 million yuan, a 10 percent reduction; thesales revenue achieved 1.9 billion yuan, up 18.8 percent; the profits realized 19.03 million yuan, an increase of 44.2 percent.Its main features are: Although the production and sales volume and industrial output value showed slight decline, the salesincome as well as profit and tax both increased significantly.The annual production of vacuum switch tubes of China Zhenhua (Group) Science & Technology Co., Ltd. YuguangBranch was 145,000 pieces, a decrease of 13.2%; the sales income achieved 140 million yuan, a 17.7% decrease; the profitand tax realized 15.62 million yuan, a decrease of 45.0 percent. Its main features are: several business indexes showeddifferent degrees of decline.The above-mentioned three enterprises not only have large-scale production capacity, but also have strong technologicaldevelopment capability enjoying certain reputation in the vacuum switch tube industry both at home and abroad. At present,Japan's Toshiba Corp. has signed an agreement with Jinzhou Huaguang Electric Power & Electron (group) Company tojointly operate ceramic vacuum switch tube products; Schneider Electric planed to establish a joint venture with ShaanxiBaoguang Vacuum Electric Device Co., Ltd. after several rounds of negotiations. In addition, several large foreign companieswere planning to establish joint ventures with China Zhenhua (Group) Science & Technology Co., Ltd. Yuguang Branch.Some foreign large companies will enter Chinese market through holding shares of China's leading enterprises, and somedomestic enterprises will enter the international market relying on foreign capital.In terms of the vacuum optoelectronic device enterprises, SVA Electronic Co., Ltd. jointly established China's firstproduction line of plasma display with Japan's Matsushita. The production line produced plasma display panel (PDP) of110,000 pieces a year, an increase of 53.2%; the sales volume was 107,000 pieces, an increase of 53.1%. It jointly produced·91·

China Business Guide28.97 million pieces of vacuum fluorescent display (VFD) with South Korea's Samsung Group, an increase of 2.4%; the salesvolume was 29.62 million pieces, an increase of 5.8%. At present, the company has become China's enterprise production ofthe widest variety of flat-panel display.Boe Technology Group Co., Ltd was mainly engaged in the production of CPT, transmitting tube, vacuum switch tube,and vacuum electronic devices. In recent years, the company developed for production of flat panel display through therestructuring, reorganizing, consolidating resources and adjustment of product structure. The annual production of vacuumfluorescent display (VFD) of Zhejiang Jingdongfang Vacuum Display Technology Co., Ltd. was 19.90 million pieces, thesales volume was 19.30 million pieces, and production and marketing rate reached 97.0%; the production of LED wasdisplay 10.40 million pieces, the sales volume was 10.2 million pieces, and production and marketing rate reached 98.1 %;the sales income reached 270 million yuan, the profit and tax achieved 12.30 million yuan, and the exports reached 18million US dollars.Huadong Electronics Group Company is China's largest and earliest vacuum optoelectronic device production enterprise,and its business expanded to the fields of color picture tubes and electronic mesh, kinescope getter, LCD display and otherfields through the integration of resources. The annual sales income reached 5.12 billion yuan, the total profit was 130million Yuan; it ranked No. 37 in the 20th China’s Top 100 China Electronics & Information Enterprises.On the vacuum electron devices enterprises, China Electronics Technology Group Corporation No.8 Research Institute,Guoguang Electric Co. Ltd. Chengdu and Nanjign Sanle Optoelectronics Co., Ltd. are the state's key units developing andproducing electronic microwave tube supported by the state. In 2005, 24 projects of electronic microwave tube passed theprovincial and ministerial technical appraisal, which not only met the needs of the state’s key projects, but also obtainedeconomic benefit. The annual production of magnetron of Shanghai Matsushita Electronic Instruments was 7.56 millionpieces and the sales volume was 7.89 million pieces. Guangdong Galanz and Media built the production line of magnetronwith the production capacity of 5 million pieces, and their products will support their microwave respectively.【Statistics data】Table 1. 2005 industry scale of vacuum electronic industry and compositionEnterprise typeIncluding: compositionNumber of TotalTechnicalenterprises staffManagement WorkerstaffColor picture tube and supporting enterprises 21 70035 8272 4855 56908Black and white display tube and supportingenterprises10 1554 151 49 1354Passive vacuum device and supporting enterprises 23 15094 2475 1793 10826Vacuum optoelectronic device and supportingenterprises enterprises15 29693 4446 2765 22482Vacuum electron device and supporting enterprises 14 7163 1920 765 4478Total 83 123539 17264 10227 96048Table 2. 2004-2005 the production and sales of major products of vacuum electron device industryUnit:10,000/ 10,0002004 2005Product nameSales GrowthOutput Sales volume Output Growth rate(%)volume rate(%)Vacuum tube 1840 1767 1882 2.28 1908 7.98Reception discharge lamp 68 86 106 55.88 101 17.44Transmitting tube 10 9 20 100.00 18 100.00UHF tube 1762 1672 1756 -0.34 1789 7.00Braun tube 11318 11064 9356 -17.34 9388 -15.15Black and white display tube 1486 1477 739 -50.27 763 -48.34Color picture tube 6624 6491 6545 -1.19 6559 1.05Color display tube 3208 3096 2072 -35.41 2066 -33.27Ionic tube 6216 6055 10059 61.82 9639 59.19X-ray tube 2.1 2.1 4 90.48 4 90.48Vacuum switch tube 150 148 189 26.00 175 18.24·92·

Electronics & Informationvacuum fluorescent display tube 6484 6322 5672 -12.52 5607 -11.31Kinescope fittings 20265 19670 19638 -3.09 19020 3.20Black and white glass bulb 1600 1490 2448 53.00 2901 94.70Color glass bulb 9408 9220 8468 -9.99 8082 -12.34Color aperture mask 9257 8960 8722 -5.78 8073 -10.30Electric light source 17641 16130 15793 -10.48 14952 -7.30High voltage sodium lamp 593 536 227 -61.72 209 -61.01Automotive light 686 593 775 12.97 818 37.94Energy-saving lamp 6619 6262 6164 -6.87 5897 -5.83Fluorescent lamp 9743 8739 8627 -11.45 8082 -7.52Table 3. Enforcement condition of major economic indicators of vacuum electron device industry in 2005Project name Unit 2003 2004 Growth rate(%) 2005 Growth rate(%)Output value(current price) 10,000 yuan 6547600 8463576 29.3 6426571 -24.1Sales income 10,000 yuan 6580464 7846252 19.2 6381183 -18.7Profit and tax 10,000 yuan 574473 684510 19.2 97256 -85.8Table 4. Enforcement condition of scientific research results of vacuum electron device industry in 2005Product Color Flat panel Vacuum Microwave Vacuum Electric lightOthers Totalname picture tube display switch tube Tube tube sourceQuantity 3 3 5 24 5 2 8 50Table 5. Product import and export trade of vacuum electron device industry in 2004-2005Unit:10,000 US dollar2004 2005Product nameImportvolumeExportvolumeImportvolumeGrowthrate (%)ExportvolumeGrowthrate (%)Color display tube 102818 86235 64733 -37.0 79665 -7.6Color display 116365 32940 60823 -47.7 24574 -25.4Black and white display tube 2892 1662 1079 -62.7 2516 51.4Black and white display 686 774 463 -32.5 512 -33.9Other CRT 1548 58 917 -40.8 47 -19.0Vacuum tube 18976 8540 11849 -37.6 10054 17.7Parts of kinescope 41446 33513 26856 -35.2 32441 -3.2Other parts of transmitting tube 28223 6128 15077 -46.6 6125 0.1Parts of vacuum tube 4591 650 5167 12.5 517 -20.5Electric light source 45124 127745 83968 86.1 168874 32.2Total 362669 298245 270932 -25.3 325325 9.1Table 6. Products import and export volume of vacuum electron device industry in 2004-2005Unit: 10,0002004 2005Product nameExportvolumeImportvolumeExportvolumeGrowthrate (%)ImportvolumeGrowthrate (%)Color kinescope 2399 1814 1838 -23.4 1952 7.6Color display tube 2476 697 1530 -38.2 598 -14.2Black and white kinescope 390 430 264 -32.3 405 -5.8Black and white display tube 80 70 303 3.8 倍 53 -24.3Other CRT 630 51 260 -58.7 243 4.8 倍Vacuum tube 6578 6056 5291 -19.6 7143 17.9Parts of kinescope 2356 4428 1300 -44.8 4444 0.4Other parts of transmitting tube 1070 843 503 -53.0 615 -27.0Parts of vacuum tube 212 26 164 -22.6 15 -42.3Electric light source 35993 346006 83412 2.3 times 374218 8.2Total 52184 360421 94865 81.8 389686 8.1·93·

China Business GuideX. Electronic component industry(I)OverviewThe enterprise’s scope in main economic indicators statistics for China’s electronic component industry made a greaterbreakthrough in 2005. In 2005, there were totally 31,523 enterprises had been taken into the consideration of main economicindicators statistics scope for electronic component industry under Ministry of Information Industry of China. This figureaccounted for 56.64% of the total number of enterprises of electronics manufacturing industry. The number of enterprisesabove designated size (annual production value exceeded 5 million yuan) in the statistics were 8,987 (statistical magnitude ofstate-owned enterprises and those above designated size were 6,852 in 2004), accounting for 56.14% of the total number ofenterprises above designated size in electronics manufacturing industry. Average number of annual employed person forwhole year were 2,887,341, taking up 43.05% of average number of employed person in electronics manufacturing industry.The total assets of whole enterprises hit 8 61.495 billion yuan. Average balance of net value of fixed assets of wholeenterprises hit 231.393 billion yuan. Average balance of current assets of whole enterprises reached 333.487 billion yuan.Among the abovementioned figures, total assets of the enterprises above designated size hit 537.031 billion yuan; averagebalance of net value of fixed assets of the enterprises above designated size reached 154.428 billion yuan; average balance ofcurrent assets of the enterprises above designated size hit 124.240 yuan.There were 9 special research institutes engaged in the study of electronic components in electronic component industry.Furthermore, there were also some special laboratories on the study of electronic component in some special researchinstitutes on complete electronic machine. For example, Electroacoustic Device Laboratory of China Electronic TechnologyGroup Corporation No 3 Research Institute, Quartz Crystal Device Laboratory of China Electronic Technology GroupCorporation No 10 Research Institute, Printed Circuit Board Laboratory of China Electronic Technology Group CorporationNo 15 Research Institute, Printed Circuit Board Laboratory of Jiangnan Institute of Computing Technology, Optical FiberLaboratory of the 46th Research Institute China Electronic Technology Corporation and Optical Fiber, Optical Cable andPassive Component Laboratory of Wuhan Research Institute of Post and Telecommunications.Reform and the reorganization works-Holding proprietary intellectual property rights. China’s electronic component enterprises harvest lots of fruits bygiving top priority to the self-innovation in 2005. For example, Hengdian Group Dongci Co.,Ltd. in Zhejian had seven patentapplications for invention and other 24 patent applications. Yongding Group Co.,Ltd. had eight patent applications. PresentlyYongding Group Co.,Ltd. has been granted 12 letters of patent and its nine patents application were acepted. ChengduXingweike Company’s two patents application were accepted. Ningbo Forward Relay Corporation Ltd was awarded twoletters of patent. Presently, Ningbo Forward Relay Corporation Ltd holds 30 kinds of products with letters of patent.-Developing private brand products. China Zhenhua Electronics Group, Xiamen Hongfa Electroacoustic Co.,Ltd.and Zhejiang Hengdian Group Dongci Co.,Ltd. actively cultivated and developed private brand products and maderemarkable progress by carrying out “Going Out” Strategy.-Many enterprises were successful listed on the stock market. Guangzhou Guoguan electroacoustics Company andJingyuan Electronics (JYEG) were listed on Shenzhen Stock Exchange and became the first listed company respectively indomestic electroacoustics industry and domestic quartz crystal component industry. Furthermore, Baoding Fengfan Companywas listed on Shanghai Stock Exchange. Wuxi Shangde Suntech Power Co.,Ltd. was listed on stock market in the US byforeign capital infusion and its productivity leaped into the front ranks of the world.- Remanufacturing and confederating practice. Shaanxi Qunli Radio Appliance Factory was successfulremanufactured into Shaanxi Qunli Electric Co.,Ltd. by debt-to-equity swap. Yangtze Optical Fiber and Cable Co.,Ltd.(YOFC) engaged in optical fiber industry and Jiangsu Zhongtian Technology Co.,Ltd. engaged in optical cable industryaccelerated their long-term strategic cooperation by means of equity participation.Work on Electron & Information Industrial ParkThere are eight industrial parks related to electronic component and electronic component materials industries amongthe first batch of national electron & information industrial parks approved by Ministry of information industry. They are·94·

Electronics & InformationChina (Tianjin) Chemistry and Physics Power Industry Park, China (Xinxiang) Chemistry and Physics Power Industry Park,China (Guiyang) Chip Component & Device Industrial Park, China (Tianjin) Chip Component & Device Industrial Park,China (Jiangxing) Electromechanical Components Industrial Park, China (Fuyang) Optical Fiber and Cable Industrial Park,China (Tongling) Electronic Materials Industrial Park and China (Yichang) Electronic Materials Industrial Park.Other worksPost-doctoral Workstation of Fenghua Group and Post-doctoral Workstation of Hengdian Group Dongci Co.,Ltd. wereawarded the honor of “National Outstanding Post-doctoral Workstation” on Conference on National Outstandingpost-doctorate commendation & Post-doctoral Working.Jiangsu Shuangdeng Group Company has been qualified the assessment on environment-friendly enterprise by Ministryof Environmental Protection of the People’s Republic of China and become the first enterprise in battery industry passedabovementioned assessment.China Industrial Association of Power Sources and China Electronic Components Association respectively havesuccessfully held the 4th and 5th members representative conference and completed the term-change election work.(II)Production and salesChina’s electronic component industry has become a major force to boost the growth of electronic information industryat the growth rate higher than the average growth level of entire electronic information industry. The general growth ismarked by increasingly expansive scale, rapidly growing economic returns, continuously rising production and exports andincreasingly improved industrial concentration in 2005.According to the statistics by Ministry of Information Industry, in 2005, China’s electronic component industry realizedthe value of gross output (current value) to 8 94.189 billion yuan, accounting for 25.7% of the total output value ofelectronics manufacturing industry, the added value of industry to 218.064 billion yuan, accounting for 29.06% of that ofelectronics manufacturing industry, sales value of industry to 846.493 billion yuan, accounting for 25.3% of that ofelectronics manufacturing industry. The sales revenue, total profits and total tax complete by China’s electronic componentindustry hit 852.92 billion, 47.807 billion and 11.125 billion yuan respectively. It is necessary to explain that the comparisonmade between the enterprises above designated size and state-owned enterprise and enterprise above designated size in 2005due to the lack of all-society statistics. Compared with the figures in 2004, the industrial production, industrial added value,sales revenue, total tax profits and total profits of China’s electronic component industry increased 40.5%, 47.7%, 45.6%,12.2% and 33.8% respectively in 2005 thanks to the 31% growth of the number of enterprises and the real development ofthe enterprises.According to statistic data, we can learn that the China’s electric wire and cable manufacturing industry depended on theenterprises below designated size to realized the main economic indicators, while other manufacturing industries mainlydepended on the enterprises above designated size, which offer most of the production value, production value of newproducts, export delivery value, industrial added value, sales revenue, total profits and tax. By comparing with the diversescales of enterprises in electronic component industry, main indices of economic returns and contribution ratio of total assets,the figures of abovementioned indicators realized by the enterprises below designated size were well below those realized bythe enterprises above designated size in other manufacturing industries, except the figures of figures of abovementionedindicators realized by the enterprises below designated size is higher than those realized by the enterprises above designatedsize in micro-machine and electric wire & cable manufacturing industries.The amount of loss for electronic component enterprises is 84.1 billion yuan generated by the unprofitable firms, ofwhich the enterprises above designated size are 1,722 and the enterprises below designated size are 5,872. The amount of lossof the 1,722 enterprises above designated size and 5,872 enterprises below designated size is 4.062 billion and 80.121 billionyuan respectively, accounting for 19.1% and 25.9% respectively of the total loss of electronic component industry.According to Ministry of Information Industry’s statistics on sales and output of the electronic component products for804 enterprises, in 2005, the sales of electronic component products hit 684.555 billion pieces, increasing 39.3%; the outputof electronic component products hit 707.966 billion pieces, increasing 40.0%. Among them, the chip electronic componentsare 513.719 billion pieces and chip rate hit 72.7%. The output and sales of the products of electronic component industry are·95·

China Business Guideshown respectively in Table 3 and Table 5. Make a comparison between economic operation indicators and number ofenterprises in sales and output tables. The sales and output of electronic component industry shown in Table 3 and Table 5 isonly the statistics for 804 enterprises. In fact, the all-society statistics of the economic indicators for the enterprises is over30,000 enterprises, of which the enterprises above designated size are 9,000. Due to the means of classification on economicand financial statistics, the enterprise was classified in manufacturing industry accordingly by its main products at first.Furthermore, some enterprises were classified by original standard on basis of history record. Therefore, all the financial datawere charged to the manufacturing industry. The statistics on product output was the total volume of the products of samekind made by the abovementioned enterprises and other enterprises of other manufacturing industries. So it is unlikely toeasily compare the economic operation data and product output on an annual basis.According to the statistics by Electroacoustic Sub-association of China Electronic Components Association, the salesrevenue of China’s electroacoustic industry in 2005 hit 40.7 billion yuan, an increase of 25.62% on a year-on-year basis.Output of electroacoustic component products hit 6.04 billion pieces, increasing 17.7%.(III)Scientific research and new productThe production value of the new products realized by electronic component industry in 2005 hit 65.90513 billion yuan,accounting for 7.37% of the total industrial output value (current price) all the year round and less than 18.16% of theproduction value of the new products (current price) realized by electronics manufacturing industry.According to incomplete statistics, the number of certified new product of electronic component and new technologiescompleted in 2005 is totally 180, of which 49 of them reached the international advanced level. The detailed information is asfollows: 43 products such as acoustic surface wave (ASW) components, inertial components, Ceramic components andacousto-optic device were from China Electronic Technology Group Corporation No 26 Research Institute, the 440WYb-doped double clad optical fiber of Fenghuo Communication Group Co.,Ltd., the mass production processing technologyof multi-layer comunication backplane developed by Shenzhan Shennan Circuits Co.,Ltd., four products such diverse seriesof electrical connector and composite material connector developed by China Aviation Optical-Electrical TechnologyCo.,Ltd., 65 products such as high tensile-strength twin cable floating cable and pole connector as well as optical and electriccable developed by China Electronic Technology Group Corporation No 33 Research Institute, 16×16 non-blocking matrixswitch based on MOEMS jointly developed by Shanghai Institute of Optics and Fine Mechanics and Research Institute ofMicro/Nano Science and Technology of Shanghai Jiao Tong University, two products including high performanceelectromagnet filter NiZn core developed by Tiantong Holding Co.,Ltd., three products including environment-friendlyphysically foamed polythene insulated flexible coaxial cable developed by Jiangxi Lianchuang Optoelectronic Science AndTechnology Co.,Ltd. Cable Branch, ten products including dry-pressed anisotropic magnetic ferrite DM3930D developed byZhejiang Hengdian Group Dongci Co.,Ltd., three products including optical fibre sensor developed by China ElectronicTechnology Group Corporation No 8 Research Institute, nine KNF-004 products developed by China Electronic TechnologyGroup Corporation No 40 Research Institute, three products including electrical relay developed by Shaanxi Qunli ElectricCo.,Ltd., 24 products including thick film circuit, connector and regulation resistance developed by Xijing ElectronicCorporation, two projects including ferroboron N48H sintered magnet developed by Zhejiang Hengdian Group DongciCo.,Ltd. and ten products including DC solid state relay developed by Beijing Keystone Electronic Relay Corp.(IV)Major engineering and key projectChina Zhongchi Nano Technology Co.,Ltd. is the first manufacturer engaged in nano ferrous power. In 2005, ZhongchiNano Technology’s 1,200-ton nano ferrous power auto production line was put into operation in Yangquan in Shanxi.Tianjin Lishen Battery Joint-Stock Co.,Ltd. completed its phase IV expansion. Presently, this company’s productivity inlithium battery hits 200 million pieces per year.(V)International cooperation and foreign tradeWorks on foreign capital introduction, joint venture and cooperation·96·

Electronics & InformationIn 2005, electronic component enterprise utilized foreign capital to 22.32851 billion yuan, accounting for 41.53% oftotal amount of foreign capital utilized by electronics manufacturing industry. The foreign direct investment hit 19.74770billion yuan, accounting for 43.31% of total amount of foreign direct investment in electronics manufacturing industry and35.47% of total investment in fixed assets this year of electronic component industry. There were 562 construction projects infixed asset investment by three kinds of foreign-invested enterprises (Sino-foreign joint ventures, cooperative businesses andexclusively foreign-owned enterprises in China) of electronic component industry. Among the abovementioned projects, 380projects were started and 342 projects were put into operation in 2005. Therefore, the foreign investment in China’selectronic components has exceeded that in computer, special equipment, communication and home audiovisual.The campaign on foreign investment and factory establishment for foreign enterprise (including Hong Kong SpecialAdministrative Region and Taiwan Region) engaged in PCB and PCB materials production has reached a new boiling point.Dalian Pacific Electronics Co.,Ltd. was a joint venture, co-founded by Dalian Daxian Enterprises Holdings Co.,Ltd., DalianPacific Multi-Layer PCB Co.,Ltd., Japan Circuit Technology Co.,Ltd. and Singapore SME Investment Co.,Ltd., engaged indevelopment, design and production of HDI multi-layer PCB and 2-M-2, 3-M-3BUILD Upsubstrate. In 2005, this companywas officially put into operation. AT&S (China) Shanghai Plant began to build its second plant in Chinese mainland. JiandingElectronics Co.,Ltd. is the largest breadboard manufacturer on TFT-LCD and memory-chip panels in Taiwan region. Thiscompany has established No 1 and No 2 Jianding Electronics Wuxi Plants respectively. After these two plants were put intooperation, the company prepares to establish No 3 plant in Chinese mainland. Hong Kong Topsearch Co.,Ltd. has finished itsphase II project of a new plant in Shaoguan of Guangdong Province and quickened the construction of its plant project inTongliao City of Inner Mongolia. Japan Mingxin Company expanded its plant in Wuhan and expected to increase 140% ofproductivity. Then, this plant would become the largest manufacturer on automobile PCB in Chinese mainland.Shenzhen Deren Electronic Co.,Ltd. signed an agreement with US-based Tyco International Ltd to cooperate inelectronic connector production and market. Anhui-based Tong Feng Electronics signed an agreement with Germany-basedEPCOS (joint-venture funded by Siemens and PANASONIC) to establish a joint venture engaged in manufacturing powercapacitor and power-factor correction capacitor in Tongleng.Import and exportIn 2005, the import volume of electronic component products hit US$ 28.448 billion, an increase of 18.3% on ayear-on-year basis. The growth rate fell back to 8% for the first time for years. The export volume hit US$ 19.391 billion,increasing 22.9%, an increase of 3% on a year-on-year basis. The export and import trade of electronic component productshad been in red for seven years. The value of passive balance would continue to increase to US$ 9.057 billion, an US$ 800million growth on a year-on-year basis. Same with that of 2004, there were still passive balance in export and import trade ofseven products including magnetic materials, electrical relay, electroacoustic device, micro-machine, magnetic head, opticalcable and cadmium-nickel storage battery, of which electroacoustic device is the largest deficit product and its passivebalance hit US$ 2.44 billion, a US$ 0.46 billion growth on a year-on-year basis. On the contrary, hybrid circuit and capacitorgenerated the largest passive balance, US$ 5.87 billion for hybrid circuit and US$ 2.88 billion for capacitor. Furthermore, thepassive balance for PCB hit US$ 1.23 billion, for connector hit US$ 0.78 billion, for resistor hit US$ 0.73 billion and forquartz crystal device hit US$ 0.68 billion. Among 17 products shown in Table 9, the growth rate of import began to lowerthan that of export for seven products. Although the growth rate of export is higher than that of import for some products, buttrade deficit still remains. For example, the exports of PCB increased 39.7%, while the import of that increased 29.5%. Inrecent years, the import and exports of optical cable shows trade deficit with export growth rate higher than that of import.Compared with that of 2004, the import structure for electronic component products has not changed; the imports for fourmajor products such as hybrid circuit, PCB, electric connector and capacitor exceed 60% of that of electronic componentproducts.The export volume of electronic component products is divided by economic classification of the export enterprise: thetotal exports of three kinds of foreign-invested enterprises accounts for 75.49% of that of electronic component products.Among this figure, exclusively foreign-owned enterprises accounted for 52.65%, increasing 33.9%; Sino-foreign jointventures accounted for 19.4%, increasing 10.5%; state-owned enterprise accounted for 13.69%, decreasing 5%. On basis ofclassification by trade mode, exports of processing products with imported and supplied materials accounted for 77.81% of·97·

China Business Guidethat of electronic component products; exports for products classified by general mode accounted for 18.1%. Domestic majorexport region in electronic component products was Hong Kong Special Administrative Region, accounting for 43.2% oftotal exports of electronic component products. The US accounted for 9.55% of total exports of electronic componentproducts. Japan and South Korea accounted for 9.34% and 6.64% of total exports of electronic component productsrespectively.According to the statistics by China Electronic Components Association, in 2005, the top 10 exporter of electroniccomponent products were as follows: Xiamen TDK Co.,Ltd. with exports of US$ 333.97 million, Tianjin ZenmayElectro-acoustic Equipment Company with exports of US$ 239.03 million, Shanghai Feilo Co.,Ltd. with exports of US$227.15 million, NEC Dong Jin Technology (Xiamen) Co.,Ltd. with exports of US$ 219.86 million, Shanghai KYOCERAElectronics Co.,Ltd. with exports of US$ 193.05 million, EPCOS (China) Investment Ltd with exports of US$ 173.20 million,Kaiping Elec Eltel Electronics Co.,Ltd. with exports of US$ 154.06 million, Hengdian Group Dongci Co.,Ltd. with exportsof US$ 152.80 million, Guangdong Shengyi Sci. Tech Co.,Ltd. with exports of US$ 140.73 million and Guangzhou HongrenElectronic Industry Co with exports of US$ 102.52 million.On basis of the classification by the economic mode of exported enterprise, the exports of electronic componentproducts mainly concentrated in exclusively foreign-owned enterprises. The imports of exclusively foreign-owned enterprisesaccounted for 63.1% of total exports of electronic component products, an increase of 23.0% on a year-on-year basis. Theimports of Sino-foreign joint ventures accounted for 19.0% of total exports of electronic component products, an increase of13.9% on a year-on-year basis. The imports of state-owned enterprises accounted for 9.7% of total exports of electroniccomponent products. On basis of classification by trade mode, exports of processing products with imported and suppliedmaterials accounted for 76.6% of that of electronic component products; exports for products classified by general modeaccounted for 11.3%. On basis of the imports of imported product, three-fourths products were the electronic componentproducts needed processing into finished product at home other than the real imported electronic component products. Therewere 89 countries and regions, of which Japan accounting for 22.8%, Taiwan region accounting for 17.5% and South Koreaaccounting for 10.1%, providing China with electronic component products. In accordance with statistics, the electroniccomponent products from home market (free trade area) accounted for 28.3% of total imports of electronic componentproducts.Therefore, China’s import and export trade of electronic components were mainly conducted by three kinds offoreign-invested enterprises by means of imported and supplied materials and formed a special industrial chain of supply anddemand for domestic sales of commodities originally produced for exports.In accordance with the statistics by Ministry of Information Industry, in 2005, the export delivery value of electroniccomponent manufacturing enterprise was 332.41295 billion yuan, accounting for 17.96% of that of electronics manufacturingindustry and 39.3% of total production value of electronic component industry, of which the export delivery value of theenterprise above designated size hit 266.23546 billion yuan, an increase of 23.5% and accounting for 51.5% of sales ofindustries of the same kind. The exported number of general electronic components hit 440.56 billion pieces, accounting for64.3% of total sales on a year-on-year basis. The exports of PCB hit 53.6% of its total sales. The exports of radio-frequencycable accounted for 47.5% of its otal sales. The export delivery value of electronics manufacturing industry accounted for51.79% of sales of the industries of the same kind. The export delivery value of electro-mechanic products accounted for22.45% of its sales.(VI)Main enterprisesTop 100 electronic information enterprisesIn 20th ranking of top 100 electronic information enterprises, 42 enterprises were electronic component manufacturingenterprises, of which 27 enterprises mainly engaged in electronic component manufacture and 15 enterprises engaged inoptical wire and cable production. Hengtong Group Co.,Ltd. was the top one of the 42 enterprises, taking the 33rd slot; thenYongding Group Co.,Ltd. took the 39th slot; Jiangsu Zhongtian Technology Co.,Ltd. took the 49th slot and its operatingprofit hit the 6th slot; Jiangsu Hongtu High Technology Co.,Ltd. took the 50th slot; Zhejiang Fuchunjiang CommunicationGroup Co.,Ltd. took the 51st slot; Tongguang Group Co.,Ltd. took the 52nd slot; Wuhan Research Institute of Post and·98·

Electronics & InformationTelecommunication took 60th slot and its total number of enterprise patent application took the 10th slot; YOFC took the66th slot; Hualun Group took the 75th slot; Tongling Jingda Copper Material Group Co.,Ltd. took the 76th slot; ChongqingNew Taishan Electric Wire & Cable Co took the 96th slot; Hong’an Group Co.,Ltd. took the 98th slot and its operating profittook the 9th slot.The following four enterprises engaged in comprehensive electronic component production. Shanghai Feilo Co.,Ltd.took the 28th slot and its total profit took the 5th slot; China Zhenhua Electronics Group Co.,Ltd. took the 64th slot; ShanghiaJinling Co.,Ltd. took the 67th slot; Jiangxi Electronics Group took the 85th slot and its R&D input took the 4th slot.Four enterprises engaged in battery production were as follows: Qingdao Aucma Co.,Ltd. took the 30th slot; BYDCo.,Ltd. took the 31th slot and its total profit took the 8th slot and its operating profit took the 10th slot; Harbin GuangyuGroup Company Ltd took the 87th slot; Jiangsu Shuangdeng Group tool the 74th slot and its operating profit took the 7th slotand its R&D input took 10th slot. Following four enterprises mainly engaged in magnetic materials and devices production.Hengdian Group Dongci Co.,Ltd. took the 53rd slot. Ningbo Yunsheng Co.,Ltd. took the 69th slot. Xianyang PianzhuanGroup Corporation took the 71st slot. Zhenghai Group Co.,Ltd. took the 91st slot. The enterprise mainy engaged inproduction of copper clad laminate was only one as follow. Guangdong Shengyi Sci Tech Co.,Ltd. took the 89th slot and itsoperating profit took the 4th slot.About Top 100 Electronic Component EnterprisesTotal sales of the 19th ranking of top 100 electronic information enterprises hit 84.26 billion yuan, increasing 10.62billion yuan, a 14.42% increase on a year-on-year basis. Total profit hit 6.614 billion yuan, an increase of 19.83%, accountingfor 13.83% of the total profit of electronic component industry. Foreign exchange earnings hit US$ 4.057 billion, a 27.18%increase, accounting for 20.9% of total exports of electronic component industry. The Top 100 Electronic ComponentEnterprises in the 19th ranking changed a lot. 17 enterprises in the last Top 100 can’t be listed in the 19th ranking. Comparedwith last ranking, there were 26 enterprises’ sales exceeded one billion yuan and additional seven enterprises’ sales exceededthis figure. 76 enterprises’ sales increased over 10% on a year-on-year basis, while nine enterprises experienced negativegrowth. Sales of 13 enterprises, increased over 50% on a year-on-year basis, included Guizhou space appliance share Co.,Ltd.(a 114.2% increase in sales on a year-on-year basis), Xi’an Chuanglian Electronic Component (Group) Co.,Ltd., ChinaZhenhua (Group) Xinyuan Electronic Component Co.,Ltd., Shenyang Aero-Electric Appliance Co.,Ltd., Foshan Cheng’anCopper Co.,Ltd., Hangzhou Fusheng Electrical Appliance Co.,Ltd., Ruisheng Acoustics Technology Co.,Ltd. and ShenzhenEYang Technology Development Co.,Ltd..In the 19th Top 100 Electronic Component Enterprises, the top one was Shanghai Feilo Co.,Ltd., which realized thesales of 5.36776 billion yuan; the second one was Hengtong Group Co.,Ltd., which realized the sales of 5.56394 billion yuan;the third one was Yongding Group Co.,Ltd., which realized the sales of 4.74624 billion yuan. Top 100 Electronic ComponentEnterprise of the 19th ranking were mainly located in the following 18 provinces and municipalities directly under theCentral Government, including Zhejiang, Guangdong, Jiangsu, Fujian, Beijing-Tianjin-Tangshan regions and City ofShanghai. There were 20 enterprises in Zhejiang, 21 in Guangdong, 17 in Jiangsu, seven enterprises in Fujian, five inBeijing-Tianjin-Tangshan regions, three in Shanghai and 18 in other provinces and municipalities directly under the CentralGovernment.In the 19th Top 100 Electronic Component Enterprises, comprehensive enterprises hit 14% and the sales of suchenterprises accounted for 22.33% of total sales of Top 100 Enterprises. There were 12 enterprises engaged in optical wire andcable production and the sales of such enterprises accounted for 31.64% of total sales of Top 100 Enterprises. There were 16enterprises engaged in capacitor production and the sales of such enterprises accounted for 9.9% of total sales of Top 100Enterprises. There were 10 enterprises engaged in printed circuit production and the sales of such enterprises accounted for9.5% of total sales of Top 100 Enterprises. There were six enterprises engaged in magnetic materials production and sales ofsuch enterprises accounted for 5.7% of total sales of Top 100 Enterprises.The Top 100 Electronic Component Enterprises hit a 19.83% increase in total profit on a year-on-year basis. There were12 enterprises, which total profit exceeded 100% on a year-on-year basis, and 44 enterprises, which total profit exceeded 30%on a year-on-year basis, in Top 100 Electronic Component Enterprises. In 2005, among the electronic component enterpriseswith sales over one billion yuan, the max return on gross assets of Guangdong Fenghua Hi-tech Holding Co.,Ltd., Futong·99·

China Business GuideGroup Co.,Ltd., Guangzhou Hongren Electronic Industry Co.,Ltd. and NEC Dong Jin Technology Co.,Ltd. only hit 4.05%,which was far behind the average level, 9.78%, of the 19th ranking for electronic component enterprises due to the negativegrowth of total profit. So the ranking of abovementioned enterprises fell over last year.In the 19th Top 100 Electronic Component Enterprises, there were 56 enterprises with exports over US$ 10 million and21 enterprises with exports over US$ 50 million.About Top 100 Printed Circuit EnterprisesThe 5th Top 100 Printed Circuit Enterprises realized the sales of 19.77538 billion yuan. The min standard of salesrevenue for the 5th Top 100 Printed Circuit Enterprises was 36 million yuan. There were 75 enterprises, which sales revenueexceeded 100 million yuan and 15 enterprises, which sales revenue exceeded one billion yuan. Among the 5th Top 100Printed Circuit Enterprises, the top one was Guangzhou Tianli PCB Co.,Ltd. with sales revenue of 2.7 billion yuan; thesecond one was Lianneng Technology (Shenzhen) Co.,Ltd. with sales revenue of 2.569 billion yuan and the third one wasSCSC with sales revenue of 1.816 billion yuan.(VII)Market prospectChina has become a large manufacturer in electronic component and its output of multi-products has been leaped intothe front ranks of the world. China has become an important link in the supply chain of electronic component industry, whileits general level of this industry has still been in the low level and still depended on the core and key technology. China’strade balance and industry security still need to intensify. Therefore, the top priority should be given to the support inelectronic component industry and the promotion on technical breakthrough in key fields as well as the development ofcompetitive enterprises.Characteristics on the development of electronic component marketFirstly, with the increase of integration level and capacity of the IC with single-function complete appliance, the numberof the electronic components needed by single machine tended to go down. For example, mobile phone was only composedof over 200 components, which were over 1000 component at first. Secondly, thanks to the application and promotion of themulti-function and multi-media technology of complete electronic appliances, the number of electronic component in needtended to increase. Thirdly, the adjustment on the structure of the complete electronic appliances made the market a few newgrowth points. For example, the change from common phone to wireless phone made the number of electronic componentsneeded by phone increased from around 60 to around 400. Furthermore, the ratio of the output of wireless phone in the totaloutput of phones rapidly increased.Characteristics on the development of battery industryChina’s battery industry as a whole has still been in the fast and stable growth period. Its development characteristics areas follows: firstly, the competition on large and medium valve regulated sealed lead acid storage battery has been in a rat race;pushed by the automobile industry, small valve regulated sealed lead acid storage battery has bright market prospect andsound market space. Secondly, lithium battery industry still maintained a rapid growth. The market growth manner changedfrom low capability and high output to large-scaled production paying attention to quality and efficiency. Thirdly, China’scapacity in solar battery developed rapidly, but the actual output is under the capability due to the restriction of raw materials.Fourthly, China’s enterprises have increasingly attached profound importance to the R&D work for battery materials. Chinahas improved the situation that the key materials of new batteries such as lithium battery and nickel-hydrogen batterydepended on import. The rapid growth rate and the price increase of great disparity in lithium, lead, nickel and othernonferrous materials had impacted the battery industry a lot.·100·

Electronics & Information【Statistical data】Item nameTable 1 Electronic component industry scale in 2005NumberofResearchInstitutesNumberofenterprisesIncluding:enterpriseabovedesignatedsizeProportionaccountingfor totalnumber ofenterprises(%)Averagenumber ofemployedpersonsIncluding:average numberof employedpersons ofenterprise abovedesignated sizeElectronic component industry 9 31 623 8 989 28.43 2887341 2222237 76.96Proportionaccountingfor averagenumber ofemployedpersons(%)Electronic componentmanufacturing industry1 3852 731 18.98 272455 189318 69.49Electronic component andsubassembly manufacturing 4 11189 2961 26.46 1472437 1196422 81.26industryPrinted circuit boardmanufacturing industry 1623 535 32.96 332560 290751 87.43Micro-machine manufacturingindustry1 2889 982 33.99 324637 274430 84.53Electric wire and cablemanufacturing industry2 8951 2824 31.55 195010 44690 22.92Optical wire and cablemanufacturing industry(2) 325 124 38.15 32274 27072 83.88Battery manufacturing industry 1 2795 832 29.77 257968 199554 77.36Remark:1. Two research institutes of electric wire and cable manufacturing industry and optical fiber and cable manufacturingindustry also conducted the R&D work on products for these two industries;2. Average number of employed persons is only that of the employees of the enterprises;3. Source: Department of Economics Reform and Running of China Ministry of Information Industry (MII)Table 2 Performance of main economic parameters of electronic component industry from 2003 to 2005Item name Unit 2003 2004 2005Growth rate(%)Total industrial output value of the electronicsmanufacturing industry as a whole(currant price)10,000 yuan 347902857Including: enterprises above designated level 10,000 yuan 178344756 245016711 306503181 25.09Including: industrial output of electroniccomponent industry(currant price)10,000 yuan 89418859Including: enterprises above designated level 10,000 yuan 32833177 46400568 65202356 40.52Industrial added value of electronics manufacturingindustry as a whole10,000 yuan 75045327Including: enterprises above designated level 10,000 yuan 35454701 51929847 67005327 29.03Including: added value of electronic componentindustry10,000 yuan 21806387Including: enterprises above designated level 10,000 yuan 8026375 11514924 17013863 47.75Sales revenue of electronics manufacturing industryas a whole10,000 yuan 345109932Including: enterprises above designated level 10,000 yuan 175789524241268786310098014 28.53Including: sales revenue of electronic componentindustry10,000 yuan 85292545Including: enterprises above designated level 10,000 yuan 30995080 44242941 64422463 45.61Total pre-tax profits of electronics manufacturingindustry as a whole10,000 yuan 15035556Including: enterprises above designated level 10,000 yuan 9535822 13108184 14531681 10.86·101·

China Business GuideIncluding: total pre-tax profits of electroniccomponent industry10,000 yuan 5893330Including: enterprises above designated level 10,000 yuan 2345084 3240107 4228582 30.51Total pre-tax profits of electronics manufacturingindustry as a whole10,000 yuan 11245194Including: enterprises above designated level 10,000 yuan 6958893 10041945 10741319 6.97Including: total pre-tax profits of electroniccomponent industry10,000 yuan 4780768Including: enterprises above designated level 10,000 yuan 1712470 2398678 3209177 33.79Remarks:Data source: from Department of Economics Reform and Running of China Ministry of Information Industry (MII)Name ofproductsTotal volume ofelectroniccomponentsCapacitorResistance andregulationresistanceElectricconnectingelementElectrical relayMagneticmaterials,inductor andtransformer(1)Magnetic headElectroacousticdevicePiezoceramicsand ultrasoniccomponentSensingcomponentPiezoelectricquartz crystalcomponentThick-filmhybridintegratedcircuitAmmeter usedfor electronicequipmentsPrinted circuitboardElectronic fiberand cablePrimary cellTable 3 Sales of the products of electronic component industry from 2003 to 2005Unit10,000pieces10,000pieces10,000pieces10,000pieces10,000pieces10,000pieces10,000pieces10,000pieces10,000pieces10,000pieces10,000pieces10,000piecesSquaremeters2003 2004 2005Growth NumberGrowth NumberSalesSalesSalesrate of enter-rate of entevolumevolumevolume(%) prises(%) rprises·102·Growthrate(%)37551540 13.8 774 49135723 30.8 804 68455520 39.318320589 17.8 86 27857009 52.0 104 32204530 15.615663458 10.7 53 16980804 8.4 44 30371457 78.9884699 27.6 71 1055639 19.3 82 1641053 55.5118398 68.4 30 150665 27.2 31 185680 23.22250628 16.8 101 2524580 12.2 116 3063248 21.316109 -66.6 12 20612 27.9 11 16662 -19.278228 49 91796 17.3 57 96338 5.582903 -62.0 20 115608 39.4 20 172144 48.973249 77.3 39 75526 3.1 39 160520 112.5285579 51.2 30 233318 -18.3 39 530936 127.612278 54.6 20 10681 17 12386 16.0121 -67.2 6 152 25.6 5 66 -56.637281610 126.2 52 55776498 49.6 62 66193287 18.7Km 17377800 -16.2 130 18504773 6.5 173 34096591 84.310,000pieces298828 -2.4 20 199881 -33.0 18 225543 12.8

Electronics & InformationAlkaline andlithium storagebattery(2)Micro motorOther electroniccomponentsand partsRemarks:KVAH 709069 18 3538093 398.9 16 4658971 31.710,000sets10,000pieces61919 -9.7 56 116168 87.6 56 137187 18.110486069 21.6 34 16794514 60.1 42 11947980 -28.91. Such records as below the PCB are not included in the total number of electronic components. The new statisticalclassified catalog will be applied from 2002.2. (1) Including deflecting coil and line output transformer.3. (2) The lead acid storage battery and the physical power source are not included in it.4. Data source: Department of Economics Reform and Running of China Ministry of Information Industry (MII); partsof data are adjusted.Table 4 Sales revenue of the product of electronic component industry from 2003 to 2005Sales2004 2005revenue ofSalesSalesItem namesNumber ofGrowth Number ofGrowth2003(10,revenue(10,revenue(10,enterprisesrate(%) enterprisesrate(%)000 yuan)000 yuan)000 yuan)Electronic components 31623 85292545Including: enterprises abovedesignated level30995080 6852 44242941 42.7 8989 64422463 45.6Including: power & electronicsmanufacturing industry3852 7723679Including: enterprises abovedesignated level2773830 539 4135588 49.1 731 5446402 31.7Electronic parts and componentsmanufacturing industry11189 37566289Including: enterprises abovedesignated level16573564 2369 21871139 31.9 2961 30217061 38.2PCB manufacturing industry 1623 12063159Including: enterprises abovedesignated level3191548 251 4822726 51.1 535 11039852 128.9Micro machine manufacturingindustry2889 8925284Including: enterprises abovedesignated level2510993 765 5513953 119.6 982 7137379 29.4Electric wire and cablemanufacturing industry8951 9315278Including: enterprises abovedesignated level1287355 2219 1823653 41.6 2824 2628019 44.1Optical fiber and cablemanufacturing industry325 2232771Including: enterprises abovedesignated level2109865 96 2187693 3.7 124 2051631 -6.2Battery manufacturing industry 2795 7466085Including: enterprises abovedesignated level2547925 613 3888190 52.6 832 5902118 51.8Remarks:1. The new statistical classified catalog will be applied from 2003.2. Data source: Department of Economics Reform and Running of China Ministry of Information Industry (MII).·103·

China Business GuideTable 5 Output of electronic component products from 2003 to 20052003 2004 2005Name of productsUnitGrowthGrowthGrowthOutput rate Output rate Output rate(%)(%)(%)Electronic components 10,000 pieces 37780203 11.0 50550439 33.8 70796665 40.1Capacitor 10,000 pieces 18532948 14.4 28706744 54.9 32520980 13.3Resistance and regulationresistance10,000 pieces 15635156 8.1 17405833 11.3 32302143 85.6Electric connecting element 10,000 pieces 920533 29.8 1088506 18.2 1679811 54.3Electrical relay 10,000 pieces 118905 67.4 155968 31.2 186048 19.3Magnetic materials, inductorand transformer(1)10,000 pieces 2291543 17.6 2592250 13.1 3073825 18.6Magnetic head 10,000 pieces 15944 -66.8 21155 32.7 16680 -21.2Electroacoustic device 10,000 pieces 79245 94461 19.2 99057 4.9Piezoceramics and ultrasoniccomponent10,000 pieces 84890 -62.4 118940 40.1 192885 62.2Sensing component 10,000 pieces 77541 77.5 80038 3.2 161621 101.9Piezoelectric quartz crystalcomponent10,000 pieces 313199 50.2 255604 -18.3 551013 115.6Thick-film hybrid integratedcircuit10,000 pieces 12887 57.8 11455 12536 9.4Ammeter used for electronicequipments10,000 pieces 115 -66.2 152 32.2 66 -56.6Printed circuit board Square meters 40250886 148.9 55810095 38.6 69403339 24.4Electronic fiber and cable Km 25436496 21.8 18529213 -27.1 33959671 83.3Primary cell 10,000 pieces 307670 -2.5 358007 16.4 231290 -35.4Alkaline and lithium storagebattery(2)kVAH 772213 -91.3 3794436 391.3 4712172 24.2Micro motor 10,000 sets 62337 -8.3 118629 90.3 137710 16.1Other electronic componentsand parts10,000 pieces 10394573 24.9 16953689 63.1 12323478 -27.3Remarks:1. Such records as below the PCB are not included in the total number of electronic components. The new statisticalclassified catalog will be applied from 2002.2. The lead acid storage battery and the physical power source are not included in it.3. (1) Including deflecting coil and line output transformer.4. Data source: Department of Economics Reform and Running of China Ministry of Information Industry (MII); partsof data are adjusted.Table 6 Industrial output (current price) of electronic component industry from 2003 to 2005Name of productsOutput of2003(10,000 yuan)Number ofenterprises·104·2004 2005OutputGrowth Number ofvalue(10,rate(%) enterprises000 yuan)Outputvalue(10,000 yuan)Growthrate(%)Electronic components 31623 89418859Including: enterprises abovedesignated level32833177 6852 46400568 41.3 8989 65202356 40.5Power & electronics manufacturingindustry3852 8344075Including: enterprises abovedesignated level2883062 539 4206189 45.9 731 5551623 32.0Electronic parts and componentsmanufacturing industry11189 39145646Including: enterprises abovedesignated level17356112 2369 22800211 31.3 2961 30610765 34.3

Electronics & InformationPCB manufacturing industry 1623 12243387Including: enterprises abovedesignated level3380438 251 5083844 50.4 535 11077598 117.9Micro machine manufacturing industry 2889 9337908Including: enterprises above1132.2694017 765 5746001designated level9982 7283007 26.8Electric wire and cable manufacturingindustry8951 10085418Including: enterprises abovedesignated level1364992 2219 1893039 38.7 2824 2640336 39.5Optical fiber and cable manufacturingindustry325 2346865Including: enterprises abovedesignated level2447800 96 2549218 4.1 124 2119504 -16.9Battery manufacturing industry 2795 7915559Including: enterprises abovedesignated level2706756 613 4122066 52.3 832 5919524 43.6Remarks:1. The new statistical classified catalog will be applied from 2003.2. Data source: Department of Economics Reform and Running of China Ministry of Information Industry (MII).Item namesTable 7 Ratio of all economic parameters of all the enterprises above designated level to those ofRatio towholeenterprises(%)Ratioto totalassets(%)Ratio tototalindustrial outputvalu(%)the whole industry in 2005Ratio tooutputvalue ofnewproducts(%)Ratio toexportturnover(%)Ratio toindustrialaddedvalue(%)Ratio tosalesrevenue(%)Ratio togrossprofits(%)Ratio tototal tax(%)Electroniccomponents industry28.4 62.3 72.9 100.0 98.6 78.0 75.5 67.1 91.6 77.0Power electroniccomponentmanufacturing19.0 54.6 66.5 100.0 97.6 74.4 70.5 64.4 92.8 69.5industryElectroniccomponents andaccessories 26.5 68.3 78.2 100.0 98.5 83.3 80.4 76.9 93.5 81.3manufacturingindustryPCBmanufacturing 33.0 84.1 90.5 100.0 99.5 92.6 91.5 101.3 95.1 87.4industryMicromachinemanufacturing 34.0 68.5 78.0 100.0 99.5 75.6 80.0 56.8 94.0 84.5industryElectrical wireand cablemanufacturing31.6 18.8 26.2 100.0 78.1 31.1 28.2 13.3 64.3 22.9industryOptical fiberand cablemanufacturing38.2 76.3 90.3 100.0 97.8 92.3 91.9 133.5 98.8 83.9industryBatterymanufacturingindustry29.8 55.1 74.8 100.0 99.1 82.1 79.0 96.2 93.5 77.4Remarks:Data source: Department of Economics Reform and Running of China Ministry of Information Industry (MII)Ratio toemployedpersons(%)·105·

China Business GuideTable 8 Main economic parameters completed by enterprise of different scales in electronic components industryItem namesPower electroniccomponentsmanufacturingindustryElectroniccomponents andaccessoriesmanufacturingindustryPCBmanufacturingindustryMicromachinemanufacturingindustryElectrical wire andcablemanufacturingindustryOptical fiber andcablemanufacturingindustryBatterymanufacturingindustryRemarks:Enterprise scalesAbove designatedlevelBelow designatedlevelAbove designatedlevelBelow designatedlevelAbove designatedlevelBelow designatedlevelAbove designatedlevelBelow designatedlevelAbove designatedlevelBelow designatedlevelAbove designatedlevelBelow designatedlevelAbove designatedlevelBelow designatedlevelTotalassetscontributionratio(%)9.804.888.434.917.680.389.7211.8910.3210.476.44-1.998.270.84Asset-liabilityratio(%)56.0949.4556.3646.9358.8549.9757.9055.0960.0751.7850.9643.2859.5349.54Turnoverratio ofcirculationassets(%)1.768.792.165.122.181.952.625.272.3253.521.441.862.045.57Ratio of profitsto TotalIndustrialCosts(%)6.237.645.436.126.21-0.784.4112.254.6110.683.47-9.334.970.67Overalllaborproductivity(%)80321629027051461143101311562054635181775155098102158184010799658257661483Data source: Department of Economics Reform and Running of China Ministry of Information Industry (MII)Table 9 Import and export trade of electronic component products from 2003 to 2005Productsalesratio(%)96.6983.6197.6586.3596.7489.5597.7987.2398.4690.2798.4479.3398.3880.20Monetary unit: 10,000 dollarsYear 2003 Year 2004 Year 2005Names of products ImportvalueExportvalueImportvalueExportvalueImportvalueGrowthrate(%)ImportvalueGrowthrate(%)Total 1901795 1325135 2404092 1577047 2844827 18.3 1939177 22.9Capacitor 307987 101781 379850 128939 435912 14.8 147884 14.7Resistance and regulationresistance92851 36709 118812 46579 127019 6.9 53592 15.0Magnetic materials 31925 47756 35705 59440 45653 27.8 66788 12.4Magnetic head 3474 7216 3405 6055 3285 -3.5 5607 -7.4Thick-film hybridintegrated circuit472783 193419 567757 70238 668114 17.7 81144 15.5Hummer 4243 3132 4809 3115 4492 -6.6 2596 -16.6Piezoelectric quartz crystalcomponent96591 50485 123738 62828 138527 11.9 70585 12.3Electrical relay 23890 28302 31673 34135 34808 9.9 38580 13.0Switch lamp holder 61294 48286 76634 57633 86649 13.1 70978 23.1Connector 105393 51141 120194 73790 167138 39.1 88661 20.1Electro acoustic device 49483 198322 71320 269487 98730 38.4 342722 27.2·106·

Electronics & InformationSound head 13552 23621 17235 12020 3935 -54.7 3733 -68.9Micro motor 159718 189275 176922 214690 187854 6.18 234081 9.0Optical cable 4516 3993 4003 7159 3177 -20.6 13138 83.5Electronic wire and cable 100640 69727 134484 107694 155131 17.7 146833 36.3PCB 363385 239811 507251 382057 657039 29.5 533816 39.7Cadmium-nickel storagebattery23623 32161 30300 41193 27377 -9.6 38438 -6.7Remarks:1. In order to compare with the historical data, the import and export trade data of some accessories for electroniccomponents and some products such as power capacitor, transformer and inducer difficult to tell whether belong to electronicproducts are not included in this table.2. Data source: China customs.Table 10 Import and export data of electronic component products from 2003 to 2005Year 2003 Year 2004 Year 2005Names of products Unit ImportvolumeGrowthrate(%)ImportvolumeGrowthrate(%)ImportvolumeGrowthrate(%)Capacitor 10,000 pieces 47779251 23.7 69627303 45.7 83512895 19.9Resistance and regulationresistance10,000 pieces 30548047 -16.9 46670412 52.8 50784031 8.8Magnetic materials Kilogram 56635579 0.03 74181552 31.0 73534279 -0.9Magnetic head 10,000 pieces 15962 -24.7 15555 -2.5 14427 -7.3Thick-film hybrid integratedcircuit10,000 pieces 354984 7.4 422798 19.1 546326 29.2Hummer 10,000 pieces 48239 12.5 51618 -90.9 47160 -8.6Piezoelectric quartz crystalcomponent10,000 pieces 853699 5.9 984188 15.3 1078826 9.6Electrical relay 10,000 pieces 60772 21.2 76861 26.4 79227 3.1Switch lamp holder 10,000 pieces 686116 16.7 812325 18.4 896640 10.4Plug-and-socket 10,000 pieces 1148974 15.6 1139457 -0.8 1371030 20.3Electro acoustic device 10,000 pieces 148385 27.9 179103 20.7 209251 16.8Sound head 10,000 pieces 7609 -16.7 3436 -54.8 1690 -50.8Micro motor 10,000 sets 165242 4.6 164128 -0.7 162926 -0.7Optical cable Kilogram 4513122 -52.8 4536083 0.5 1511229 -66.7Electronic wire and cable Kilogram 167585538 -12.4 218148475 30.2 214041519 -1.9PCB 10,000 pieces 1063137 29.0 1348977 27.0 1765776 30.9Cadmium-nickel storage battery 10,000 pieces 54568 1.9 73720 35.1 69823 -5.3Remarks:1. In customs catalog, the measuring unit of capacitor and resistance was thousand pieces before 1993 and changed to beKilogram during 1994 to 2002 and Kilogram/ thousand pieces in 2003. The measuring unit of PCB has been changed into 10,000 pieces/kilogram.2. In order to compare with the historical data, the import and export trade data of some accessories for electroniccomponents and some products such as power capacitor, transformer and inducer difficult to tell whether belong to electronicproducts are not included in this table.3. Data source: China customs.Table 11 Import and export data of electronic component products from 2003 to 2005Names of products Unit ExportvolumeYear 2003 Year 2004 Year 2005GrowtGrowtExportExporth rateh ratevolumevolume(%)(%)Capacitor 10,000 pieces 22962401 40.1 28684566 24.9 43985717 53.3Resistance and regulationresistance10,000 pieces 20546214 49.2 30416001 48.0 38013411 25.0Magnetic materials Kilogram 164226415 10.6 196437865 19.6 202405954 3.0Growthrate(%)·107·

China Business GuideMagnetic head 10,000 pieces 24795 -11.3 22155 -10.6 16419 -25.9Thick-film hybrid integratedcircuit10,000 pieces 401724 28.0 259351 -35.4 307554 18.6Hummer 10,000 pieces 26567 -18.7 26947 1.4 23763 -11.8Piezoelectric quartz crystalcomponent10,000 pieces 574349 28.8 676369 17.7 742019 9.7Electrical relay 10,000 pieces 105923 11.6 129379 22.1 137414 6.2Switch lamp holder 10,000 pieces 795756 23.2 900647 13.2 955939 6.1Plug-and-socket 10,000 pieces 487284 32.8 554619 13.8 650856 17.4Electro acoustic device 10,000 pieces 299136 21.4 382795 27.9 454887 18.8Sound head 10,000 pieces 3718 -43.3 2311 -37.8 991 -57.1Micro motor 10,000 sets 318456 6.8 326842 2.6 315391 -3.5Optical cable Kilogram 4670703 33.3 8154343 74.6 14859798 82.2Electronic wire and cable Kilogram 249269076 37.8 340771395 36.7 405061724 18.9PCB 10,000 pieces 628289 22.3 1014829 61.5 1216913 19.9Cadmium-nickel storagebattery10,000 pieces 64956 30.4 82612 27.2 80544 -2.5Remarks:1. In customs catalog, the measuring unit of capacitor and resistance was thousand pieces before 1993 and changed to beKilogram during 1994 to 2002 and Kilogram/ thousand pieces in 2003. The measuring unit of PCB has been changed into 10,000 pieces/kilogram.2. In order to compare with the historical data, the import and export trade data of some accessories for electroniccomponents and some products such as power capacitor, transformer and inducer difficult to tell whether belong to electronicproducts are not included in this table.3. Data source: China customs.Table 12 Sales revenue of the first 20 enterprises among the 19th Top 100 Electronic Component EnterprisesComprehensiveNoYear2006Year2005Names of enterpriseSalesrevenue(10,000 yuan)Year 2005Ranking ofsalesrevenueRankingof grossprofits1 1 Shanghai Feilo Co.,Ltd. 536776 1 1 12 3 Hengtong Group Co.,Ltd. 536394 2 4 23 2 Yongding Group Co.,Ltd. 474624 3 5 54 4 Jiangsu Tongguang Group Co.,Ltd. 350812 5 3 115 6 Hengdian Group Dongci Co.,Ltd. 276014 8 7 46 5 Futong Group Co.,Ltd. 311365 7 13 37 9 Guangdong Shengyi Sci Tech Co.,Ltd. 165959 13 8 98 7Zhejiang Fuchunjiang Communication GroupCo.,Ltd.350913 4 20 79 10 Xiamen TDK Co.,Ltd. 321731 6 17 1010 13 Kaiping Elec Eltel Electronics Co.,Ltd. 157077 16 6 1411 20 Ruisheng Acoustics Technology Co.,Ltd. 107374 22 2 1212 EPCOS (China) Investment Ltd 162043 14 12 1313 10 Hualun Group 209265 9 23 814 12 Shanghai KYOCERA Electronics Co.,Ltd. 190428 11 24 1715 8 Wuxi Jingshi Electronics Co.,Ltd. 159780 15 18 2416 30Zhejiang Fehong Communication GroupCo.,Ltd.101299 26 9 2317 22 Ningbo Xiangyang Group Co.,Ltd. 122070 19 11 3218 26 Jiangsu United Technology Group Co.,Ltd. 112635 21 16 3019 17 Xiamen Hongfa Electroacoustic Co.,Ltd. 101396 25 15 2720 25Tianjin Zenmay Electro-acoustic EquipmentCompany206866 10 30 31Remarks: date source: China Electronic Components AssociationRankingof totalassets·108·

Electronics & InformationTable 13 Sales revenue and industrial distribution of different enterprises amongthe 19th Top 100 Electronic Component EnterprisesIndustrial classification Enterprises Sales revenue(10,000 yuan)Comprehensive enterprises 14 1881867Capacitor 16 832666Resistance and regulation resistance 5 145411Magnetic materials 6 480870Electronic transformer 4 117813Electronic ceramic device 4 68004Inducer 1 10015Piezoelectric quartz crystal 3 46926Control relay 5 228214Electrical adapter 5 144284Micro motor and components 6 269446Electro acoustic device 9 728382PC 10 805785Optical fiber and cable 12 2665929Total 100 8425609Remarks: date source: China Electronic Components AssociationTable 14 Sales revenue of the first ten enterprises among the 5th Top 100 PC EnterprisesNo Names of enterprises Sales revenue(10, 000 yuan)1 Guangzhou Tianli PCB Co.,Ltd. 2700002 Lianneng Technology (shenzhen) Co.,Ltd. 2568993 SCSC (Suzhou) 1816494 Guangdong Shengyi Sci Tech Co.,Ltd. 1659595 Kaiping Elec Eltel Electronics Co.,Ltd. 1570776 Wus electronic (Kunshan) Co.,Ltd. 1530377 Huatong Computer (huizhou) Co.,Ltd. 1490008 Mingxing Electronic (Guangzhou Nansha) Co.,Ltd. 1486729 Topsearch printed Circuits (Shenzhen) Co.,Ltd. 13690810 Kalex Multi-Layer Circuit Board (Zhongshan) Co.,Ltd. 110000XI.Special electronic materials industry(I)OverviewIn 2005, the last year of the 10th Five-Year Plan, with the support of the relevant departments of China and under theparticipation of the enterprises, great progress had achieved by special electronic materials industry. China electronicmaterials industry maintained stable development, which pushed by the development of semiconductor, solar energyphotovoltaic industry and flat panel display industry. The number of enterprises had exceeded 1,500; the number of employedpersons had been around 100,000; the total income of the industry as a whole was around 55 billion yuan, accounting for1.3% of the sales revenue of information industry. The sales revenue from copper clad laminate materials, magnetic materialsand semiconductor materials was around 47 billion yuan. Total exports reached around US$ 2.5 billion.(II)Production and salesSemiconductor silicon materialsPolysiliconThe annual output, annual capacity and actual total output of China’s polysilicon industry still maintained around 100tons, 400 tons and 80 tons respectively for years. In 2005, the need for polysilicon of domestic IC and silicon solar cell hitaround 3,000 tons, over 95% of which need to import. The balance of supply-demand relationship loosened seriously, which·109·

China Business Guidebecome a bottleneck holding back the development of the industry. In December 2005, under the support of the relevantdepartment of China and by the efforts of China Nonferrous Engineering and Research Institute and Luoyang ZhongguiHi-Tech Co.,Ltd. as well as other units, an annual 300-ton polysilicon project had put into operation. Therefore, thepolysilicon industry formed its industrial pattern on basis of Luoyang Zhonggui Hi-Tech Co.,Ltd., Emei SemiconductorMaterials Plant and Leshan Xinguang Silicon Industry Co.,Ltd..Silicon single crystalThe average annual growth rate of China’s silicon single crystal had been around 30% by 1995. For several years, theannual output of silicon single crystal in Chinese mainland grew twenty to thirty times. In 2004, the output of silicon singlecrystal exceeded 1,700 tons by the push of the development of solar battery. In 2005, the output of silicon single crystal hit2,700 tons, increasing 47%. The total sales revenue hit 5 billion yuan. The output of silicon single crystal used for solarbattery hit around 2,000 tons. The export volume of silicon single crystal in 2005 hit 1 406.31 tons; export reached US$136.5873 million. Export volume of single crystal silicon wafers reached 479.38 tons; exports hit US$ 116.7408 million.Main exported enterprises in solar-grade monocrystalline silicon include: Hebei Jinglong Group Co.,Ltd. (Including HebeiNingjin Songgong Semiconductor Co.,Ltd., Ningjin Changlong Semiconductor Plant and Ningjin Ganglong ElectronicMaterials Co.,Ltd.) and Langfang Songgong Semiconductor Co.,Ltd.. The products of the abovementioned enterprises weremainly exported to Japan. The main imported enterprises engaged in the production of silicon chip used for semiconductordevices include: Grinm Semiconductor Materials Co.,Ltd., Ningbo Lili Semiconductor Materials Co.,Ltd., LuoyangMonocrystalline Silicon Group Co.,Ltd., Shanghai Hejing Silicon Material Co.,Ltd. and Zhejiang Wangxiang Silicon-PeakElectronic Co.,Ltd.. The general level of China’s monocrystalline silicon products was very low. The products structure canmanufacture parts of IC and chips used for all kinds of discrete devices as well as 8-inch polished silicon chips on basis ofproduction of 4, 5 and 6 inches single crystal silicon wafers. Grinm Semiconductor Materials Co.,Ltd. and ZhejiangUniversity State Key Lab of Silicon Materials had made profound scientific and technological achievements and establishedmonthly 10,000-chip small pilot production line in term of 12-inch polished silicon chips. China had ranked among theworld's top level in research and production of large-size silicon chips.GaAs MaterialsGaAs was widely used in Electronic and micro-machine industry. China’s GaAs materials made a rapid progress inindustrialization. All the research institutes holding GaAs materials technologies were carrying out the industrializationconstruction. Meanwhile, some foreign enterprises expressed their confidence in the future development prospect of China’sGaAs materials industry and began to take part in the industrialization. Therefore, the industrialization constriction of GaAsmaterials industry expressed vigorous development. At time of purchasing the production line of US’ Litton Airtron, ChinaElectronic Technology Group Corporation No 46 Research Institute relies on its own force to develop the productiontechnology for VB-GaAs single crystal and carried out the industrialization in semi-Insulation GaAs materials and GaAsmaterials used for lower resistance photoconducting device for purpose of realization the annual output of 200,000 piecesphotoconducting GaAs substrates and 150,000 to 200,000 pieces of semi-Insulation GaAs materials. Beijing Zhongke JiayingSemiconductor Co.,Ltd. was established to carry out the industrialization work in semi-Insulation GaAs materials and epitaxymaterials on basis of the technologies of Institute of Semiconductors of Chinese Academy of Sciences and undercombination of Beijing Beixin Building Material Group Co.,Ltd. and other units. Guorui Electronic Materials Co.,Ltd. wasestablished to manufacture the GaAs materials used for photoconducting devices for years on basis of the HB-GaAstechnology developed by General Research Institute for Nonferrous Metals (GRINM). Other enterprises such as DaqingJiachang, Beijing Meixi Semiconductor Materials Co.,Ltd. (formerly Fuzhou Jingzhen Semiconductor Co.,Ltd.) andXinxiang Shenzhou Crystal Technolgy Co.,Ltd. had also carry out the industrialization in GaAs materials.Piezoelectric crystal materialsPiezoelectric crystal materials are raw materials used to manufacture harmonic oscillator, oscillator, filter, SAW deviceand optical device. In 2005, the domestic output of China’s crystal materials hit 2,000 tons, but the domestic enterprises weresmall and decentralized; the products were dominated by medium and low level ones; the main equipment were mainly thesmall-sized pressure pan with diameter from 250 mm to 280 mm.Magnetic materials·110·

Electronics & InformationPresently, China’s industry scale of magnetic materials has ranked first in the world. In 2005, the output of magneticmaterials hit 450, 000 tons. The output of hard magnetic ferrite hit 290, 000 tons. The output of soft magnetic ferrite hit 160,000 tons. The total sales revenue reached around 25 billion yuan. The export volume accounted for 50% of that of magneticmaterials. The medium and low end products held 60% market share in international magnetic materials market. Thehigh-end products were very competitive. The output of high-performance soft magnetic ferrite materials PC40(µ>10 000)and hard magnetic ferrite (Double 4,000 Kw-type magnetic component) accounted for 30% of that of magnetic materials inthe whole year. In view of the development of the industry as a whole and compared with the magnetic materials industry inforeign advanced countries, China’s magnetic materials industry faced many problems such as decentralized location, weakmanagement, low product standard and unstable quality.From 1996 to 2000, the output of domestic sintered neodymium iron boron increased 1.5 times and its average annualgrowth rate hit 20%. The accumulative sale for five years reached 6.6 billion yuan and foreign exchange earning hit US$ 500million. Presently, there are three enterprises with annual output of sintered neodymium iron boron over 1, 000 tons. Ningboregion in Zhejiang, Beijing-Tianjin region and Shanxi have become three major production bases in sintered neodymium ironboron. The total output of sintered neodymium iron boron of these regions has accounted for over 90% of sinteredneodymium iron boron of the whole country.Copper clad laminateCopper Clad Laminate (CCL) is the main material used to manufacture PCB.In 2005, the annual output of CCL reached around 200.55 million square meters, a 20.7% increase on a year-on-yearbasis. The output of glass fabric substrates hit 111.60 million square meters. The output of paper substrates reached 70.85million square meters. The output of compound substrates reached 18.10 million square meters. The total sales revenue of thewhole year hit 16.9 billion yuan, increasing 26%. The exports reached US$ 570.18 million. The annual imports increased5.66%. The large trade deficit existed in the import and export trade of copper clad laminate mainly due to the impact of theimported products of Taiwan region and South Korea. The China’s output of CCL ranked the second in the world.Presently, there are ten enterprises engaged in CCL production. The large enterprises include: Jiantao Build-Up BoardCo.,Ltd., Guangdong Shengyi Sci Tech Co.,Ltd., Hongren Electronic Industry Co.,Ltd., Hezheng Science&TechnologyCo.,Ltd., Lianmao Electronics Co.,Ltd., Nan Ya Electronic Materials (Kunshan) Corp Ltd, Suzhou Matsushita Electric WorksCo.,Ltd., Zhaoyuan Jinbao Electronics Co.,Ltd., Shnghai Nanya Technology Group Co.,Ltd. and Shenzhen Pacific InsulatingMaterial Co.,Ltd.. All domestic enterprises can manufacture the CCL materials with size of 12µm, 18µm, 35µm and 70µm.The product quality of the major enterprises had reached the international advanced level.Electronic ceramic materialsChina has become the major MLCC manufacturer in the world. The Y5V, X7R and NPO ceramic materials used forMLCC have put into mass production. The Ni electrodes base-metal ceramic was under reseach and development. In 2005,the global need for ceramic materials reached 15,000 tons. The need for base-metal anti-reduction ceramic materials hit12,000 tons. The main goal of manufacturer engaged in MLCC ceramic materials production is to research and develop aswell as manufacture Ni electrodes MLCC anti-reduction ceramic materials in large quantities.There are hundreds of institutes and enterprises engaged in medium ceramic materials R&D and production in China.They have made a batch of scientific and technological achievements, reaching the international advanced level in recentyears. Some of the achievements have won proprietary intellectual property rights. The annual output of all kinds of mediumceramic materials reached over 1,800 tons. Some kinds of ceramic materials possessed the same performance as the foreignproducts of the same kind. Some products surpassed the foreign products in electronic performance and processing.Compared with the microwave medium ceramic materials of foreign countries, there is still big gap between domesticmicrowave medium ceramic materials in technology, product types and production scale. The substituted materials of leadceramic have become the key development trend in ceramic materials for the coming two years. Guangzhou JiesaiTechnology Company Limited of China Electronic Technology Group Corporation No 10 Research Institute has made greatprogress in research and development.Polypropylene film for capacitors·111·

China Business GuideBefore the 1980s, the polypropylene film for capacitors mainly depended on import from Japan, France and Germany.After 1980s, the output of polypropylene film reached over 80,000 tons on basis of technical improvement andself-innovation. In 2003, the sale volume of polypropylene film for capacitors hit 26, 342 tons and the sales revunes reached1.23041 billion yuan. There were three enterprises which output exceeded 2, 000 tons. The sales revenue of the threeenterprises hit 682.46 million yuan, accounting for 55.5% of that of polypropylene film industry. In 2004, the annual outputof most enterprises exceeded 2, 000 tons. In 2005, the sales revenue of the first three enterprises accounted for 28.4% of thatof the whole industry. It was proved that the industry was highly concentrated.In recent years, parts of original enterprises intensified their investment volume and expanded the productivity.Furthermore, joint venture, newly-built enterprise and parts of enterprise engaged in the production of packaging filmoriginally also entered into the polypropylene film industry after improving the production lines. These enterprisesstrengthened the competition in the market. According to incomplete statistics, there were 136 domestic enterprises engagedin the production of the polypropylene film for capacitors totally. They were mainly located in the Pearl River Delta and theYangtze delta as well as Sichan. The major manufacturing enterprises include: Anhui Tongfeng Electronics Co.,Ltd., SichuanDongfang Insulating Material Co.,Ltd., Jiangmen Enrichment Industrial Limited, Jiangsu Nantian Group Co.,Ltd. andZhejiang Nanyang Electronic Film Co.,Ltd.. In 2005, the annual output of the abovementioned enterprises totally exceeded80,000 tons (calculated by 7-8µm), which held over 60% of the domestic market. The growth rate was very rapid. The annualoutput of Anhui Tongfeng Electronics Co.,Ltd. hit 16, 000 tons and its production scale ranked the first in the world. Thescale of China’s polypropylene film industry for capacitors leaped into the front ranks of the world. The product development,production technology, processing technique and application technology also reached the international advanced level.During the production, domestic enterprises adopted the international advanced standard such as IEC 60674 BiaxiallyOriented Polypropylene Film for Capacitors. The quality of the products reached international advanced level of theinternational products of the same kind or the same level of the international products of the same kind. At time of beingexported to foreign countries, the domestic products not only met the need of the domestic users but also can be used as thesubstituted materials.In addition, by attaching profound attention to the construction of self-innovation and the improvement of coretechnology, domestic enterprises engaged in production of polypropylene film for capacitors relied on its own force todevelop some products such as rough-surface biaxially oriented polypropylene film for capacitors and high temperatureresistant polypropylene film for capacitors. The main enterprises had established the technical innovation system on basis ofthe independent intellectual property rights and founded the industrial basis and the industrial chain. The number of patentsheld by the enterprises increased year by year. The enterprises also carried out technical cooperation and established thestrategic cooperation relationship with the multinationals. The export volume of the products held independent brand grewincreasingly.Electrode foil for aluminum electrolytic capacitorIn 2005, the need for electrode foil for aluminum electrolytic capacitor reached 90 million square meters and its marketshare hit 3.5 billion yuan. The market shares of low and medium-high voltage electrode foils accounted for 50% of the totalmarket share respectively. Domestic output of electrode foil for aluminum electrolytic capacitor reached around 49 millionsquare meters. So another 40 million square meters of electrode foils needed to supply by means of import. The importedproducts mainly include high voltage-high capacity and special high-end etch surface of aluminum foil and formed foil (forexample, aluminum electrolytic capacitor for flash lamp and electrode foil for high ripple current aluminum electrolyticcapacitor). Such electrode foils for special specification were under research and development period.There are 28 enterprises engaged in the production of electrode foil for aluminum electrolytic capacitor in China. Sevenenterprises mainly produced aluminium foil. The main manufacturers include HEC, Jiangsu United Technology GroupCo.,Ltd., Yangzhou Shengda Group (Gaoyou City Shengda Electronics Co.,Ltd.), Fengbin Electronic Technology (renhua)Co.,Ltd., Zhaoqing Huafeng Electronic Aluminum Foil Co.,Ltd., Zhaoqing Gaoyou Aluminum Foil Co.,Ltd., NanhuiElectronic Materials Co.,Ltd., Huaibei Dongci Electronic Co.,Ltd., Sancon Jetwell (Haimen) Electronics Co.,Ltd. andGuangxi Hezhou City Guidong Electronics Co.,Ltd.. The annual sales revenue reached around 2 billion yuan. The output hit·112·

Electronics & Informationaround 49 square meters. The output of low - medium voltage foils and medium-high voltage electrode foil accounted for50% of the total output respectively.The production technique of domestic electrode foil mainly adopted two processing such as muriatic acid and sulfuricacid (environment-friendly) and dichromic acid and hydrofluoric acid. These two processing were increasingly developedinto environment-friendly processing. The types of formed foil include low-voltage and medium-high voltage foils. Thespecifications include 20µm-104µm. The withstand voltages were ranging from 50V, 100V, 160V, 250V, 400V to 500V.At the beginning of 1990s, the margin low-voltage formed foil technique and performance between China and foreigncountries was narrow. Yet the large gap was formed on the product performance between China and foreign countries due tothe development environment and other reasons. Therefore, foreign low-voltage foils flooded into China market, whichbecome a serious threat for domestic industry. On basis of key technical breakthrough (including environment-friendlyproduction processing and production line improvement) make by HEC, Jiangsu United Technology Group Co.,Ltd.,Yangzhou Shengda Group, Dongci Aluminum Industry Group and other enterprises and by international advanced electroniccontrol technology, the production process was controlled effectively and the mechanical behavior and the presentationquality were also improved notably. The general quality of low-voltage formed foils was increase a lot. The production scaleand market share has also boosted. The domestic need for aluminum electrolytic capacitor was basically satisfied.The starting point for medium-high voltage foil was very high. HEC, Dongci Aluminum Industry Group and otherenterprises improved the product’s capacity consistency, mechanical strength or other indices such as leakage current reachthe level of imported products by applying the domestic aluminum foil materials and corrosion process-independentintellectual property right. Furthermore, compared with imported foils, the price of the domestic foils was also competitive.In recent years, Japan, South Korea and Taiwan region in China transferred the production lines of aluminum electrolyticcapacitor to Chinese mainland. It not only provided domestic electrode foil production with market space but also suppliedprofound opportunities to bring China’s electrode foils into international market. The products from main domesticenterprises accounted for over 60% of market share in domestic market. The export volume in the whole year exceeded 3,100 tons. The export volume hit US$ 42.74 million. The main exported countries and regions include South Korea, SouthEast Asia and Taiwan region.Tin solderIn December 2004, the debut of Lead-Free Solder Draft Standard of China expressed the top priority given to thelead-free work of the domestic solder industry. In 2005, the tin-solder output of domestic solder industry reached 88,000 tons,of which the output of lead-free solder hit 14,000 tons.The product quality of general domestic solder wire and bar was the same with the foreign product. But the there wasstill large gap between the domestic high-end products and the foreign ones. We can see it from the following aspects: firstly,there were gaps between the production equipments, processing techniques and product quality in tin power and BGA tinballs; secondly, the product performance-free flux technology was inferior to the foreign technology; fourthly, the R&Dability for new product was weak; fifthly, market share of lead-free solder products was low in domestic market.Optoelectronic materialsLaser crystal materialsThere were 13 enterprises engaged in production of laser crystal materials in China. The main products included Nd:YAG materials and its quality reached the international advance level. The products were exported to international market.Liquid crystal materialsThe domestic liquid crystal materials were mainly the liquid crystal materials for TN-LCD. It accounted for 80% ofmarket shares in global market in liquid crystal materials for TN-LCD. This kind of materials characterized by large salesvolume and low production value. Domestic enterprises can produce small parts of low-end liquid crystal materils forSTN-LCD other than liquid crystal materials for TN-LCD. The TFT compound liquid crystal product was still a margin indomestic market. Presently, parts of enterprises have possessed the R&D and production capacities of TFT single crystal andsold the TFT intermediate product.ITO conducting glass·113·

China Business GuideThe domestic need for ITO conducting glass reached 10 million square meters. There are 16 enterprises mainly engagedin the production of ITO conducting glass at present. The output reaches 0.1 billion pieces (totally 14 million square meters,calculated by 14×16 inches). The supply has increasingly exceeds demand in ITO conducting glass production. The productstandard needed to be improved.Polaroid70% of the polaroid relied on import in China. The annual domestic output only reached 0.4 million square meters. Themajor products were TN poloroids and few STN polaroids.Optical fiber materialsChina’s consumption on optical fiber ranked the third in the world, next only to the US and Japan. China’s optical fiberindustry has formed the optical fiber preform rod industrial pattern dominated by Wuhan Changfei Optical Fibers & CablesCo.,Ltd.. The quality of major optical fiber products reaches the first class in the world. Parts of products are exported tointernational market. In 2005, the output of optical fiber preform rod hit 19 million square meters, accounting for 10% of themarket share in global optical fiber preform rod market. The product pattern was dominated by single-mode optical fiber andincluded multi-mode optical fiber, polarization maintaining optical fiber and other special optical fiber such as rare earth. Thedrawing capacity of optical fiber was more than sufficient for domestic need. The production scale exceeded 30-millionsquare meters/per year.Major fine chemical materialsHigh pure chemical reagentsThere are ten enterprises engaged in the production of high pure chemical reagents in China. The market structure of theproducts is mainly composed of sulphuric acid, nitric acid, hydrochloric acid, hydrofluoric acid and 2-propanol. Presently, theannual demand for the reagents used for electronics hit 28,000 tons. The output of domestic high pure chemical reagents ofMOS grade reaches 5,000 tons. The metallic contamination content of parts of semic-8 standard product is lower than 1 PPb.But the grain diameter has not reached the standard. The high pure chemical reagents below 0.5µm are under research anddevelopment.PhotoresistThere are seven enterprises engaged in the production of photoresist. Few enterprises possess the capacity of massproduction. Its market structure of products is mainly composed of UV positive resist, negative resist and electron beam resist(or Grade G and I wire resist). Presently, the total demand for UV positive resist and negative resist used for the production ofmedium and small-sized IC (process width is above 5µm), large-sized IC (5µm、2µm-3µm、0.8µm-1.2µm), discrete devicesand LCD hit 150-200 tons/per year, which basically met the domestic need. Other types of resist have still been underresearch or experimental period. In recent years, with many ULSI production lines have brought in and been constructed inChina, the need for 248 nm-photoresist become increasingly large. But the domestic enterprises have no ability to producethis kind of products. 193 nm-photoresist is under research and development.Epoxy moulding compoundThere are seven enterprises engaged in the research and development of epoxy moulding compound. These enterprisesare as follows: Lianyungang Henkel Huawei Electronics Co.,Ltd., Eternal Electronic Materials (Kunshan) Co.,Ltd.,Sumitomo Bakelite (Suzhou) Co.,Ltd. and Beijing KeHua Advanced Materials Technology Co.,Ltd.. The total annual outputreached around 20,000 tons, of which the output of Lianyungang Henkel Huawei Electronics Co.,Ltd. hit 12, 000 tons/peryear. The products can meet the packaging need of parts of IC and discrete devices and are mainly packaged in form of DIPand SOP. The products used for BGA and CSP package are under research and development. The domestic market need forsolid moulding compound reached around 40,000 to 60,000 ton annually. Parts of products relied on import. SumitomoBakelite (Suzhou) Co.,Ltd. can manufacture all kinds of products used for package and holds major market share among thesolelyforeign-owned enterprises.Electronic special gasThe research and development of electronic special gas has started since the 1980s. Compared with the foreign products,there is still large gap in product performance and production scale of domestic electronic special gas products due to some·114·

Electronics & Informationfactors including the products’ characteristics, technology and investment. Therefore, several large foreign enterprises possessthe most market share of some kinds of electronic special gas products. Some domestic products such as NF3, SF6, SiHCl3and parts of Mo are very competitive in the market. These products play an important role in balancing the price ofinternational electronic special gas products in China.Parts of special metal materialsLead frame materialsThe domestic lead frame materials are mainly composed of copper frame. Five enterprises are engaged in the productionof lead frame strips. These enterprises are as follows: Luoyang Copper Processing Factory Industry Company, NingboXingye Copper Co.,Ltd. and other enterprises. Their market scale reached around 40, 000 tons/per year to 50, 000 tons/peryear. Total output hit 5,000 tons. The lead frame copper strips used for IC mainly depended on import. The degree ofself-sufficiency on the lead frame copper strips used for discrete device was very high. There are ten manufacturers in leadframe. The foreign owned-enterprises include Mitsui, Fengshan and other enterprises. The domestic enterprises mainlyinclude Ningbo Kangqiang Electronics Co.,Ltd., Xiamen Yonghong Electronics Co.,Ltd. and Tianshui HuatianMicroelectronics Co.,Ltd. (No 749 Factory).Gold bonding wireThere are five enterprises including Zhaoyuan Heraeus Precious Metal Materials Co.,Ltd. and Ningbo KangqiangElectronics Co.,Ltd.. In 2005, domestic output of gold bonding wire exceeded 7,000 kilogram. At present, the domesticoutput of gold bonding wire can meed the need of foreign-owned enterprises and some products have used for export.(III)Scientific research and new productsIn 2005, the development on lead-free solder and environment-friendly materials made notable progress. Under theorganization of Tin Solder Branch of China Electronics Materials Industry Association, the enterprises made investment bythemselves and developed the tin-silver-copper and rare earth element lead-free alloy solder with proprietary intellectualproperty rights. In addition, the branch drew up the industry standard for lead-free alloy solder. The researches on mouldingmaterials and CCL used for non-halogen elements have made great breakthrough in Institute of Chemistry of ChineseAcademy of Science and some CCL manufacturers including Dongguan Shengyi Electronics Co.,Ltd..Institute of Semiconductor of Chinese Academy of Science has made profound scientific progress with proprietaryintellectual property rights in the R&D of semi-conductor; for example, temperature profile design, growth control andcrystal ingot annealing technologies on large-sized (6 inches) single crystal gallium arsenide. The weight of single crystalgallium arsenide reached 5 kg. The crystal technical parameters reached the domestic and international advanced level.Institute of Semiconductor of Chinese Academy of Science also developed the 2-6 inches gallium arsenide crystal multi-wirecutting and chemical mechanical polishing. The crystal technical parameters reached the international advanced level. Itinvented the transmission type polarizing difference method to measure the residual stress of gallium arsenide. It developedthe flip-chip GaN-based white and blue LED in flip-chip GaN-based structure LED technology and parts of technicalparameters exceeded the standard of the international devices of the same kinds in 2005. It developed a kind of designmethod of optical, electrical and thermal integrated flip-chip LED, which is the first flip-chip LED with thermal resistanceinterface and transitional thermal sink structure in the world. The comprehensive integrated technology had applied for oneinternational patent and one domestic patent. The average percent of pass for the 12 batches (six pieces in one batch) ofsuccessive engineering researches reached 80%.China made the breakthrough in optical fiber perform by the efforts of Changfei Optical Fiber and Cable Co.,Ltd.,Zhejiang Futong Group Co.,Ltd. and Jiangsu Fasten Co.,Ltd.. The diameter of the optical fiber perform was increased from80 mm in 2004 to 120 mm in 2005. The length of string hit 1,000 km. The attenuation value at water peak decreased to0.29db/km. Beijing Guojing Infrared Optical Technology Co.,Ltd. had make great progress in germanic chloride used foroptical fiber perform. The product performance reached the level of Germany Merck chemical Co.,Ltd.’ s products of thesame kind. This kind of product replaced the imported products. The market share in germanic chloride had increased from40% to 90%. This kind of products was also exported to the international market.·115·

China Business Guide(IV)Important engineering and key projectsIn December 2005, under the support of National Development and Reform Commission, Ministry of Science andTechnology and other departments and by the efforts of China Nonferrous Engineering and Research Institute and LuoyangZhonggui High-Technology Co.,Ltd., a annual 300-ton polysilicon project had been put into operation. At that time, a1,000-ton polysilicon project had also been under the way. It was estimated that this project would be completed at the end of2006.Shandong Zhaoyuan Jinbao Electronics Co.,Ltd. contracted the high-end electrolytic copper foil industrialized modelproject of National Development and Reform Commission and depended on its own force to develop a low cost productionline with low investment and high technical level. Under the same production scale, this production line can save one third ofinvestment used for foreign production line and reduced the production cost by 10%. The technical level of the productsreached the international advanced level.The Zhuhai Gowin Fiberglass Co.,Ltd.’ s electronic-grade glass-fiber used for CCL production has made great progressin performance and production scale, which was ranked among the world top five. Especially, the scientific research onoptical fiber technology made a notable breakthrough in 2005 and promoted the development of multi-layer printed circuitboard.Beijing Crystal Photoelectric Science & Technology Inc has made great progress in the hi-tech model-engineeringproject in high quality crystal materials used for photoelectric information products awarded by National Development andReform Commission. The company had developed into a integrated manufacturer in piezoelectric quartz crystal materials andoptical quartz crystal materials from a enterprise mainly engaged in the production of single piezoelectric quartz materials. Itbecame the largest and best crystal materials production base with in China.(V)Market analysis and forecastingIt is estimated that the market demand for polysilicon would exceed 3,000 tons in China in 2006. The operation ofSichan Xinguang Silicon Technology Co.,Ltd.’ s thousands-ton polysilicon production line would help to relieve the relievethe tense supply and demand situation in domestic market. The growth rate of China’s SIC and photoelectronic device wouldexceed 30%. But most products of silicon materials were the 4-inch, 5-inch and 6-inch silicon chips. In the coming severalyears, the output of 8-inch and 12-inch silicon chips will be increased. Two or three hi-tech industrial bases, which produce8-inch and 12-inch polished silicon wafers and epitaxial wafers, will be established to meet the need of 100-65 nm IC. The6-8 inches SOI and SiGe and strained silicon materials industrial model engineering projects will be founded.It was estimated that the demand for base glass used for LCD would reach 30, 000,000 square meters/per year(including demand for TFT reached 16, 000, 000 square meters/per year and demand for TN and STN reached 12, 000, 000square meters/per year). The domestic demand for color filter for LCD would exceed 10,000,000 square meters. Thedevelopment of such materials would become the new point for economic growth in China due to the higher profits of theseproducts.With the implementation of UN’s RoHS and WEEE Indicators and the issuance of Pollution Control and Managementof Electronic Products of PRC, the advanced semi-conductor moulding demand for lead-free solder would continue toincrease. In domestic market, the annual demand for lead-free solder would reach around 70,000 tons, accounting for 35% ofthe world use.In brief, the growth of electronic materials would continue to increase steadily in 2006. Especially the growth of basicindustry such as polysilicon would increase rapidly due to the promotion of the PV industry. Parts of electronic materialsrelied on import for a long time would still face such pressures including bulging price of raw materials and higher importduty. The domestic enterprises would intensify the ability on self-innovation and on the development of core technology, givetop priority to promotion of technology and the protection of proprietary intellectual property rights and strengthen the massproduction of high-end electronic information materials.·116·

Electronics & Information【Statistical data】Table 1 Industrial scale situation in electronic materials in 2005Number ofNumber ofTotal number of Including: technicalTypesinstitutesenterprisespersonnelpersonnelElectronic materials Around 50 Over 1 500 Around 100 000 20000Table 2 Output, sales volume, export and sales revenue of electronic materials in 2005Name of products Unit Output Sales ExportSales revenue(10,000 yuan)Polysilicon materials Ton 80 80Silicon single crystal materials Ton 2700 2700 1886 500000Germanium single crystal Ton 10 10 6 8300Gold bonding wire Kilogram 7510 7510Moulding-powder and accessories Ton 32213 31699 1014Quartz ware Kilogram 1296789 1282138 882000CCL materials 10,000 square meters 20055 20055 139370 tons 1690608Including: glass-fiber base 10,000 square meters 11275 11160Paper base 10,000 square meters 7085 7380Compound base 10,000 square meters 1810 1845Magnetic materials Ton 450000 450000 2500000Including: soft magnetic materials Ton 160000Permanent-magnet material Ton 290000Casting metal materials Ton 3000Electronic optical glass Kilogram 7721200 7257200 1200Electric-vacuum glass Kilogram 11561860 11464963 4578504Electrolytic manganese dioxide powder Kilogram 38898000 34967000 14597000Condenser foil materials Kilogram 31138779 28636245 169672Including: aluminum foil Kilogram 21553996 21505107 169672PET Kilogram 377969 340544Polypropylene membrane Kilogram 9206814 6790594Piezoelectric material Kilogram 317196 283004 5075Including: Lithium niobate single crystal Kilogram 8701 3775 145Lithium tantalite single crystal Kilogram 60 250Synthetic quartz Kilogram 308435 278979 4930Tungsten products Kilogram 265144 250630 23780Including: tungsten filament Kilogram 41235 41433 480Tungsten rod Kilogram 160145 146471 10750Tungsten wire and heating element Kilogram 17320 16282 250Tungsten sheet Kilogram 46444 46444 12300Molybdenum products Kilogram 261005 250800 2990Including: molybdenum wire Kilogram 75449 70339 840Molybdenum rod Kilogram 88112 82063 1150Molybdenum sheet Kilogram 97445 98398 1000Nickel base alloy Kilogram 698693 660536 850Including: nickel wire Kilogram 50943 44655 850Nickel strip Kilogram 646538 614676Nickel pipe Kilogram 1213 1204Composite metal electronic materials Kilogram 2093131 2077831 11250Including: dumet wire Kilogram 61131 57831 250Nickel-plated iron strip Kilogram 2032000 202000 11000Contact materials Kilogram 291367 332371 5000Alloy materials Kilogram 16033830 15036490 42720Including: silver-copper solder Kilogram 174553 174545Lead-tin alloy materials Kilogram 429 432Other alloy materials Kilogram 15858849 14861513 42720Semiconductor packaging materialsIncluding: gold bonding wire Kilogram 7510 7510·117·

China Business GuideMetal pipe used for package 10,000 pieces 479094 490298 338419Lead frame and metal strips 10,000 pieces 1649449 1668163 165580Moulding-powder and accessories Ton 9913 6786 1014Other semiconductor packaging materials Ton 1292789 1282138 1902XII. Optical and photonics industry(I)OverviewChina’s optical and photonics industry developed rapidly in 2005. The market is extremely active, showing a goodmomentum of export. All areas of the industry have achieved progress to different extents. Affected by the hot selling of theLCD, color screen cell phones, digital products and optoelectronic products, the optical processing, optical materials, laserdevices, LED, LCD industries also got rapid development. TFT-LCD industry grows at fastest pace.(II)Production and salesIn 2005, China's laser products (including holographic products) achieved total sales of 5.40644 billion yuan. The salesamount of laser products was 4.011 billion yuan, up 16.2 percent; the sales amount of laser holographic products was 1.395billion yuan, an increase of 20.7%.The infrared devices and materials have maintained stable development. The annual production output of majordomestic enterprises engaging in infrared materials achieved an increase of 20 percent YoY. The sales amount of infraredsensors was basically the same as that of last year.China has about 300 enterprises producing optical components and equipment with certain scale; about 45,000employees, including 7,000 technical staff. Based on statistics for 108 units, the sales amount of optical components andequipment achieved 1.7 billion yuan in 2005. The product categories include optoelectronic devices, optical prism, lens,integrated optics, film plating machines, skimming machines, microscopes and optical materials used in opticalcommunications and security systems.The market scale of optical instruments grows rapidly. At present, the domestic optical instruments mainly focus onlabor-intensive products, such as: telescopes and microscopes.In 2005, the yield of LED chip was about 18 billion, of which the yield of ultra bright LED chips was 6 billion. Atpresent, Delta and Pearl River Delta region. According to incomplete statistics, the annual sales amount in southern Chinawas about 1.17 billion yuan, and about 1.026 billion yuan in East China.According to statistics for 87 units in the industry, the annual sales amount of liquid crystal materials and LCD deviceswas 21.885 billion yuan (not including foreign-invested enterprises), a year-on-year increase of 7.295 billion yuan, up 50%.Of which the sales amount of liquid crystal display was 18.203 billion yuan, accounting for 83.17% of that of liquid crystalmaterials and LCD devices; related materials was 3.128 billion yuan, accounting for 14.29% of that of liquid crystal materialsand LCD devices; manufacturing equipment was 434 million yuan, accounting for 1.98% of that of liquid crystal materialsand LCD devices; others (including ancillary services, trade, etc.) was 20 million yuan, accounting for 0.55% of that of liquidcrystal materials and LCD devices.(III)Scientific research and new productsNanjing Institute of Astronomical Optics & Technology (NIAOT) developed silicon carbide aspheric optical systemwith the caliber of 520 mm. The system marked that China’s development technology of high-precision bigbore siliconcarbide optical mirror marks a new stage.China South Industries Group Corporation CDGM GLASS CO.,LTD first adopted continuous melting method toproduce large-diameter and high-precision optical glass. The project's main indicators have reached the advancedinternational level, and made China South Industries Group Corporation CDGM GLASS CO.,LTD became Asia's onlyenterprise having production capacity of large-diameter and high-precision optical glass.·118·

Electronics & InformationIn May 2005, the “research on key technology of industrialization of gradient-index rod lens” made by Xi'an Institute ofOptics and Precision Mechanics, Chinese Academy of Sciences (CAS) was approved and accepted by CAS Bureau ofHigh-Tech Research and Development. In addition, the project of “development of large-diameter levelling magnetic rotationglass” also passed expert testimony. The project fill the gap in China and its main technical indicators have reached theinternational advanced level.The 0.55-inch DLP optical engine developed by Henan Costar Group Co., Ltd passed expert testimony. The product is ahigh-tech product integrated with optics, mechanical, electrical and other technical integration, the core components ofprojectors and rear projection television. Its optical system adopts a solid rod, relay lens used in K9 materials, prism wedgeand nine-lens projecting lens, an innovative system.The high-tech equipment designed and developed by China independently is: high-efficiency and large-Watt laser aidwas established by the Institute of Physics, CAS and passed expert testimony. The successful development of this devicemarks that China has stepped into international advanced group in the fields of super-power and ultra-short laser technology.The 4th-generation TV- “laser television” developed by the Institute of Optics and Electronics, CAS passed the scientificand technology achievements evaluation.Nanchang University made progress in the research of silicon substrate on the growth of GaN epitaxial material.Currently, Nanchang University has developed blue LED chips, the luminous power reached 6 mw to 9mw, and yield reached70%. After 50 mA electrical stimulation treatments for 1000 hours on the chip which is 0.3 × 0.3mm2 thick, its luminousefficiency declined to 10 %. In addition, Nanchang University also developed green LED chips, and achieved betterbatch-to-batch reproducibility.The project of “full-color LED display system brightness uniformity correction technology” developed by ShanghaiSansi Technology Co., Ltd have made progress in achieving a brightness correction point by point; the new product of“C0401-type bright area ratio indoor full-color LED display” maintains the unchanged resolution, increases pixel luminousarea, raises bright area ratio, thereby eliminating harsh sense, shortening the viewing distance to over three meters, andeliminating the black areas and “Mosaic Phenomena”.The “organic light display technology” jointly developed by Nankai University and The Hong Kong University ofScience and Technology have made progress, five technologies related to this project have reached the international advancedlevel. At present, the scientific research personnel has produced China’s first 5-inch full-color, active site of organic lightemitting display substrates achieving dynamic display.ChangChun GuangHua Micro-electronics Eguipment Engineering Center Co., Ltd. held by Changchun Institute ofoptics, fine mechanics and physics, Chinese academic of sciences, developed China's first liquid crystal box short-circuit ringlaser cutting machine, and passed expert testimony. The equipment is China's first self-developed liquid crystal boxshort-circuit ring laser cutting machine, and is characterized by reasonable design, advanced performance, accurate and rapidautomatic identification of the image, rapid motion positioning control, smooth and clean laser marks, and othercharacteristics . Its integrated technology and performance indicators have reached the international advanced level amongsimilar products.Supported by the National 863 project and Jiangsu Province 2004 high-tech projects, Nanjing University developedChina's first three-dimensional liquid crystal display, and passed acceptance. The product can be directly seen with the nakedeye three-dimensional images without the help of any accessory appliances. Two 15 and 17-inch three-dimensional liquidcrystal displays as prototype, both possess independent intellectual property rights.The project of “light control film’s control on the liquid crystal pretilt angle” undertaken by Changchun Institute ofoptics, fine mechanics and physics, Chinese academic of sciences has passed the testimony of Jilin Province Science andTechnology Office in Changchun. It is an innovative project in the design of light control film, and the performanceindicators have reached international standards.(IV)Key projectsChina Luoyang Float Glass Group Company invested 280 million yuan and built ultra-thin ITO glass production lines atthe end of 2005. The production line mainly produces 1.1 mm, 0.7mm, 0.55mm of ultra-thin and high-quality electronic glass·119·

China Business Guideproducts. The complete equipment of the production line have also been a part of the current domestic capacity.In early 2005, Shenzhen Julong Photoelectric Co. Ltd was officially established. The company is invested by manycompanies, of which BOE Technology Group Co., Ltd accounts for 40 percent share, Shenzhen Skyworth Group, TCL GroupCo., Ltd., Konka Group Co., Ltd. and Sichuan Changhong Electronics Group Ltd. -10% of the shares each, and ShenzhenScience and Technology Investment Co. Ltd. accounts for 20 percent of the shares.Corning is the world's largest TFT-LCD glass substrate manufacturer, and its market share of TFT-LCD glass substratesaccounts for 60% in the world. The company announced to set up liquid crystal display (LCD) glass substratesafter-processing production line in the Beijing Economic and Technological Development Area. The production line will helpdomestic LCD enterprises to form a complete industrial chain, to reduce production costs and enhance marketcompetitiveness.“China’s first largest LED screen” is 200 meters in length and 27 meters in height, with a total area of about 6,000square meters. It will be made up of more than 2,000 LEDs with over 500 million pixels, cost 20 million US dollars.Guanglei Electronics (Suzhou) Co., Ltd. is responsible for the design and construction of this project; it is expected that theproject will be completed in September 2006. The product is to meet Beijing 2008 Olympic Games and is set in the street ofthe CBD.As a part of “National Semiconductor Lighting Project”, the project of “semiconductor lighting industry technologydevelopment” of 2005 National Key Science and Technology Project from “Tenth Five-Year Plan” was accepted by theExpert Group of Ministry of Science and Technology in Beijing.As a national major scientific and engineering project, “Large Celestial area, Multi-Objective, Optical Fiber SpectrumTelescope (LAMOST)” primary mirror (MB) of three pairs of diameter diagonalis 1.1-meter hexagonal mirror were piecedtogether by Nanjing Institute of Astronomical Optics & Techonology, CAS and succeed. This is the first time that theapplication of thin mirror (deformable mirror) active optical technology and segmented mirror active optical technology onthe large-scale mirror simultaneously in the world, and the first time that two pieces of large segmented mirror are applied inthe optics system. LAMOST project plans to install and debug optical mirror in the second half of 2006.(V)International cooperation and foreign tradeCurrently, China's foreign trade field of optical and photonics industry is mainly in the field of liquid crystal materials,optical components, binoculars series, microscope series, LED display, liquid crystal display products, laser materials,infrared materials, optical materials, and other related equipment, of which the most competitive products are opticalcomponents and raw materials.The exports of telescope and other labor-intensive products show good prospect. In 2005, China’s telescope exports wasabout 280 million US dollars, the microscope was 80 million US dollars, and the export volume of the optical equipment (notincluding optical components and spare parts) was about 660 million US dollars.In 2005, the exports of liquid crystal monomer have taken shape. Yantai Valiant Fine Chemicals Co., Ltd. exported thelargest number.The annual export volume of LED display was 550 million yuan, of which the full-color export volume was 481 millionyuan, accounting for 87.3% of the LED display industry's total exports.(VI)Market analysis and expectationsIn 2005, the global laser market witnessed a slight increase with the sales amount hit 5.5 billion US dollars, an increaseof 1%. China's laser products market has become the largest hotspot of international laser photonics industry currently. Withthe implementation of national innovation strategy in an all-round way, and the deepening implementation of "WesternDevelopment" and “ Revitalizing the Northeast Old Industrial Base”, the government at all levels showed an increasinglystrong demand for revitalizing the modern manufacturing, especially the equipment manufacturing industry,. In 2005, China’slaser industry got a high-speed the stable development.Product market·120·

Electronics & InformationMarket for optical communication productsIn 2005, China's optical communications products market has grown steadily, despite influence of prices, the marketsales amount reached 808.7 million yuan, an increase of 31 percent.Market for laser processing productsThe laser processing products market has maintained strong momentum of development. The annual sales amountreached 1.8168 billion yuan, an increase of 21%. Its main products is laser marking, engraving equipment, laser cutting andwelding equipment, as well as laser heat treatment equipment, etc.Market for laser medical productsThe laser medical products market has maintained steady development. The annual sales reached 239.8 million yuan, anincrease of 2 percent, roughly equal to that of 2004. The main reason for market growth is the increase in cosmetic laserequipment and semiconductor laser cure instrument.Market for laser measurement productsChina's laser measurement (mainly ranging, collimation) products market has been developing steadily. The annual salesreached 4.9868 billion yuan, up 28 percent.Market for laser devices productsThe laser devices products market achieves annual sales of 1.6456 billion yuan, an increase of 27%. The increase ofall-solid-state lasers played a major role for the growth; despite the increase in the number of semiconductor lasers, the pricestill went down; the sales amount of traditional CO 2 is roughly equal to that of 2004. Except the optical components, crystaland power increased in sales amount, other laser devices all declined with the sales amount of i 482.9 million yuan market in2005, decreased by 16.6%.Holographic products marketThe holographic products market achieved sales of 1.395 billion yuan, a slight increase over 2004. The holographicpackaging materials achieved sales of about 1.21 billion yuan; and holographic security standard products hit sales of 185million yuan.In terms of the industry development patternThere were 12 (names are arranged in random order) enterprises engaging in laser photonics industry (excludingholographic products) that the sales amount exceeded 100 million yuan. Of which there were two enterprises engaging in theproduction of optical communications, namely: the Wuhan Research Institute of Post and Telecommunications, and ShenzhenPhoton technology Co.,Ltd.; three enterprises engaging in the production of light measurement, namely: Jiangsu Shuguangphotoelectron CO., Ltd., Changzhou Laser Technology Co., Ltd. and Hubei Huazhong Photoelectric Science And TechnologyCo., Ltd.; seven enterprises engaging in laser processing production, namely: Shenzhen Han’s Laser Technology Co. Ltd.,Wuhan Chutian Laser (Group) Co., Ltd., Wuhan Huazhong Laser Engineering Co., Ltd., Wuhan Unity Laser Co.,Ltd.,Dongguan Yuming Technology Co., Ltd., Shenyang Dalu Laser Instrument Company, and Shanghai Unity Prima LaserMachinery Co., Ltd.. Among which, Wuhan Chutian laser (Group) Co., Ltd. and Wuhan Huazhong Laser Engineering Co.,Ltd.are also engaged in the production of medical equipment.In terms of market predictionIt is predicted that China's laser products market will remain strong development momentum in 2006 with the totalmarket sales of (including holographic products) 6 billion yuan. The sales amount of laser processing equipment will remainbullish; the optical communications products will continue to pick up; laser rangefinder, measurement and detectionequipment will continue to grow steadily; laser medical equipment will increase slightly; the holographic anti-label roughlyon the same level; the holographic packaging materials will increase by a fairly big margin.In the optical components market, the total output value of Phoenix Optical Co.,Ltd., Shun Yu Group, COSTAR GROUPCO.,LTD., Chengdu Bright Photoelectricity Endoscope Co., Ltd. of six enterprises accounted for 87% of the national opticalcomponents industry output. Most products are supplied to the assembly factories at home and abroad of the digital camerasand projectors manufacturers of Japan and the United States. China has now become the largest digital cameras, projectorsand other optical components production base. It is expected that the digital camera market will become saturated in the nextfew years, and the rate of growth will be slowed down significantly. The camera phones, projectors and other products will·121·

China Business Guidecontinue to maintain a steady growth momentum. The high-speed growth trend of optical cold processing products markethas been completed. The development of the industry will transfer from the high-speed growth stage to a mature and stabledevelopment. According to the prediction of international authorities, the development of optical components marketdriven by the digital products will become saturated after 2007.STN-LCD marketIn 2005, 150 million units China’s LCD TV were sold, a year-on-year increase of 379 percent, which has played a rolein promoting the development of TFT-LCD industry. In 2005, the development of color STN-LCD continued to accelerate,making remarkable headway ranging from the production scale to the quality of products. The color STN-LCD devicesproduced by Shenzhen Tianma Microelectronics Co., Ltd., Shanwei Truly Semiconductor (China) Co. Ltd., Shenzhen BydCompany Ltd. meet the demand for color mobile phone screen to a considerable degree. The low-to medium-end andblack-and-white STN-LCD and TN-LCD maintained steady growth.Supporting material marketIn 2005, five LCD materials enterprises sold 223.5 tons (180 tons of unit liquid crystals, 44.35 tons of liquid crystalmixtures) of liquid crystals, achieving the sales amount of 731 million yuan, an increase of 89.87 percent. At present, thereare three enterprises produce polaroid sheet in a large scale, namely: Wenzhou Qiaoye Economy Development Co., Ltd.,Shenzhen Shenfang Lekai polariscope Co., Ltd., Foshan Winda Opto-Electronic Co., Ltd. The annual sales of polaroid sheetwas 1.61 million square meters, up 36.4 percent; the sales amount was 149 million yuan, an increase of 46%.ITO conductive glassCurrently, there are more than 10 ITO conductive glass manufacturers. The relatively large size of which is ShenzhenNanbo Group and Shenzhen Laibao Hi-Tech Co., Ltd. The annual production of ITO glass was 6.691 million square meters,an increase of 0.54 percent; the sales amount was 948 million yuan, an increase of 8.5%.The degree of self-sufficiency of mask, backlight source, aligning agent, sealing plastic, photoresist and other relatedmaterials improved some. According to incomplete statistics, in 2005, the output of photoresist was 90 tons, the aligningagent was 1 ton, the color filter was 100 blades, the mask was 42,700 prices, and the terminal was 8.8 billion pieces. Thereare more than 13 enterprises engaging in the above products production with the annual output value of 1.3 billion Yuan. Thecolor filter production continued to develop. Following the production of color filter achieving localization of ShenzhenNanbo Group and Shenzhen Laibao Hi-Tech Co., Ltd. in 2003 and 2004, in 2005, the color filter production of Shenzhen BydCompany Ltd. was also put into operation. It should be pointed out that the domestic production of color filter products couldonly be used as matching material of CSTN till now.Semiconductor optoelectronic devicesSemiconductor optoelectronic devices include semiconductor light emitting diode (LED), semiconductor infraredemission, receivers, optocouplers, and photovoltaic device. As semiconductor light emitting diode (LED) industry hasdeveloped rapidly in recent years, it has formed the production chain and entered lighting field.The ultra-high brightness white LED offers the advantages of energy saving, environmental protection, and long life,and small volume, low drive voltage, adjustable color, and good focusing performance. Thus, with the continuous increase ofluminous intensity of LED, its scope of application has also expanded. In addition to be applied into electrical appliances anddevices, instrumentation and display equipment, the domestic LED products are primarily used in domestic large,medium-sized and small LED displays, indoor and outdoor billboards, stadium scoreboards, information displays, trafficlights, LED lamps for the special lighting and color lighting, landscape lighting, decorative lighting and LED lamps fordifferent uses of different fields.LED backlight source productsThe products are mainly used in mobile phones, PDA, large-sized monitors, color TV screens, automobile brake lights,steering lamps. automotive interior lighting, dashboard displays and other areas and have large market potential. In addition,Beijing 2008 Olympic Games and 2010 Shanghai World Expo will use the LED. It is expected that the development speed ofLED backlight source products market in 2006 will exceed the pace in 2005 with broad market development prospects innext 5-8 years.·122·

Electronics & Information【Statistics data】Table 1. 2002-2005 opto-electronic devices enterprisesYearNumber ofIncludingenterprises Front-end enterprises Post procedure enterprises Application development enterprises2002 4202003 500 50 250 2002004 500 50 250 2002005 550 40 280 230Table 2. Sales volume and sales income of opto-electronic devices in 2002-2005Year Sales volume (0.1 billion) Growth rate(%) Sales income(0.1 billion yuan) Growth rate(%)2002 150 53.0 80 109.02003 190 27.0 100 25.02004 230 21.0 120 20.02005 280 22.0 150 25.0Table 3. Major development units of high-brightness LED epitaxy and chips and industrialized enterprisesNo. Main development units Main manufacturers1 Peking University Xiamen San’an Electronic Co., Ltd.2 Tsinghua University Dalian Lumei Optoelectronics Co., Ltd.3 Semiconductor Institute of CAS Shenzhen Fangda Guoke Optronics Technical Co., Ltd.4 Nanchang University shandong Huaguang Optoelectronics Co., Ltd.5The 13th Institute of CETC (ChinaElectronics Technology Group Corporation)Shanghai Epilight Technology Co., Ltd.6 The Institute of Physics, CAS Rainbow Optoelectronics Material Shanghai Co., Ltd7 South China Normal UniversityJiangxi Lianchuang Optoelectronic Science And Technology Co.,Ltd.8 Beijing University of Technology Nanchang Xinlei Optoelectronic Science And Technology Co., Ltd.9 Shenzhen UniversityShanghai Jinqiao Dachen Optoelectronic Science And TechnologyCo., Ltd.10 Shandong University Hebei Lide Electronic Co., Ltd.11 Nanjing University Podium Photonics Ltd.12 Xi’ Shenzhen Century Epitech Co., Ltd.Table 4. Sales income and export trade of LED display screen in 2001-2005Unit: million YuanProject name 2001 2002 2003 2004 2005Industry sales income 1 600 1 900 2 400 3023 3341Including:full color screen 600 800 1100 1485 1734Industry export amount 350 500 400 453 551Including:full color screen 300 400 280 415 481Table 5. Staff engaging in LED display screen industry and composition in 2005Including:Composition (people)Total staff Management Proportion of the Scientists and Proportion of thestaff total number(%) engineers total number(%) Workers Proportion of thetotal number(%)11380 2060 18.1 3570 31.4 5750 50.5RegionTable 6. Sales and export of LED display screen in various region of China in 2005Sales income(0.1 billionyuan)Including:sales income offull color(0.1billion yuan)Including:ratio ofsales income of fullcolor to LEDdisplay screen(%)Exportvolume(0.1billion yuan)Including:exportvolume of fullcolor(0.1 billionyuan)South China 11.17 6.21 56.0 4.14 4 96.6East China 10.27 4.21 41.0 0.69 0.23 33.3North China 6.90 2.83 41.0 0.07 0.05 71.4Northeast 2.50 1.55 62.0 0.37 0.37 100.0Including:ratio ofexport volume offull color to LEDdisplay screen·123·

China Business GuideCentral China,Southwest andNorthwest2.58 1.54 59.7 0.09 0.09 100.0Type ofenterprisesDomesticenterprisesTable 7. Distribution of China’s LED display screen producing enterprisesName of enterprisesType of productsTN STN LCM TFT LCMCountry/cityBOE-Hydis TFT KoreaBOE Technology Group Co., Ltd TFT BeijingBOE Hyundai LCD Inc. LCM LCM BeijingShanghai SVA NEC Liquid Crystal Display Co. Ltd TFT ShanghaiSVA Electronics(PTY) Ltd. STN LCM ShanghaiShanghai Haijing Electronics Co., Ltd. STN LCM ShanghaiShenzhen Tianma Microelectronics Co., Ltd. STN LCM ShenzhenShanghai Tianma Microelectronics Co., Ltd. TFT ShanghaiKunshan Longteng Photoelectric co., ltd. TFT KunshanJilin North Caijing Digital Electronics Co. Ltd. TFT Changchunilin North Zijing Electronics Co. Ltd. TN STN LCM ChangchunShantou Goworld display Co., Ltd. TN STN LCM ShantouHebei Jiya Electronics Co., Ltd. TN STN LCM ShijiazhuangChangzhou Donglan Lianfa Color Display Electron Co., Ltd TN STN LCM ChangzhouAnshan Yes Optoelectronics Diaplay Co., Ltd TN STN LCM AnshanDalian Ddongfu Color Display Co., Ltd TN STN LCM DalianDalian Eastern Display Co., Ltd TN STN LCM DalianTCL Group LCM ShenzhenShenzhen Shenhui Technology Co. Ltd.TN STN LCMShenzhen Jinghua Display Apparatus Co., Ltd.TN STN LCMChangchun Lianxin Photoelectron Co., Ltd.TN STN LCMXiamen Ocular LCD Devices Co., Ltd.TN LCMNanjing Huari LiquidCrystal Display Technical Co., LtdTFTBYD Co. Ltd. STN LCM ShenzhenZhangjiagang Huaxian Photoelectric CO., LTD. TN STN LCM ZhangjiagangNanjing Guoxian Electronics Corp. Ltd. TN STN LCM NanjingNanjing Huari LiquidCrystal Display Technical Co., Ltd LCM NanjingIntelligent Electronics Company Limited LCMShenzhen Orientdisplay Co., Ltd.LCMShenzhen Hongtong Technology Co., Ltd.TN LCMChaozhou Beilei Electronics Co., Ltd.TNShenzhen Jingxun Electronics Co., Ltd.TN LCMShenzhen JINGRUITONG Industry Co., ltd.TN LCMShenzhen Success Electronics Co., Ltd.LCMShenzhen AV-DISPLAY Co.,Ltd.LCMShenzhen SunSon HI–TECH Co., Ltd.LCMANDORIN OPTOELEC TECHNOLOGY INCLCMShenzhen Jjianfei Electronic & Technical Co., Ltd.TN LCMShenzhen Weiyue Electronic & Technical Co., Ltd.TN LCMShijiazhuang Dian Guang Electronics Co., Ltd.TNQingdao Jintai Micro-electronics Co., Ltd.TN LCMDongguan Licheng Electronic Co., Ltd.TN LCMShenzhen Liandahua Liquid Crystal Display Co., Ltd. TN LCMFuzhou Hongyu Liquid Crystal Display Co., Ltd.LCMAdvanced Display Technology Co., LtdLCMDalian F.T.Z. Zijing Electronics Co., Ltd.LCMGuangdong Tonghua Electronics Co., Ltd. TN LCM GuangzhouShenzhen Solarbrite Display LimitedTNShenzhen Yingtong Liquid Crystal Display Co., Ltd. TNGME Technology co., LtdLCMDongGuan HuaDing Electronics Co.,LtdTN LCM·124·

Electronics & InformationDongguan Jiayuan Photoelecticity Co., Ltd.Fujian Jinshijie Liquid Crystal Display Technology Co., Ltd. TN LCM FuzhouJinjiang Guanghua Liquid Crystal Display Technology Co.,Ltd. TNHainan Tsinghua Display Technology Development Co., Ltd. TNChangzhou Yasong Electro-optics Tech Co., Ltd.TN STN LCOSHunan Hengxin Electronics Co., Ltd. LCN ChangshaFujian Jianwei Liquid Crystal Technology Co., Ltd.TN STN LCMCREVIEW TECHNOLOGY Co., Ltd.TN STN LCMZhaoqing Tongwei Electro-optics Display Co., Ltd. TN LCM ZhaoqingBrillant Display Technology Ltd.LCMShenzhen Aolilai Electronics Technology Co., Ltd.LCMShenzhen Flat Panel Display Industry AssociationLCMShenzhen Rifda Liquid-crystal Display Technology Co., Ltd. LCMHefei Guoyun Electronic Technology Co., Ltd. LCM HefeiShenzhen United Electronic Technology Co., Ltd.LCMShenzhen Ebulent Technologies Development Co., Ltd. LCMHong Kong-funded enterprisesTruly Semiconductors Ltd. TN STN LCM ShanweiAoshima Jiabao LCD Co., Ltd.TNSunway Electronics CompanyTNClover Display Limited.TNShunde Longgao Liquid Crystal Co., Ltd.TNClover China Display (Shenzhen) Limited.TNJiangmen Tianhua Electronic Technology Co., Ltd.TNVaritronix Pengyuan Electronics Co., Ltd.LCMVaritronix (Heyuan) Electronics Co., Ltd.LCMVaritronix (Nanling) Electronics Co., Ltd.LCMVaritronix (Shawan) Electronics Co., Ltd.LCMConhui (Huizhou) Semiconductor Ltd.TN STN LCMFujian Putian Puhui Photoelectric Science And TechnologyCo., Ltd.TN STN LCMShanghai Sunrise Electronic Technology Co.,Ltd.LCMZastron Electronic (Shenzhen) Co., Ltd.LCMJetup Electronic (Shenzhen) Co., Ltd.TN STN LCMJurong Smartech Display Co., Ltd. TN STN LCM JurongJurong Smartech Display Co., Ltd.TN STN LCMNingbo Yinzhou Helishun Electron Co., Ltd.TNELEC & ELTEK INT CO.,LTD.TN STN LCMELEC & ELTEK Display Technology (Guangzhou) Co., Ltd.K & P International Holdings Limited. TN LCM ZhongshanJiangmen Yidu Semiconductor Co., Ltd.TN LCMTaiwan-funded enterprisesNanjing Hanyu Caixin Technology Co., Ltd.LCMKunshan Lingda Optoelectronic Tech Co., Ltd.LCMUnited Win Technology LimitedLCMDongguan Wintek LCD Co., LtdLCMShanghai Yiling Optoelectronics Co ., Ltd.LCMAU Optronics (Suzhou) CorporationLCMNingbo Qimei Electronics Co., Ltd.LCMXuntong Opto-Electronics Technology Co., Ltd. LCM SuzhouTongbao Opto-electronics (Nanjing) Co., Ltd.LCMDongguan Silicon Valley Technology Co., LtdLCMGenda Microelectronics Co., Ltd LCM ShenzhenJiangsu Suzhou Guoxiang Electronics Technology Co., Ltd. LCMDongguan Jinjia Opto-Electronics Co., Ltd.TN STN LCMJinjia Opto-Electronics (Kunshan) Co., Ltd.TN STN LCMHuaying Video Communication (wujiang) Co., Ltd.LCMProview Technology (Shenzhen) Co., Ltd.LCMChuanqi Photo-Electricity (Yangzhou) Co., Ltd.LCMInnolux Display Corp.LCM·125·

China Business GuideGuanglian Technology Huizhou)Co., Ltd.Fuxiang Electronic Technology ( Dongguan ) Co., Ltd. TN STN LCMDongguan Xinlin Electronics Technology Co., Ltd.LCMDongguan Jingshi Electronics Co., Ltd.Dongguan Powertrip Technology CorporationLCMBiqiang Technology (Shenzhen) Co., Ltd.LCMJapan-funded enterprisesSuzhou Epson Co., Ltd.TN STN LCMZhangjiagang Free Trade Zone Optrex Electronics Co., Ltd. TN STN LCMWUXI Sharp Electronic Componenis Co. Ltd STN LCM LCMHitachi Display Device (Suzhou) Co., Ltd.LCMCITIZEN GroupTN STN LCMShenzhen Kerun Crystal PlantGuangzhou Panyu District Jiushuikeng Electronic Plant TN STN LCMGuangzhou Jinggong Electric Co., Ltd.TN STN LCMDongguan Qiaotou No. 2 Zhongxing Electrical ApplianceFactorySTN LCMKorea-funded enterprisesModern Hi-Tech Development Co., Ltd. (Dalian)LCMDongguan Samsung SDI Co., Ltd.LCMLG. Philips LCD (Nanjing) Co., LtdLCMSamsung Electronics Suzhou LCD Co., Ltd.LCMForeign-owned enterprises by other countriesShenzhen Philips MDS Huijia Display PlantLCMPhilips Electronic Component (Shanghai)Co., Ltd. STN LCMIDW GroupLCMMaierkete Microelectronic (Shenzhen) Co., Ltd.STN LCMIDW Technology (Shenzhen) Co., Ltd.STN LCMThree-Five Systems (Beijing) Co. LtdSTN LCMZhaoqing Xianbang Electronic Co., Ltd.STN LCMNotes:Data sources from China Optics and Optoelectronics Manufacture AssociationXIII. Development of China Aerospace Science and Technology Corporation(CASC)(I)OverviewThe development of China's aerospace industry became the focus of the world attention in 2005. CASC successfullycompleted the research and production tasks of space flight represented by “Shenzhou VI”, and promote China's aerospaceindustry to historical peak.By the end of 2005, the total assets of CASC reached 80.4 billion yuan, a year-on-year rise of 12.8 percent; the annualoutput value of state-owned and state-holding units was 16.92 billion yuan, up 19.7 percent; the industrial added value was8.81 billion yuan, an increase of 17.9%; the main business income was 31 billion yuan, an increase of 18%; among the 28industrial enterprises from the government budget, 27 of which are profit-making enterprises, and one loss-incurringenterprise. The annual profit was 350 million Yuan of breakeven industrial enterprises.Civil aerospace industryIn 2005, the sales income of state-owned and state-holding units on civil aerospace industry was 10.201 billion yuan, theoutput value of 10.851 billion yuan achieved. The main business income of the company hit 2.2 billion yuan and the grossprofit was 200 million yuan.In 2005, the company has developed the “11th Five-Year Plan” on the civil industry, established the developmentstrategy for five major fields of satellite applications, information technology, new materials and new energy, space specialtechnology applications, as well as auto parts and components and specialty vehicles. The company cooperated with localgovernments and large corporations, and signed a strategic cooperation framework agreement with Shanghai Municipal·126·

Electronics & InformationGovernment and a framework agreement for “aero-Minhang” with Minhang District; signed strategic cooperation agreementswith the Shenhua Group, China Huaneng Group (CHNG) respectively for cooperation in coal mining equipment, windgenerated electricity, coal gasification, coal desulfurization, valves and other areas; jointly established with Spain EHNBeijing CASC-Acciona and CASC-Acciona Nantong CASC Wanyuan Acciona Wind Turbine Manufacture Co., Ltd. tocooperate in the field of wind generated electricity and other new energies; and jointly set up Great Wall Airlines Co., Ltd.with Singapore Airlines Cargo and Dahlia Investments Pte Ltd, to develop business in aviation logistics.Reform and difficulty-reliefIn 2005, the company carried out the carried out the reform and adjustment and overall planning work for the FourthInstitute that which one is associated to in accordance with overall deployment of parent-subsidiary company systemconstruction, and established reform and adjustment program initially. At the same time, it also promoted the specialtyreorganization work for the specialty vehicles department of the First Institute. On this basis, the company carried out thepreparation work of overall planning for the key development and producing units engaging in military projects andfundamental units in accordance with the requirements of higher ministries.Financial management and system constructionIn 2005, the company strengthened its research on property rights system and assets management, developed and issuedProcedures Governing Registration Of State Owned Property Right in Group Enterprises, Procedures Governing AssetsEvaluation of State Owned Property Right in Group Enterprises, Management Measure on Records of Written-off Accountsin Group Enterprises, and drafted Guiding Opinions on Strengthening the Management of Property Rights in GroupEnterprises, and Measures for the Administration of Gratuitous Transfer of State-owned Property Rights of Group Enterprises.At the same time, according to the approval of State-owned Assets Supervision and Administration Commission of the StateCouncil (SASAC) on the check-up of assets and determination of funds, the company carried out analysis of the causes of thelosses, gave suggestions on improving management and system, deployed the performance monitoring and other follow-upwork for records of written-off accounts. The company strengthened budget management and implemented financial budgetapproval system for the first time to strengthen the assessment of budget analysis and budget executive audit and highlightthe tractive effort of the budget. In addition, on the basis of further liquidation of bank debt, it carried out the deploymentwork for the bank debt and made progress through multi-party coordination, as a result, two sub-companies’ debt-to-equityswap programs have been approved. At the same time, in order to support the development of civil industries, the companyactively seek amount of enterprise bonds for 2 billion Yuan issued by the State Council.Human resources and construction of talents groupIn 2005, the company formulated and issued the Measures for Administration of Investor Representative of CivilAviation Companies, revised Regulations on Management to Leaders and Cadres of Model System, and issued theImplementation Opinions of the CASC Party Leadership Group on the implementation of Talents Strategy to RaiseCompetitive Ability of Enterprise and Strengthening the Construction of Talents Group. In 2005, one staff of the companywas elected as CAS academician and one as the academician of Chinese Academy of Engineering, 53 staff got specialallowance by the government, 20 were awarded the title of “National Technical Experts”, and 12 of “Technical Experts ofNational Defense Science and Technology Industry”. It recruited 112 college graduates, of which 121 doctoral students, 1125masters and 1555 undergraduates.(II)Scientific research and productionIn 2005, CASC successfully completed the task of launching 5 rockets, 3 satellites and 1 spacecraft. It had marked the46th flight of consecutive successful launching of long march series of carrier rockets since 1996.On October 12-17, 2005, manned spacecraft Shenzhou-VI developed by the company successfully accomplished afive-day space flight by two men, marking China has stepped into the experimental stage of manned space, and indicatingChina has changed from Aerospace big country to power country. This is another important milestone in the developmenthistory of China's aerospace industry.On April 12, 2005, a communications satellite, AsiaSat-6, manufactured by French satellite manufacturer Alcatel, wassent into space atop the Long March 3B carrier rocket developed by the company. China has begun to reenter the·127·

China Business Guideinternational launch service market since 1999. In the same year, Shijian-7 (SJ-7) satellite, two recoverable satellite satellitesdeveloped by the company were successfully launched. The Shijian-7 (SJ-7) satellite operated normally in the orbit; and tworecoverable satellites were successfully recovered.In 2005, the company won one special prize for National Progress in Science and Technology, 2 second prizes forNational Progress in Science and Technology; 7 first prizes for Prize for Progress in Science for National Defense, 22 secondprizes and 41 third prizes. It also obtained 22 granted patents throughout the year, of which 10 inventions patents; applyingfor more than 190 patents, of which more than 150 patents for inventions, and the patent application amount increased 50%YoY.(III)International cooperation and foreign tradeCASC build and launch C Nigcomsat-1 Satellite and Venezuela comsat-1 for Nigeria and Venezuela respectively. It isthe first time that China provides international satellite services for the developed countries by China's carrier rockets,satellites and launch vehicle ground support system; and also the first time that China uses its own rockets and satellites tooffer rail delivery services to the international users. At the same time, China has also realized the historic breakthrough ofexport of integrated satellite.In 2005, the company (including the holding companies) achieved the total import and export of 760 million US dollars.The total export volume was 420 million US dollars, and the total amount of imports was 340 million US dollars.(IV)Application and construction of information technologyIn 2005, the company promoted AVIDM project, enhanced scientific research and production informationization;continued to expand the scope of application of the AVIDM integration framework software, and integrated with CADsoftware tools and management systems; and promoted the construction of management information system to facilitate themanagement informationization.(V)Expectations2006 is the first year that CASC fully implemented the “11th Five-Year” plan, centering on new targets, construction ofnew aerospace, making new achievements, and achieving new leaps. It is heavy and difficult to carry out the scientificresearch and production; the development of civil aerospace industry meets new opportunities and challenges; reform andadjustment and construction of parent-subsidiary company system mechanism enter a new stage. The company will ensurethe successful launch and stable operation of eight rockets and nine satellites represented by new-generation SinoSat-2satellite, promote the development and production of various categories of satellites and carrier rockets represented byChina's lunar orbiter project, and complete various key works successfully in 2006.【Statistics data】Table 1. CASC’s spaceflight launch history in 2005Carrier rocket Firingpoint Launching time Name of satellites RemarksLong March 3B Xichang 2005.04.12 AsiaSat-6 SuccessLong March 2D Jiuquan 2005.07.06 Shijian-7 (SJ-7) SuccessLong March 2C Jiuquan 2005.08.02 21st Recoverable Satellite SuccessLong March 2D Jiuquan 2005.08.29 22nd Recoverable Satellite SuccessLong March 2B Jiuquan 2005.10.12 Shenzhou-VI Success·128·

Electronics & InformationChapter IV China’s Information Building and Technical ApplicationsI. ReviewIn this chapter the information promotion of China in 2005 will be described. The year 2005 is an important year inwhich China fully accomplished the goals of the “tenth five-year plan” and connected with the development of the “eleventhfive-year plan”, and it is also a year in which the information work was promoted into a deeper level. The promotion pace ofagricultural information, city and community information, enterprise information has been accelerated, and the developmentand utilization of information resources have been widely developed.The information projects building such as golden card project, golden tax project, customs electronic law enforcementsystem and etc have made new progress. The basic work such as the formulation of information-related laws and rules as wellas standards and specifications, the building of information talent team, electronic certification service management,e-commerce promotion and application and so on have been steadily developed.II. The building of information infrastructure(I)Telecom networkIn 2005, the capacity of the national fixed long-distance telephone exchange newly added 758,000 units, reaching13.388 million units; and the capacity of the local exchange newly added 46.075 million gates, reaching 469.543 milliongates. Of it, the capacity of the access equipments newly added 35.859 million gates, reaching 208.758 million gates. Thecapacity of mobile telephone exchange newly added 85.983 million households, reaching 482.825 million households. Theactual installment rate of fixed and mobile phones reached 74.6% and 81.4% respectively. The interfaces for the Internetbroadband access newly added 12.578, reaching 48.359 million; the Internet bandwidth reached 136106M. The length of thenational optical fiber cable line newly added 531,000km, reaching 405,000km. The length of the optical fiber cable corenewly added 9,400,000 core-km, reaching 75,820,000 core-km.In 2005, the fixed phone across the country newly added 38.677 million households, reaching 350.433 millionhouseholds. Of it, wireless urban phone subscribers newly added 20.453 million households, reaching 85.327 millionhouseholds; public phone newly added 4.454 million units, reaching 26.604 million units. The mobile telephone subscribersnewly added 58.604 million households, reaching 393.428 million households. The subscribers of mobile packet data newlyadded 44.37 households, reaching 71.011 million households. The popularization rate of fixed phone main line and themobile phone popularization rate reached 27.0 unit/100 persons and 30.3 unit/100 persons respectively.In 2005, the project of access to every village has made progress. Up to November 2005, the designated tasks of Phase I,the project of access to every village implemented by the Ministry of Information Industry and six main basic telecomenterprises have overfulfilled. The project of access to every village enabled 52304 administrative villages to newly opentelephone, and the telephone access rate of the national administrative villages grew from the previous 89% to 97%, up 8percentages. The objective that 95% of administrative village can access to the phone in the tenth five-year plan of theMinistry of Post and Telecom has been achieved over a month ahead of the schedule. The project of access to every village ineach region has achieved progress. Of the 31 provinces, municipalities and autonomous regions, 11 provinces, municipalitiesand autonomous regions have realized the whole telephone access to every administrative village, and 19 provinces haveoverfulfilled the designated tasks. (The data of this section are quoted from 2005 the Development Statistics Announcement ofthe Communications Industry made by Comprehensive Planning Department of Ministry of Information Industry.)·129·

China Business Guide(II)InternetIn 2005, China’s Internet subscribers newly added 17.00 million, and the netizen reached 111 million. Of it, dial-upsubscribers reached 35.66 million, reduced 15.563 million year-on-year; the individual line subscribers reached 6.18 million,grew by 3584; the broadband access subscribers reached 37.504 million, grew by 12.629 million; of the broadband accesssubscribers, ADCL subscribers reached 26.359 million, LAN subscribers reached 9.682 million, and WLAN subscribersreached 34,000. The domain names and WWW website number grew rapidly. By the end of 2005, China’s domain name totalreached 2.592, and WWW website number reached 694,000. (Notes: The data under this section are quoted from the netizennumber and communications development statistics announcement conducted by CNNIC.)(III)Broadcasting TV networkAt present, China has over 70,000 middle-wave, short-wave, FM broadcasting and TV transmitting stations andrebroadcast stations in total, and 84MW of total transmitting power; and it hires 9 satellites and 39 transmitters to transmit 93sets of TV programs and 126 broadcasting programs, and the satellite TV receiving stations are 1.18 million; the nationalbroadcasting TV transmission trunk line totals 2.42 million km, and the CATV network realized the interconnection amongthe Central Government, provinces, districts and cities, and the transmission quality of the distribution network has beenimproved. CATV subscribers are 116 million households, and the popularization rate reaches 33%; the whole country has 500million radios, 400 million TV sets, and the broadcasting audiences are about 1.222 billion, the TV audiences 1.238 billion.The overall population coverage of broadcasting and TV reaches 94.05% and 95.29% respectively. The overall transmissioncapacity of broadcasting, film and TV has been improved dramatically.The broadcasting and TV working level in the project of access to every village has continued to improve, and the ruralbroadcasting and TV public service system has been gradually established. The year 2005 is China’s the broadcasting, filmand TV service year for the countryside”. Starting out of the actual situations and focusing on the practical efficiency, eachregion adopts various technical methods such as cable, wireless, microwave and etc and has finished the facility repair of theproject “access to every village” in 11,472 “villages with poor broadcasting TV capacity” and the building tasks of 84,043administrative villages that has newly got electric power access and the natural villages over 50 households that electricpower has available, settling the problem of enjoying broadcasting and TV for about 27 million people. At present, eachhousehold can receive at least 4 sets of TV programs and 2 sets of broadcasting programs.Te CATV digitization has been further promoted. In 2005, China promoted and popularized digital set-top box, and fullypromoted the overall switchover from cable broadcasting TV from analog to digital according to regions and stages, enablingcable digital broadcasting TV to develop into the multimedia information platform access to thousands of households. Atpresent, there are 41 cities that have launched the overall switchover of cable DTV across the country. (Notes: The data underthis section are quoted from China Information Development Report 2006.)III. The building of information laws and regulations as well as policy andenvironmentOn August 28, 2004, China’s Chairman Hu Jintao signed No. 18 order and promulgated Electronic Signature Law of thePRC (hereafter as Electronic Signature Law), which came into force from April 1, 2005. Electronic Signature Law is the firstlaw in China’s national economy and social information field, and it is the first law that has set administrative license for theelectronic certification service industry directly related to the public interests with the legal form and authorized the Ministryof Information Industry as the implementation body to conduct supervision and management to the electronic certificationservice providers since the implementation of Administrative License Law.As the implementation body of the electronic certification institutions administrative license authorized by the law, theMinistry of Information Industry formulated the Administration of Electronic Certification Service according to ElectronicSignature Law, which together with Electronic Signature Law, came into force on April 1, 2005.·130·

Electronics & InformationIn 2005, the legislature of Telecommunication Law made progress. At present, the draft has been submitted to therelevant departments of the State Council. And the revision of Postal Law and Radio Regulations are also under smoothdevelopment. The legislature of software and IC industry promotion regulations and IT application regulations has also madeprogress. The Ministry of Information Industry developed the negotiation, examination and discussion and the like related tothe WTO “post transition-stage”. The compilation of the planning such as the development layout of the information industryin the “eleventh five-year plan” period, the information layout in the eleventh five-year plan period of the national economyand social development, and the national electronic government building in the “eleventh five-year plan” period and so onhas developed smoothly.IV. The status quo of information and IT technology applicationsIn 2005, the building on agricultural and rural information, enterprise information, urban and community informationmade new progress, and the information technology was promoted and applied in the key industries and important fields ofthe national economy.(I)Agricultural and rural information buildingIn 2005, the departments involved in the agriculture including the Ministry of Information Industry, Ministry ofAgriculture and so on enhanced the support to the agricultural and rural information building. Focusing on the improvementof the agricultural comprehensive production capacity and the development of modern agriculture and with realizing thesteady grain output growth and the farmers’ sustained income growth as the goal, they developed the rural informationservice industry and achieved progress and achievements.The project of “access to every village” of the relevant telecom departments organized by the Ministry of InformationIndustry achieved stage achievements. Based on this, the Ministry of Information Industry required relevant enterprises tostep up the service content and business categories and focus on the development of practical terminals with reliable qualitythat is suited to the rural characteristics and the farmers can afford them, and encouraged them to develop various informationservices on the market, science and technology, culture, education, entertainments and so on oriented to the countryside andthe farmers so as to help the farmers get out of the poor and make good fortune.The working system of agricultural and rural information has been preliminarily established. At present, all of theagricultural administrative authorities at the provincial level across the country have set up information function institutionsand information center; 97% of districts (cities) and 80% of the county agricultural departments have set up agriculturalinformation management and service institutions; 56% of townships have set up information service stations; the informationservice staffs of the promotion team on agricultural technology, farming, agricultural machinery, operation and management,marine lives and so on spreading the counties and townships have employed, therefore, a strong information service team haspreliminarily established. The agricultural information network platform covering provinces, districts, counties and townshipshas a certain scale. The daily average reach of the national agricultural portal website with China Agricultural InformationWebsite as the core and integrating over 20 professional websites is about 2 million person-times. The informationbroadcasting system of the national agriculture website has established the information collection index system, promotedunified data standard and adopted public module method, realizing one-stop release, and the resource sharing in the wholesystem. According to the preliminary statistics, the registration users of the national release system of the rural supply anddemand information have reached 90,000 households, covering 93% of the national counties, fully promoting thedevelopment and sharing level of the agricultural system information resources.The integration, development and application of the agricultural information resources have been strengthened. Nearly40 steady information collection channels in such fields as agriculture, farming, marine lives, agricultural cultivation,agricultural machinery and so on have been formed, and the information sharing system has also been established, thus, theintegration, development and application of the agricultural information resources have been strengthened. In 2002, theinspection early warning system on the agricultural produce including wheat, corn and etc was launched, conducting timely·131·

China Business Guidethe analysis and predictions on the supply and demand trend of the domestic and overseas market. In 2003, the economicinformation release calendar of the Ministry of Agriculture system was introduced to the society, and issued the informationof various industries and sections regularly. At present, the whole nation has 40,000 leading enterprises of the agriculturalindustrialization and 170,000 rural cooperation agencies. The agricultural administrations of each province, municipality andautonomous regions have also set up agricultural information website, and 83% of the agricultural departments at the districtlevel and 45% agricultural departments at the county level have established websites. Some agency organizations, largeagricultural enterprise groups and even private-owned enterprises have founded countryside-oriented information servicewebsite with features with consideration to their own service objects and business. By the end of 2005, the websites related toagriculture had reached about 6389, and the agricultural websites registered in China agricultural information website hadreached 4372.(II)The enterprise information buildingThe laws and regulations, policies and environments of enterprise information On April 1, 2005, Electronic SignatureLaw officially came into force, and the Administration of Electronic Certification Service and the Measures for theManagement of Electronic Certification Service Cipher also come into force. The promulgation and implementation ofElectronic Signature Law and its supporting regulations not only provides legal guarantee for the e-commerce transactionamong enterprises laying the foundation for enterprise information to develop profoundly, but also lays the foundation for theestablishment of China e-commerce safety certification system and the national network trust system; meanwhile, it alsopromotes the development of e-commerce and e-government.China’s government pays great attention to the environment building for the small and medium enterprises information.Under close cooperation, NDRC, Ministry of Information Industry and the Information Office of the State Council integratedthe resources and promulgated corresponding measures and rules. For example, the activities such as the consulting andtraining, typical demonstration, hardware and software development, the promotion and introduction of good schemestargeting to the information building of small and medium enterprises have been developed so as to help the small andmedium enterprises to settle the curbing bottleneck and common problems met in the information implementation processand form and perfect the good mechanism of information building.By the end of 2005, the “enterprise information the nationwide journey” which was guided by the InformationPromotion Department of the Ministry of Information Industry and organized by China Computer World Media Group hadbeen developed in 14 regions and cities. The aim of the activity is to publicize the policies related to the small and mediumenterprise information and promote the building experience of enterprise information. In the activity, over 4000 person-timesof enterprise information staffs were trained freely.In order to promote the enterprise information, various enterprise information coordination teams set up by many relateddepartments such as local information industry office, DRC, Science Department and Information Office in Beijing,Guangdong, Jilin, Liaoning, Shandong, Shanghai, Tianjin and etc formulate layouts and promulgate the guidance advice onthe enterprise information. The teams provide guidance to various industries and fields and preferential supporting policiessuch as government subsidies, interest subsidy, and depreciation in advance and so on to the key projects. Second, the localadministrations organize such activities as competition and selection of enterprise information model, demonstration projectsand so on, and conduct various training to the enterprises’ CIO. The government’s guidance pushed the input of the enterprisesupporting fund and optimization of the enterprise information environment and promoted the extension range of theenterprise information building.The information building of large enterprises The investigation of CCW Research to China’s large enterprises showsthat if the enterprise information is divided into four stages-individual process information, internal integration information,business restructuring and mature stage-, at present, only 3.7% of the information building of the large enterprises haveentered mature stage, 17.1% business restructuring stage and 36.1% internal integration information stage and 43.1%individual process information stage. The investigation indicates that the information building of China’s large enterprisesstill has a long way to go. At present, most of the enterprise core business systems are under building and planning, and thebuilding of core business system will become the key in the information building of the large enterprises. The close·132·

Electronics & Informationintegration of advanced information technology and core business will become the key in the information building of thelarge enterprises in the following stage.Iron and steel By the end of July 2005, of China’s iron and steel industry, 21 iron and steel enterprises includingBaogang Corp, Wugang, Hengyang Steel Tube and so on have achieved stage achievements, whose total output takes 30.2%of the national steel output. According to the preliminary statistics, the output of the enterprises that have completed or areconducting information building accounts for 55.3% of the national iron and steel output, of which, 15 enterprise have annualoutput 5 million tons or above and 14 enterprises have implemented or prepare to implement the information project, taking93% of the enterprises with same size.Electrical power industry In 2005, the system office automation of the State Grid Corp of China has realizednetwork-connection operation of the whole system. The network of the four large electrical grids has been linked together insuccession, promoting the rapid development of the electrical dispatching automation. The state electrical dispatchingdatabase has been established, which will promote dramatically the channel amount and quality of the electrical griddispatching automation system, the information quality of the plants and stations, and the reliability of the equipmentoperation and etc. The office automation system has been set up in the State Grid Corp of China and its subsidiary regionalelectrical grid companies and the provincial electrical power companies. Of them, over 80% of the provincial electricalpower companies have realized single-rail operation of the OA system, fulfilling the process network of the on-line officewhole process from drafting, checking, signature, delivery to the document reception and delivery, file move, file and datamanagement and so on.The information building of small and medium enterprises While focusing on and guiding the large enterprises’information, China’s Government also attaches great attention to the support and help of the small and medium enterprises’information. At present, the number of China’s small and medium enterprises has accounted for over 99% of the nationalenterprises amount. The investigation of CCW Research shows that in 2005, the input of small and medium enterprises on theinformation building was RMB111.414B, up 17.9% year-on-year. In 2005, the purchase of business-oriented desktopsreached 5.10 million, and the sales reached RMB30.8B, up 16.2%; the e-commerce transaction amount was RMB193.87B,up 16.8%. The transaction pattern of the e-commerce body in China’s small and medium enterprises was B2B, of which, thee-commerce of the industrial information service industry dominated the transactions.Because of the complexity of China’s small and medium enterprises, the enterprise information building has variouslevels including from the local simple finance management, the information of design and development, the building ofenterprise website, the control of manufacturing process, internal network building to the resource-integrated system, and theoverall level of information is far lower than that of the large enterprises.(III)Urban information buildingIn 2005, the information technology was widely applied in various fields such as the urban management and operation,service and community, industry and economy and etc, and the urban information building was steadily developed.Network and information resources, urban management and operation The government portal websites buildinghas made new progress. The portal website building of each central department and commission and the local governments atvarious levels have made improvement on content enriching, and quality improvement and the like. By the end of 2005, thenumber of the domain names ended with GOV had reached 23,752. On October 1, 2005, the portal website of China’sCentral Government-“China Government Website” began to operate, which included 4 function areas such as governmentinformation, work service, interactive communication and applications. The building of China Government Website plays animportant role in the development of China e-government.The building of the key business system represented by the “Golden” projects has made distinguished achievements.The building of the key projects such as “Golden Shield”, “Golden Tax”, “Golden Gate Customs”, “Golden Auditing”,“Golden Finance” and so on has speeded up, and the information method plays an important part in enhancing theadministrative supervision capacity, improving the law enforcement level and so on.Service and community information building In 2005, China made profound progress in the information buildingserving the society.·133·

China Business GuideThe information building on labor and social insurance In 2005, the individual network connection of the nationallabor insurance business achieved achievement, and the network application continued to expand. By the end of September2005, 26 units at the provincial level had realized the network delivery of the monitoring data of pension insurance, whosedata delivery accounted for over 50% of the whole pension insurance participants; the monitoring on jobless registration andjobless insurance had entered the implementation stage, 14 provinces and municipalities had completed the implementationof the monitoring software, and some regions had submitted newly 700,000 data; the on-line social insurance and on-lineoccupation introduction was piloted in some regions based on the Internet. The building of social insurance card waspromoted steadily. By the end of 2005, the cardholder number of social insurance had exceeded 18 million.The information building of medical service In 2005, the scale and application effect of the network direct reportsystem of China epidemic and emergency public health incidents had approached the world-class level. The project ofemergency public health emergency command system began to launch. In order to form an emergency command system forthe national emergency public health incidents, the Ministry of Health planned the three-year building projects to buildemergency command and decision-making platforms for emergency public health incidents at the provincial level in the 31provinces, autonomous regions, municipalities directly under the jurisdiction of the Central Government as well as theXinjiang Production & Construction Group and form the backbone network for the emergency command anddecision-making of the national emergency public health incident so as to improve the decision-making and rapid responsecapacity for the emergency public health incidents.The information building of education In 2005, China’s education information infrastructure was further improved,and the education resources sharing system was preliminarily established; the network education achieved steadydevelopment. The information played an increasingly important role in improving the rural education conditions andenhancing the national quality. The modern remote education transmission network was upgraded and the capacity wasexpanded. The rural primary and high school remote education project building made stage achievements. The “collegedigital museum building project” has completed 18 college digital museums, preliminarily established the sharing system andunified sharing platform. The further development of the education network has become an important component of China’sadvanced education and life-long learning system. By the end of 2005, over 4.20 million people had register for the networkadvanced education. Since 2003, the network education scale grew by nearly 1 million people, accounting for over 15% ofthe national advanced education enrollment total. 153 network education majors were set up, covering ten large subjects andincluding various diploma education such as the associate degree with the starting point of senior high school, bachelordegree with the starting point of senior high school, the bachelor degree with the starting point of associate degree, the secondbachelor degree and etc as well as the non-diploma education.The information building of transport The information infrastructure of the transport sections continued to bestrengthened. In August 2005, the individual information website of the transport industry began to build. The networkcovered 36 transport administrations at the provincial level and 5 transport administrations of municipalities withindependent planning status (nodes of Category I) and major transport enterprises and institutions. At present, all of thetransport administrations at the provincial level had established LANs, and 17 provincial offices had built the industrialnetwork covering the three levels of province, district and county, of which, 11 provincial offices had built a video meetingsystem across the whole province.Transport Management Information System (TMIS) has been put into use. Covering the Ministry of Railways, railwaybureaus (Sub-bureaus) and major stations and sections, TMIS has built over 10 application systems supporting the railwaytransport such as freight transport marketing, freight bill, train list information after departure, dispatching, stations, centralsystem and so on, set up three platforms including network, information safety and operation maintenance, and establishedthe ministry and railway bureau transport information database, realizing preliminarily the dynamic tracking of the largenodes such as trains, locomotives, vehicles, containers and freight.The information building of travel In 2005, China travel system built the guide network management system, whichwas the first nationwide smart card business management application system. In 2005, the travel star competition and checksystem and the travel agency operation monthly report system were put into operation, the dynamic operation of nearly10,000 travel hotels and over 10,000 travel agencies realized the regular collection, which integrated various travel andentertainment information including the stadiums, theatres and cinemas, scenic spots environment, accommodation, safety,metrology and so on, and improved the capacity of serving the public.·134·

Electronics & InformationIn 2005, China also achieved profound progress in the e-commerce and financial information building.E-commerce In 2005, based on the sustained promotion of the enterprise information building, China implemented thee-commerce project, and carried out a batch of e-commerce projects including “the fully playing the driving function of thebackbone enterprises especially the large and medium enterprises in the purchase and sales, and guiding the enterprises tobuild e-commerce” project and the “key industry and partial district e-commerce demonstration pilot”.On April 1, 2005, Electronic Signature Law and the Administration of Electronic Certification Service came into force.By the end of 2005, 17 electronic certification service institutions had passed the examination of the Ministry of InformationIndustry, and got the licenses. These certification institutions accumulatively issued 2.60 million electronic signature licenses,which were applied in on-line tax collection, industrial and commercial management, organization agency code management,community service, biding and purchase, e-banking, enterprise supply chain management, e-commerce platform and so on,promoting the development of e-commerce.The information building of finance On June 27, 2005, large amount payment system was promoted in the wholecountry, which indicated that China’s modern payment and settlement system was basically established. At present, the largeamount payment system was directly linked to over 1500 financial institutions, involving in over 60,000 sub-bank institutions.The system handles over 450,000 cross-bank payment business per day, and the amount reaches RMB700B. The creditsystem building has made important progress. By the end of August, 2005, the credit registration consultancy system of Bankof China recorded 4.47 million enterprises, RMB17400B of the balance, taking 93% of the loan balance of the nationalfinancial institutions. By the end of 2005, the Internet inquiry of all the commercial banks in the four provinces andmunicipalities including Shanghai, Tianjin, Zhejiang, and Fujian had been realized. It is estimated that the nationwideInternet inquiry can be realized in the first half of 2006. By the end of October 2005, the personal credit system totallycollected 35.22 million persons of personal loan and credit card information, and the account total is 48.46 million. Thesystem recorded RMB2100B of credit balance, taking 98.2% of the personal consumption credit balance in the nationalfinancial institutions. The commercial banks have opened 47000 inquiry user terminals in the sub-institutions across thecountry. The bank card industry has been developed rapidly. By the end of September 2005, there had been 117 card issuinginstitutions in the country, and 917 million cards were issued in total. (Notes: The above data are quoted from ChinaInformation Development Report 2006.)V. The contributions of China’s information industry to the information developmentIn 2005, the information industry kept the sustained rapid healthy development; the development goals of the tenthfive-year plan was fully accomplished, making great contributions to the economic and social development and theinformation building.(I)Electronic information product manufacturing industryIn 2005, the economic operation of China’s electronic information industry was in good conditions. It realizedRMB3841.1B of sales income in the whole year, up 24.8% year-on-year, of which, software and system integration realizedRMB390B of sales income, up 40.3%; the industrial growth value was RMB670.1B, up 29.0%; the profit tax wasRMB174.2B, up 6.5%; and the import and export trade volume was USD488.7B, up 25.8%.The restructuring of the industrial structure achieved distinguished achievements. The output of some product such ascomputers, mobile phones, color TV sets and etc ranked the first in the world, and the new-generation AV products,communication network equipments, new display components have become the new economic growth points. The largecompany strategy has made distinguished progress, and there 22 enterprises with sales income over RMB10B. The nationalelectronic information industrial base and industrial park building has been steadily developed; the industrial aggregationeffect was reflected. The sales income, industrial growth value, profit total and employment number of the Pearl River Delta,Changjiang Delta, and Bohai Rim Region take over 70% of the overall industry.(II)Software industry·135·

China Business GuideIn 2005, China’s software industry continued keeping rapid development trend, and the industrial scale expanded dayafter day; the software export steadily grew and the industrial structure and the industrial layout were restructured, which hadbecome the important force to push the rapid growth of the overall electronic information industry.In 2005, China’s software industry accumulatively accomplished RMB390B of sales income, up 40.3% year-on-year,which was 15.5% higher than the sales income growth of the electronic information manufacturing industry, thus, it was stillone of the fields with fastest growth in the electronic information industry. during the ten five-year plan from 2001 to 2005,the average growth speed of the software industry exceeded 40%, and the scale added over 4 times, and the percentage in theelectronic information industry grew from 6.3% in the year 2001 to 11.2% in the year 2005, which played a vital in thecontinual improvement of the whole electronic information industry structure.By the end of September 2005, a total of 1713 enterprises had achieved the qualification certification of systemintegrator in the whole country, of which, 71 were Class I, 315 Class II. By the end of October 2005, a total of 12715software enterprises were certified across the country, and 29204 software products were registered. Among the top 100enterprises in China’s software industry, there were 25 enterprises with sales income over RMB1B in 2005. The Top 100software enterprises selected in the year 2004 had sales income over RMB100B in the year 2005, up 16.4%; the exportvolume reached USD1.59B, taking 45% of the software industry export total.In 2005, China’s software export scale continued to expand, but the growth speed was slowed down. It fulfilled thesoftware export total of USD2.59B, up 28.2%, and the growth rate was 11.8% lower than that in the last year, and it was also1% lower than the export growth rate of the electronic information manufacturing.In 2005, the software industrial base was under good development. It played a demonstration and driving role in theR&D and introduction of new software technology, the innovation and development of new software products, theacceleration of the software achievements transformation and the promotion of the software export and so on.(III)Communications industryIn 2005, the investment on the fixed assets in the communications industry accomplished RMB207.13B, slightly lowerthan the investment scale in the year 2004. While the investment was reduced, the overall industrial benefit was graduallyimproved.In 2005, the communication business total was fulfilled RMB1200B, up 25%; the communication business income wasfulfilled RMB638.0B, up 11%; the investment on fixed assets in the communications industry accomplished RMB210.0B.The telephone subscribers newly added 103 million households, reaching 750 million households. Of it, the fixed telephonesubscribers were 360 million households, and the mobile phone subscribers were 390 million households. The main linepopulation of fixed telephones and the popularization of mobile phones reached 27.0 line/100 persons and 30.3 line/100persons respectively. The implementation of the “access to every village” project achieved stage achievements, and theaccumulative investment was RMB15.9B, and 52,800 administrative villages newly opened telephone.While speeding up the development, the telecom industry attached great attention to the legal rights of the consumers. Itformulated service standard and criteria, which settled some hot problems with strong social complaints. The overall servicelevel was improved dramatically (The data in the section are ones that reflect the production operation in 2005, and all ofthem are briefing data.).(IV)The technical innovation made progressThe industrial policies including Document No. 18 were well carried out, and the management rule of the IC R&D fundwas promulgated, which created good environment for the development of the software and IC industry. The “China chipproject” achieved achievements, and the IC design level reached 1.03 micron. The R&D and industrialization of CPU,Chinese Linux, 3G mobile communications, Trunking communications, and DTV and so on achieved distinguished results.Batches of technology and products with independent intellectual property have sprung up, and the gap with the world-classtechnology was gradually shrunk.·136·

Electronics & InformationChapter V Technological ProgressSection I Review of the Information Technology of the Ministry of InformationIndustryI. ReviewIn the five years from 2001 to 2005, a number of technical alliances with production, research and development as awhole were established; many industry-oriented public R&D and testing environments were formed; and the technicalfundamental fields such as technical standard, technological information, intellectual property, quality supervision, metrology,achievement transformation and IT application and etc went into a new stage in the development course of China’sinformation industry. In the 10th “five-year plan” period, 368 national standards and 647 industry standards in theinformation industry were issued; over 930 articles were submitted to the international standard organizations such as ITU,IEC / ISO and etc; 17 metrological verification regulations/calibration regulations were issued, and 150 metrological standarddevices were newly built; 5316 technological achievements authentication were finished, and 28 key technical inventions ofthe information industry were selected. According to the statistics of the State Intellectual Property Bureau, 227,711 inventionand practical new patents in the information industry were applied for in China, of which 160,591 were invention patents.II. Key tasks in the year 2005(I)strengthen technological policy making and planning guidanceCompiling the Eleventh “Five-Year-Plan” of the Technological Development in the Information Industry and theLong-Term and Medium-Term Layout of the Year 2020 (Outline)The goal is to grasp the long-term and medium-term development trend of information technology, and providescientific guidance to the technological development and scientific research and development of the information industry, i.e.,to provide strong technical supports for China's information industry development and the implementation of the strategy onthe mutual promotion of information and industrialization.On May 18, 2004, the Ministry of Information Industry organized a compilation planning meeting. Vice-minister LouQinjian attended the meeting and expounded the new features of the technological planning of China’s information industryin the new era and the significance of the good implementation of the work, and proposed the requirements on thetechnological development planning of the information industry. In September 2004, the strategic research work wasofficially launched; and after more than eight-month endeavors, up to April 2005, the experts have completed 26 researchreports and asked the opinions of the strategic guidance team and conducted modification. Based on it, the “planning outline”draft for comments was formed and the revision and improvement were conducted according to the feedback opinions. Itwould be issued in 2006.Researching and making related technological policiesA number of research and policies were conducted including the research on the issues in the development strategy ofchina’s satellite communications, the research on the next-generation network system frame and related issues, the overallresearch on home network, the overall development strategy of radio frequency identification (RFID) and sensor networks,the countermeasures and advice research on speeding up China’s IC R&D and industrialization, the research on the set-cardseparation technology of digital TV, the research on the laser disc technological development, the implementation scheme andguidance advice on the national and regional logistics information platform and etc.Developing soft scientific research·137·

China Business GuideA total of 139 plans on soft scientific research were developed including the organization of 2005 communications softscientific research plan program, the examination of the soft scientific programs declared by the TelecommunicationsResearch Institute and National Radio Monitoring Center, the research on the implementation of the development strategy ofhow to support the development of manufacturing industry and the broad band wireless access, the research on thedevelopment strategy of mobile video business, IPTV development strategy research, the research on the strategy of thecombined development of China’s fixed communications network and mobile communications network, the discussion onthe FTHH, home network and integrating the three networks including telephone network, computer network and VATVnetwork, the all-optical core network, the research on the development strategy, tactics and management policy of China’sInternet and etc.(II)Strengthening technical innovation, and fully promoting the industrial core competitivepower Organizing the related domestic units to conduct the research and development of homemadehigh-performance 64-bit CPUIn accordance with the guiding ideology of “market-oriented, demand driven, overall planning, leaping and innovation”and the basic ideas of “government’s guidance, enterprises’ participation, implementation step by step, and attaching greatimportance to intellectual property”, the overall technical scheme was confirmed, and industry alliances were established; atthe same time, international cooperation and communications were developed so as to shorten the research and developmenttime.Promoting the research and development of 3G mobile communications TD-SCDMA technical standard and theindustrialization stepThe corporate technical R&D center building was strengthened and the innovation on system and mechanism werepromoted so as to improve the corporate independent development capacity via the R&D input growth of the enterprisesdriven by the government’s investment. Currently, some well-known domestic enterprises such as Datang, Huawei, ZTECorporation, Putian and so on have already possessed hundreds of patents related to TD-SCDMA, forming a coreTD-SCDMA patents group, some of which have achieved the patent protection of many countries and regions including theUnited States, Japan and so on. As an important bargaining chip, these patents play a supporting role in the ongoingnegotiation of 3G mobile communications intellectual property. At the same time, the industrialization of systems, chips,terminals, instruments and software and etc has achieved a breakthrough and a complete TD-SCDMA industry chain hasbeen established, laying a solid foundation for the follow-up development of TD-SCDMA technology.–the experience and patterns of TD-SCDMA:At present, the conflict that China's high-tech industries are large but not strong is still very prominent. The trend of theinternationalization of domestic competition and the localization of international competition, the lack of intellectual propertyand technical standards, and the weakness of innovative capacity and the shortage of innovation environment have becomethe bottleneck that restricts the development of the high-tech industry. If this situation persists, China's new high-techindustries will lose their core competitive power and be in the disadvantageous position in the international industrial division,and reduce to the low-end element market and the “workshop” of the MNCs, which will affect directly the national economicrestructuring and sustainable development capability and threat the competitive power.The development of China's mobile communications industry has long been subject to other countries, and TD-SCDMAprovides an extraordinarily excellent development opportunity for China’s enterprises to improve their innovation capacity.TD-SCDMA is the first time in the history for Chinese to dominate and push the industry development by the internationalstandard proposed by its own, and it is also an important practice on the road ofChina's independent innovation and animportant breakthrough in China’s communications standard field, which will play a key role for China to change thebackward situation of its mobile communications industry and improve the commercialization of mobile communicationsindustry, laying a solid foundation for the evolution of the follow-up standard and technology of mobile communications.In recent years, owing to the strong governmental support the joint endeavors of domestic and international enterprises,the R&D and industrialization of TD-SCDMA have achieved a breakthrough: the TD-SCDMA core network, base stations,·138·

Electronics & Informationterminals and various supporting product series of chips have been initially formed, and a relatively complete industry chainhas been built, which effectively promoted the maturity and commercialization of the TD-SCDMA products. As an importantpractice and attempt for China in the independent innovation field, TD-SCDMA has achieved significant achievements inpushing enterprises to become truly innovative entities. A number of enterprises have come to the front stage in the standardand core technical innovation and developed into the main entity in China’s high-tech innovation field, which effectivelyguarantee the close integration of technical innovation and industrial development. The success of TD-SCDMA standard andindustrialization provides an positive and beneficial exploration for the independent innovation and enhancing the industrialcompetitive power of China’s other industries, and possesses important referential meaning for other fields to carry outinnovative strategy.a. Guided by the government with the enterprises as the main entity, an independent innovation road that integrates“government, product, learning, research and investment” has been explored.The government played a leading role in the standard innovation and industrialization process of TD-SCDMA andcreated good macro-environment for the development of TD-SCDMA via 3G frequency planning, program guidance and theinitiation of special fund industrialization. And the promotion of TD-SCDMA industrialization was accomplished under thecommon concern and endeavors of NDRC, the State Ministry of Science and Technology, Ministry of Information Industry,as well as leaders at all levels. Under the unified organization and coordination of the Government, the enterprises fullyplayed the main role and implemented the independent innovation via confirming benefits and responsibilities. Other sectorsincluding academia, research institutions as well as the capital party also joined in the standard innovation andindustrialization process of TD-SCDMA. It is because the close integration of the above parties that the standard innovationand industrialization process of TD-SCDMA has been ensured to develop rapidly. Obviously, the support and guidance of thegovernment is the ultimate guarantee to promote the industrialization of TD-SCDMA. Focusing on the industrializationprograms, the establishment of the development and the industrialization system with enterprises as the main body is the rootto realize the project industrialization.b. Good organization form and mechanism must be established to provide guaranteeIt is the key to enhance the organization and coordination and form effective guarantee mechanism in the promotion ofTD-SCDMA development. The TD-SCDMA Industry Alliance and Technical Forum have been set up under the joint effortsof NDRC, the State Ministry of Science and Technology and the Ministry of Information Industry (the three ministries orcommissions). Ministry of Information Industry actively organizes and coordinates the members of the industry alliance aswell as every links of the industry chain to form resultant force; develops technical communications and publicity promotionby means of TD-SCDMA Forum; and establishes an expert team of TD-SCDMA technology to take charge of the technicalstandards research and technical test work.c. Promoting the alliance development and building a complete industry chainSince the mobile communications industry is a huge system project involved in standards, patents, technology, productsand application, it is difficult for any enterprise to accomplish industrialization by itself. In order to accomplish theindustrialization, it is a must to build a complete industry chain and form industrial groups, meanwhile, to utilize theadvantage of each link and each enterprise in the groups and realize the resource share. Only in this way can the layout ofrapid development be formed. Therefore, the TD-SCDMA Industry Alliance was set up under the support of the Government.The alliance conducted many common technologies and standard development such as standard improvement, standardconsistency and code development, business research and planning, testing specifications formulation and etc in the way ofworking groups and created conditions for the interconnection and mutual communication. In addition, the complete systemand industry chain including access network, smart antennas, core network, terminals, terminal chips, testing environmenthave been gradually established and perfected, the protecting the healthy and orderly development of the TD-SCDMAindustry.d. Realizing the share of patent technology and lowering the entrance threshold for enterprisesThe alliance has developed a principle of intellectual property sharing and achieved the mutual approval and transfer ofcore technology and platforms, which have effectively settled the issues occurred in the industrial development such as·139·

China Business Guidemutual technology and the building of testing platforms and etc, lowering greatly the entrance threshold of enterprises andattracting more enterprises to enter the TD-SCDMA industry development field.e. Promoting the cooperation and matching of enterprises and creating the development patterns of industry chainsIt is a bold attempt to build open labs via parallel development pattern. Generally, the relationship of the upper and thelower reaches of industry chains is serial, in the R&D and overall industrialization process of TD-SCDMA, however, theparallel development pattern was creatively adopted to remove the barriers for enterprises and the building of fully open labsenhanced the close cooperation of the system and chips, the chips and terminals, the terminals and system, dramaticallyspeeding up the overall process of TD-SCDMA industrialization.f. Under the guidance of the expert team and the support of the operators, the network tests are jointly organized toaccelerate the maturity of productsIn order to verify the system technology and accomplish the network performance test, the government activelyorganized the six major domestic operators to positively provide the network test environment for TD-SCDMA networktechnology tests and the CATR to furnish the indoor testing conditions and also established an expert team technical fortechnical testing. The government fully mobilized the positivity of the experts to insist on science and strictly conduct eachtest and verification. The technical characteristics of TD-SCDMA were validated, which showed that TD-SCDMA hadpossessed the capacity to organize independently large-scale cellular network, and promoted the technical perfection andmore matured products.g. Promoting actively international enterprises to enter the product development field, and driving TD-SCDMA to go tothe worldWith the increased Government's support for the TD-SCDMA industry, the industry chain has been built more and morecomplete. The government actively has promoted MNCs to enter the TD-SCDMA industry field, which has laid a foundationfor the global application of TD-SCDMA and created conditions for China’s enterprises going to the world in the future viasuch ways as government guidance, the technical communication and cooperation of enterprises and so on.Actively developing the digital trunking technical tests and standard formulation, and promoting the maturity of thedigital trunking technology independently developed by China’s domestic forces and speeding up the pace ofindustrializationIn 2005, the GOTA digital trunking system developed by ZTE Corporation and the GT800 digital trunking systemdeveloped by Shenzhen Huawei Technologies Co., Ltd. passed the technical authentication and achieved active applicationpromotion. The GOTA of Shenzhen Huawei Technologies Co., Ltd. successfully finished the trunking communications oflarge-scale activities and emergency incident scheduling in the "10th National Games" this year. Currently, GuangdongProvincial Information Industry Department is actively promoting the application of GOTA and GT800 in the wholeprovince.In order to tie with the research and development of the domestic IC and operating system and with the consideration ofthe situation that the complete development capacity of home-made software and hardware industry is very weak, the “theresearch and development as well as the demonstration and application of the public information platform based onhome-made software and hardware” project under the state technological key plan during the period of the “tenthfive-year-plan” has been put forward and implementedThe implementation of the project will optimize the supporting level of China’s home-made software and hardware,extend the application range of the home-made software and hardware, and improve the technical level an industrializationcapacity of the home-made software and hardware.Organizing relevant experts and units to put forward the implementation advice on “the domestic automobile computingplatform project” and accomplish the feasibility report of the special project via wide investigation and researchThe Report on the Implementation of the National Automobile Computing Platform Project issued by NDRC (NDRCHigh-tech No. 466, 2005) and the automobile computing platform project supplemented in the Key Special Projects in theNational Long and Medium-Term Technological Development Plan issued by the national Ministry of Science andTechnology provide strong information technical support and guarantee for the upgrading of automobile, a traditionalindustry.·140·

Electronics & InformationIn addition, as for such aspects as digital TV, audio video coding standard (AVS and etc), logistics (RFID), IPTV,semiconductor illumination, two-dimension bar code and so on,the government strengthened the technical and policyguidance for independent innovation to promote the technical development and improve the competitive power.(III)Accelerating the implementation of standard strategy and developing well the standardresearch and formulationFocusing on the key and popular products with promoting the industry development as the top priorityFocusing on the key technical fields such as digital audio and video, digital TV terminal equipments, the sharingcollaborative service of information equipment resource, home network, new displays, Chinese information processing, newcomponents and etc and the market spotlights including new-generation high-density digital video disc system, tax-controlledPOS machines, Tibetan coded character set, solar photovoltaic system and so on, the research and formulation of technicalstandard were conducted and a large number of industrial standards and national standards were issued in time, whichsupported powerfully the relevant industrial policies and technical policies and played a pioneer role in the independentinnovation of standards.At the same time, in order to comply with the laws and regulationspromulgated by the state and relevant departments,the research and formulation of the standards in resource saving and comprehensive utilization, the pollution control ofelectronic products, and green energy were launched timely, which provided a good technical basis for technical laws andregulations and reflected substantially the role and status of the standardization of the electronic information industry in thenational economic and social development.On key technical standard projects, a number of research and formulation on the key technical standard projects in theelectronic information industry have been fully completed including satellite positioning systems, the IP core of IC, Chineseinformation processing, LINUX, broadband wireless IP technology, enterprise information, high-definition flat-panel displaytechnology, software projects and etc. These projects have prominent characteristics in such aspects as the system planning,close to the industry, regulating the market, guiding projects, promoting the industrialization process, increasing theinternationalization of technical standards and etc and play an important promoting role in the standardization of electronicinformation industry and the development of related industries.On this basis, focusing on the mechanism innovation, the standardization of electronic information industry in 2005positively and steadily explored and exercised the new mechanism with CESA as the main framework and including theworking system of electronic standard formulation and revision and the organization management system, and achieved stageachievements.On the international standardization, the “going outward” move with promoting the WAPI international standardproposal as the key symbol achieved strong response in the formulation of international standards. The proposals such asflat-panel display technology, RF connector and Chinese Information Processing Standards have been officially adopted bythe international standardization organization. The Facts have proved that China's electronic information technologystandards has preliminarily established an international standardization working pattern with the synchronous development ofdomestic and abroad, progress in various fields, multi-channel communication, and multi-level cooperation and the standardsformulated by itself are being accepted and adopted by more and more countries and attracting the attention of the world.Having organized and completed a number of research reports on standardsThe following subjects have been completed: the Research on the Develop Strategy of China’s Technical Standard-theResearch Report on Development Strategy of China’s Communications Technical Standards, the Research on the DevelopStrategy of China’s Technical Standard-the Research Report on Development Strategy of China’s Electronic TechnicalStandards, the Research on the building of China’s Technical Standard System-the Research Report on China’s ElectronicTechnical Standard System and the Research on the building of China’s Technical Standard System-the Research Report onChina’s Communications Technical Standard System and etc.Guiding and supporting the powerful domestic enterprises to formulated standards in an open way and activelyparticipate and promote the research and formulation of international standards·141·

China Business GuideFor WAPI, the difficult promotion process of two-year WAPI international proposal not only underlines China’sdetermination to insist on independent innovation, safeguard national information security, and unyieldingly build theelectronic power on the electronic information industry standardization work, but also plays the strongest voice of China’selectronic information industry to participate in substantially the international standardization. The coordination meeting ofWAPI international standards held in Geneva, the ISO headquarters in 2005, has a landmark meaning in the promotion courseof the proposal. Standing at the highest stance of the national interest and upholding forcefully the flag of independentinnovation, China’s delegation knew well the international standardization rules and used them strategically. The meetingre-established legitimate status of our proposal and eventually pushed officially the WAPI international standard proposal intorapid procedure voting stage, which is the first case to enter independent voting stage in the ISO/IEC LAN standard fieldmonopolized and controlled by the United States Association of Electrical and Electronic Engineers so far.Focusing on the key national technical development and industrialization special projects, industry development, markethot spot, the connection of the communications network, network service quality, market supervision demand andagricultural information, developing the research and formulation of information industry standardsThe five key technical standards, i.e., the Research on the Key Technical Standard of 3G Mobile Communications, theResearch on Automatic Switched Optical Networks and Broadband IP Technology, the Research on the Series Standards ofthe Communications Platform for Distance Learning, the Research on the Technical Standard of ENUM and “IP over SDHtributary” , the Research on the Key Technical Standards of Wireless LAN and Broadband Wireless IP Network (WirelessLAN Section) have been accomplished; the draft for comments of the Rural VSAT Satellite CommunicationsNetwork/System and Technical Requirements has been finished; “the broadband wireless mobile communications technicalexpert team” was prepared to establish, which will promote the R&D and the standardization of China’s broadband wirelessmobile communications technology and improve China’s independent innovation capacity in the wireless communicationsfield via organizing and developing the research on the technology and development strategy of broadband wireless mobilecommunications; a subject team focusing on “home network overall research” was set up to conduct comprehensive andintegrated research on “home network”; the research and formulation of the IPTV and relevant standards have beendeveloped; the standard formulation and system research on digital TV has been accelerated; the GPS standardization hasbeen steadily developed; the LINUX Application Programming Interface (API) Specification has been completed; theendeavors to promote China’s WAPI technical mechanism to become international standard has been made; and the researchand formulation on semiconductor illumination standards has been organized and developed.Strengthening the cooperation on electronic information industry standards with Taiwan Province, ChinaUnder the deployment of Taiwan Affairs Office of the State Council and Taiwan Affairs Office of the Ministry ofInformation Industry, “the Cross-Strait Technical Standard Forum of the Information Industry” was successfully held jointlyby Chinese Electronics Standardization Association, China Communications Standards Association and Taiwan SINOCONIndustrial Standards Foundation, which built a platform and bridge for cross-strait information standardization cooperationand achieved substantial progress in the cooperation in the following four technical fields: flat panel display technology,TD-SCDMA, digital AV coding and decoding technique and mobile memory. On the basis of the existed cooperation in thefields such as flat panel display technique, mobile memory and digital AV coding and decoding technology, ChineseElectronics Standardization Association organized the mainland enterprises to conduct technical standard communication andcooperation in the two newly set fields, i.e., “green batteries” (including solar cells and lithium ion batteries) and“semiconductor illumination technology”. The 2nd Cross-Strait Technical Standard Forum of the Information Industry isunder earnest preparations to promote the technical standard communication and cooperation of the cross-strait informationindustry.Standards issue50 national standards were submitted, of which, 10 were about communications and 40 about electronics. 101 standardsof the communications industry were issued, of which, 2 were communications technical regulations and 2 were referentialtechnical documents for communications standards. 24 standards of the electronic industry were issued, of which, 19 werethe standards for the electronic industry.·142·

Electronics & Information(IV)Speeding up the implementation of intellectual property strategy, attaching more attentionto the intellectual property issuesWith the intellectual property strategy as the guidance, “the research on the intellectual property issues in theinformation industry field” was fully developed, and the mechanism innovation on intellectual property was enhanced; thedomestic enterprises were guided to attach more attention to intellectual property and encouraged and supported to developindependent technical innovation and expand the intellectual property quantity while improving the patent awareness. Thespecial research on “the early warning mechanism and system building for the intellectual property of the informationindustry” was developed so as to establish gradually the early warning mechanism and system for the intellectual property ofthe information industry. The selection of key technical inventions in the information industry was successfully completed,and 9 key technical inventions of the information industry in 2005 were selected. The key tasks such as the conference on thepatent trend release in the information industry were smoothly conducted.(V)Intensify the supervision according to laws, and creating a fair and just, effective andorderly market environmentIn accordance with the Laws on Administrative Licensing requirements, the management to the communicationselectronic quality examination and metrological institutions of the Ministry was normalized. We organized and participated inthe supervision on the metrological authentication and the inspections of expanded items to 15 communications electronicquality examination institutions, and established a database for the quality inspection institutions management.We compiled the Common Specifications of Cablecasting Receiver Card in the Long-Distance Modern Education Pilotfor the National Party Members and Cadres in Rural Areas jointly with the Ministry of Education and State Administration ofRadio, Film and Television, accomplished the upgrading of standard conformance testing to such products as special receivercard and etc and the recommended equipment directory of terminal reception stations, and formulated the authenticationManagement Rule for the Standard Conformance of the Information Products.In order to promote the software process improvement and evaluation, we issued the Evaluation and Management Rulefor Software Process and Maturity jointly with the State Regulatory Commission of Certification and Accreditation in March2005 and proposed the work plan to establish the registration system for software evaluation staffs. We also studied the issuesin the information security product certification and information security management system certification (1 SO/IECl7799),and launched the rule formulation for 12 project working teams while establishing the national information security productcertification management system jointly with relevant departments and commissions.The quality supervision and pot checks and the manufacturing license monitoring of electronic information productswere well developed. The report on the quality supervision and spot checks to 233 product industries of 221 enterprises in2004 and the special quality supervision and spot checks to 41-type mobile telephones of 36 manufacturers in 2005 hasfinished. The manufacturing qualifications management of tax-controlled POS machines has been enhanced, and theexaminations of manufacturing license and product testing to 82 enterprises with qualifications have been accomplished.The quality development layout of the “eleventh five-year-plan” has been organized and compiled. The guiding ideologyand development goals of the layout have been put forward, and the special content of the layout outline has been established.In 2005, we continued organizing communications authority, quality inspection institutions and operating enterprises todevelop the charging testing of fixed network. A total of over 7000 fixed switches have been tested, and over 20 provincesand cities across the country has accomplished or basically accomplished the charging testing of fixed network. The chargingtesting of mobile network has been developed, the mobile network testing in Beijing has been fully completed, and themobile testing in the whole country is on-going. The charging testing specifications of such businesses as short message,smart network and so on is in busy research and formulation, which will lay a foundation to further deepen the chargingtesting of telecom business. The management rule of telecom charging testing has collected comments for many times, and itwill be issued as soon as possible so as to normalize the related testing issues.The government coordinated the national meteorological units to carry out the supervision function of the Ministry ofInformation Industry to the lightning protection of communications system. The Inspection and Implementation Rule of·143·

China Business GuideLightning-Proof Products Conformance in the Communications Industry, the Regular Inspection Rule of the LightningSystem in Use on the Communications Network, the Report Management Rule of the Lightning Disaster Investigation andConfirmation of the Communications Network and related technical standards have been completed, which created favorableconditions for the full implementation of the supervision system and the establishment of supervision system.(VI)Developing actively international technological communication and cooperationCombining with the implementation of technical innovation, standard strategy and intellectual property strategy in thekey fields, the international technological cooperation communication has been developed. The government continuesdeveloping well the research on the international organizations such as ITU, ISO, IEC, AIC and etc and actively participatedin the research and formulation of international standards to further improve the status of our country in the formulation ofinternational standards. In 2005, the Ministry of Information Industry submitted 416 articles to ITU, exceeding greatly that in2004. The experts sent by China has undertaken a lot of organization tasks and played a role conforming to a large power.The five international standard proposals, i.e., Flat Panel Display, RF Connector, the Software and etc have been submittedto ISC/IEC. In 2005, 904 ISO/IEC standard documents were developed, and the response rate reached 99%. The internationalstandard proposal of WAPI safeguarded China’s sovereignty and interest.The communication and cooperation of Sino-America, Sino-Europe, Sino-France, Sino-Japan-Korea and etc under themultilateral and bilateral cooperation system framework has been developed. The government organized the Sino-Americaninformation technical standard and quality evaluation workshop, conducted the inspection on intellectual property to the USAand attended the 3G and RFID work team meeting among China, Japan and Korea, the Sino-European information societydialogue work team meeting, and the meeting of Sino-French information communications cooperation joint commission andso on.III. Key Tasks in the year 2006With independent innovation and improving the core technical competitive power of the information industry as thestrategic objective, and choosing the two directions, i.e., the development bottleneck and key applications, the governmentshould step up the implementation of standard strategy and intellectual property and achieve gradually the overalltechnological breakthrough and frog-leap development of our information industry so as to transform the industry from largeto strong.A market-oriented technical innovation system with the enterprise as the main body, applications as the main thread andintegrating “politics, production, learning, research and capital” should be established.The system environment such as laws, regulations and etc needed in the technical innovation of information industryshould be established and completed, and an institutional guarantee for independent innovation should be provided.Attaching importance to the basic research and cutting-edge technology, the original innovation and re-innovation basedon the introduction and digestion should be enhanced.With application as the orientation, the integrated innovation with software, network and system as the center should beaccelerated.Focusing on the strategic demand, the government should break the key bottleneck curbing the development and achievestage breakthrough on the R&D, and production of IC, software and key components to master a batch of key technologiesand a batch of core patents and standards. With the key applications as the orientation, the government should realize thetechnical breakthrough in key fields. Attaching importance to the market demand, the government should focus on thenational information building and key applications and build well the network infrastructure of information communicationsand the key equipments for electronic information to push the breakthrough of core technologies and key products in theimportant fields.Work emphasis in details·144·

Electronics & Information1.Strengthening policy formulation and planning guidanceThe Eleventh “Five-Year-Plan” of the Technological Development in the Information Industry and the Long-Term andMedium-Term Layout of the Year 2020 (Outline) should be publicized and implemented. The regulations and administrationsystems that can enhance the technological progress of the information industry should be studied and formulated. Thepreferential policies needed by the development of the key special projects in the “eleventh five-year-plan” should be furthercompleted and carried out, and the policies that encourage the development of newly rising technologies should beformulated. The system restructuring on the input for information technology innovation should be deepened, ad theguarantee mechanism of the input for information technology innovation should be established and completed gradually.Combing with the implementation of the technical innovation and standard strategy in the key fields and the intellectualproperty strategy, the international technological cooperation and communication should be developed. The support to theresearch and development of common technologies should be enhanced. The building of public technology service platformand technological agency service institutions should be reinforced.2.Accelerating the research and development of the core technologies in the key fields such as IC,software, key components and etcThe government should guide more social fund to increase the input in the research and development of open sourcesoftware with Linux as the representative, and support the research and development of digital TV, semiconductorillumination project, auto computing platform, the supporting IC for the radio frequency identification (RFID) project, andthe R&D and industrialization of new display components. It should push the technologies in the key fields such as nextgeneration network, broadband wireless mobile communications, home network, smart terminals, network and informationsafety, information technology application and digital content and etc to achieve breakthroughs.3.Accelerating the building of technical innovation system with the enterprise as the main bodyFocusing on the major industrial applications and key technical breakthroughs, a series of technical alliances with theenterprise as the main body and participated by scientific institutions and colleges should be formed. The enterprises shouldbe encouraged to set up technical centers so as to promote the technical innovation activities with the enterprise as the mainbody. The building of public technical service platform should be accelerated so that the industrial public technical researchand development can be supported selectively via electronic development fund. With applications as the orientation, theenterprises should be led to accelerate the integrated innovation, introduction, digestion, absorption and re-innovation withsoftware, network and system as the center.4.Strengthening the standard formulationThe research and formulation of the key standards such as 3G mobile communications, digital TV, next generationnetwork, broadband wireless mobile communications technology, network management and radio frequency identificationand etc should be well developed. The research and formulation of the key technical standards that have great influence overthe independent innovation and industrial development should be enhanced. The government should also continue developingwell the research and development of the standards for digital AV, 3G mobile communications, digital TV, IC, software, greenenergy, satellite navigation application system, semiconductor illumination and etc. Combining the regional developmentcharacteristics, the research and application of RFID, two-dimensional bar code and Chinese voice connected withGuangdong, Hong Kong, and Macao should be promoted. It should reinforce the research and formulation of theinternational standards in the key technology fields and continue conducting the research connected with related internationalorganizations. The communication and cooperation on the technical standards of the cross-strait information industry shouldbe further promoted.5.Strengthening the protection of intellectual propertyThe research on the Strategy Special Topic on Intellectual Property of the Information Industry should continuedeveloping to complete the working system of intellectual property. The building of intellectual property organization andagency institutions of the information industry should be accelerated and the IT patent database should be established. TheWhite Paper on intellectual property of the information industry should be compiled and published. The release of patentstate in the IT field and the competition on the key technical invention of the information industry should be well conducted.·145·

China Business GuideThe laws, policies and environment of the intellectual property in the foreign information industry should be studied and thebuilding of the early warning of the intellectual property and the information service mechanism in the information industryshould be speeded up. The policies encouraging technology transfer should be formulated to promote the technology transferand the industrialization of the intellectual property achievements. The domestic enterprises are encouraged and promoted toactively apply for patents and carry out the protection and utilization of intellectual property to gradually develop into themain implementation entity of the intellectual property protection strategy.6.Strengthening the quality management of electronic information productsThe Quality Development Layout of the Eleventh Five-Year-Plan of the Electronic Information Industry should beformulated and issued. The government should promote and implement the lightning protection testing system of thecommunications system, the capacity evaluation system of the software process, the certification system of the informationsafety products and the license system of the production of key electronic products, and the certification management to theproduct conformance testing to the key IT standards; organize the special quality supervision and spot checks to normalizethe market; compile and release the special quality analysis report; study and propose the implementation scheme on thequality credit record management of the information products and complete the supervision evaluation system and publictechnology service platform.7.Establishing and completing the management system of telecom charging testingThe charging testing of fixed network should be accomplished, and the charging testing of mobile network should becarried out in the whole country, and the charging of short message, smart network business should be developed.8.Further strengthening the international technological communications and cooperationCombining with the implementation of technology innovation, standard strategy, intellectual property strategy and talentstrategy in the key fields of the information industry, the government should actively develop international cooperation,positively participate in the technical activities organized by international organizations, continue developing the connectionresearch with the international organizations such as ITU, ISO, IEC and AIC and etc, participate in the research andformulation of international standards to promote the mutual development. The international communication and cooperationsuch as Sino-America, Sino-Europe, Sino-Japan-Korea and Sino-France and etc under the multilateral and bilateralcooperation mechanism framework should be well developed and the preparations for the Sino-American engineeringtechnology workshop should be well organized.Section II the Various Standards on the Electronic Information Industry Approvedand Released in 2005I. ReviewIn 2005, the study and formulation of standard system on electronic information products, communications network andinformation building were developed, especially the research and formation of the standards on the protection of poisonousand harmful articles and pollution in the electronic information industry, wireless broadband IP network and applications,advanced computing and network technology, data warehouses, home network, network interconnection as well as servicequality, network and information safety, broadband wireless access, 3G mobile communications, trunking communications,the next generation network and so on.A total of 69 various standard of the electronic information industry were released in 2005, of which, 19 were nationalstandards (see Table 1), 7 were national military standards (see Table 2), 24 were electronic industry standards with greatinfluence in the industries including “new generation high-density laser digital video disc system”, “the collaborative serviceof information equipment resource sharing”, “home network” and etc (excluding the communications industry standards)(see Table 3), and 19 were military industry standards (see Table 4).The approval and release statistics of national standards of the electronic information from 2001 to 2005 were illustratedin Figure 1; the approval and release statistics of national military standards of the electronic information from 2001 to 2005·146·

Electronics & Informationwere illustrated in Figure 2; the approval and release statistics of industrial standards of the electronic information from 2001to 2005 were illustrated in Figure 3; and the approval and release statistics of industrial military standards of the electronicinformation from 2001 to 2005 were illustrated in Figure 4.The formulation of industrial standards were reinforced in 2005, and see Table 3 for details. Of it, the formulation ofeach standard is given below:Items 6, 7 and 8 belong to Chinese character font standards, whose compressed fonts are compressed with the dot matrixfonts in SJll295-2003 Information technology-Universal multiple-Octet coded character set (basic multilingualplane)-12-dots matrix font of Chinese ideogram, SJ11296-2003 Information technology-Universal multiple-Octet codedcharacter set (basic multilingual plane)-14-dots matrix font of Chinese ideogram, and GB17698-1999 Informationtechnology-Universal multiple-Octet coded character set (basic multilingual plane)-16-dots matrix font of Chinese ideogramas the matrix. The three standards adopt the same compression technology, and the compression ratios all reach therequirements in GB 11460 Information technology-Test method of the Chinese ideograms font data. Since the restriction ofthe imbedded system structure, the huge data of dot matrix fonts is difficult to accept, and the formulation of the seriesstandards is to meet the demand of imbedded equipments. The three standards are important basic technical standards andplay a vital role in protecting the normalization of Chinese language and ideogram and promoting the development of China’sChinese ideogram font industry, therefore, the series standards are all compulsory standards.Figure 1 the Approval and Release Statistics of National Standards of the Electronic Information from 2001 to 2005140Standard amount12010080604020066302001 2002 2003 2004 2005645019Figure 2 the Approval and Release Statistics of National Military Standards of the Electronic Informationfrom 2001 to 2005Standard amount30252015105025 24191372001 2002 2003 2004 2005·147·

China Business GuideFigure 3 the Approval and Release Statistics of Industrial Standards of the Electronic Information from 2001 to 20056050Standard amount5040302010211752402001 2002 2003 2004 2005Figure 4 the Approval and Release Statistics of Industrial Military Standards of the Electronic Informationfrom 2001 to 2005Standard amount160140120100806040200136743135192001 2002 2003 2004 2005Items 9 and 10 belong to satellite positioning application system standards, whose purposes are to normalize acomprehensive information service platform that can meet the requirements of vehicle automation control, operationmanagement and individual information processing. It is a newly rising technical industry, thus, there are still no similarstandards abroad at present.Items 11, 12, 13 and 14 belong to connector standards, all of which adopt the detailed specifications in IEC61076 D.C.and low-frequency simulation and digital high-speed data processing equipment connectors Part IV and below. Thecompatibility, interchangeability and high reliability will become the main basis to choose connectors. The same adoption ofthese IEC standards will enable the data transmission connectors more unified, and the quality and evaluation requirementswill become more normalized, which will play an important role in the promotion of our connector industry.Items 5, 23 and 24 belong to material standards, of which, General Specification for Thermal Transfer Ribbon is suitablefor the thermal transfer ribbon with thermal transfer imaging method as the working principle. The standard is formulatedwith reference to the national standards and the overseas advanced standards on the ribbon used for stylus printers and barcode identification and etc. The standard can normalize the industry and provide stable, reliable products with good quality,and improve the domestic manufacturing level of the thermal transfer ribbon. Glass powder for soldering with low-melt pointis the supporting material for color tube production. In order to meet the demand of the technical development of color tubeproduction, Glass Powder for Soldering with Low-Melt Point is the revision to the industrial standard (SJ3231) issued in1989. The main differences between the two visions are: the error range of chemical compositions and some physicalperformance indexes are adjusted, and the latter is fully revised and amended in accordance with the requirements inGB/T1.1-2000. Quantity Test Method of the Oxidation Sludge in the Tin Solder under Dynamic Conditions is the quantity testmethod of the oxidation sludge content in the tin solder under dynamic conditions, which has improved the test method thatuses the time of keeping mirror plane for solder liquid surface under static conditions to reflect. The oxidation sludge content·148·

Electronics & Informationcan affect directly the soldering quality, and the standard has practical value for improving the development capacity andproduct quality of tin solder. The three standards don’t involve in related domestic and abroad intellectual property.Item 15 and 16 belong to the collaborative service standards of information equipment resource sharing. The twostandards are put forward aiming at the information equipment discovery, resource sharing and collaborative service.Information Device Intelligent Grouping and Resource Sharing Part 1: Core Protocol defines a series of equipment and dutyspecifications, including equipment and service discovery agreement, equipment and service description as well as servicetransfer mechanism and safety mechanism and etc. Information Device Intelligent Grouping Resource Sharing Part 4 DeviceValidation defines the judgment rules on conducting tests to the information equipments according to the basic agreement.The two standards are independent innovative standards with the enterprise as the main body, and the related enterprises haveformed a lot of independent intellectual property during the process of studying and compiling standards.Items 17, 18, 19, 20, 21 and 22 belong to home network platform standards, of which, Home Network SystemArchitecture and Reference Model describes the home network system architecture and reference model, briefly introducesthe narration of other parts of the series standards and the related contents; Home Network Device Description FileSpecification specifies the format of the device description files necessary for the terminal devices access to the homenetwork; Specification for Home Backbone-Network Communication Protocol specifies the communication protocols of thebackbone network in the home network system, and the home backbone network is the network segment of the homenetwork including home backbone network gateway, information devices, entertainment devices, communications devices,home sub-gateway and etc; Specification of Conformance Test on Home Backbone-Network Interface specifies the methodand inspection standards on the home backbone-network interface conformance; Specification for Home Sub-NetworkCommunication Protocol specifies the communication protocols of the sub-network of the home network system, and thehome sub-network is the network segment of the home network including home sub-gateway, mobile control terminal,illumination devices, safety (monitoring) devices and water gauges, natural gauges and thermal gauges or the so-called threegauges and three protective devices, home alarm devices, household appliances and so on; Specification for ConformanceTest on the Interface for Home Control Sub-Network specifies the method and inspection standards on the home controlsub-network interface conformance. The six standards are independently innovative standards with the enterprise as the mainbody. And the related enterprises have formed a lot of independent intellectual property during the process of studying andcompiling standards.II. The work emphasis of standards in the year 2006While carrying out the standard strategy with independent innovation as the center, the government should deeplydevelop the research and formulation of the important technical standards which have great influence over independentinnovation and industry development; deepen the restructuring of the standardization operation mechanism in the informationindustry, and strengthen the research, guidance and management of the standardization task; continue developing well theresearch and formulation of the standards in the fields including digital AV, 3G mobile communications, the next generationnetwork, network management, RFID, IP and multimedia, broadband wireless mobile communications technology, ruralcommunications, digital TV, IC, software, green energy, satellite navigation application system, semiconductor illuminationand etc. Combining the regional development characteristics, the research and application of RFID, two-dimensional barcode and Chinese voice connected with Guangdong, Hong Kong, and Macao should be promoted. It should reinforce theresearch and formulation of the international standards in the key technology fields.SerialNo.【Statistics data】Table 1 the Directory of National Standards Approved and Released in 2005Standard No. Name of standard Release date1 GB/T2423.53-2005Environmental testing for electric and electronicproducts-Part 2: test methods Test Xb: the markscaused by the hand’s attritionImplementationdate2005-01-18 2005-06-01·149·

China Business Guide2 GB/T2423.54-2005Environmental testing for electric and electronicproducts-Part 2: test methods Test Xc: fluid pollution2005-01-18 2005-06-013 GB/T19665-2005General specification for electronic infrared imagingthermometer of body skin2005-02-02 2005-06-014 GB/T19667.1-2005Specification for the structure of electronic officialdocument based on XML-Part 1:General principles2005-02-18 2005-05-015 GB/T19667.2-2004Specification for the structure of electronic officialdocument based on XML-Part 2:Document body2005-02-18 2005-05-016 GB/T19668.1-2005Information system project surveillancespecification-Part 1: Generic specification2005-02-18 2005-05-017 GB/Z19669-2005 Guide for XML application in e-government 2005-02-18 2005-05-018 GB/Z15843.5-2005Information technology-Security techniques-Entityauthentication mechanisms –Mechanisms using zero 2005-04-19 2005-10-01knowledge techniques9 GB/T17902.2-2005Information technology-Security techniques-Digitalsignatures with appendix-Part 2:Identity-based 2005-04-19 2005-10-01mechanisms10 GB/T17902.3-2005Information technology-Security techniques-Digitalsignatures with appendix-Part3:Certificate-based 2005-04-19 2005-10-01mechanisms11 GB/T19713-2005Information technology-Security techniques-Public keyinfrastructure-Online certificate status protocol2005-04-19 2005-10-0112 GB/T19714-2005Information technology-Security technology-Internetpublic key infrastructure-Certificate management 2005-04-19 2005-10-01protocol13 GB/T19715.1-2005Information technology-Guidelines for themanagement of IT Security-Part 1:Concepts and 2005-04-19 2005-10-01models of IT Security14 GB/T19715.2-2005Information technology-Guidelines for themanagement of IT Security-Part 2:Managing and 2005-04-19 2005-10-01planning IT security15 GB/T19716-2005Information technology-Code of practice forinformation security management2005-04-19 2005-10-0116 GB/Z19717-2005Secure message interchange based on MultipurposeInternet Mail Extensions (MIME)2005-04-19 2005-10-0117 GB/T16264.8-2005Information technology-Open systems Interconnection-The Directory-Part 8:Public-key and attribute2005-05-25 2005-12-01certificate frameworks18 GB/T19771-2005Information technology--Security technology-Publickey infrastructure-Minimum interoperability2005-05-25 2005-12-01specification for PKI components19 GB 18240.5-2005Fiscal cash register Part 5: Specification of FiscalPrinter2005-10-10 2006-04-01Table 2 the Directory of National Military Standards Approved and Released in 2005Serial No. Standard No. Name of standard1 GJB 1215A-2005 General specification for radio frequency cable assemblies2 GJB 5437-2005General specification for leaded molded solid tantalum electrolytic capacitors withreliable indexes3 GJB 5438-2005 General specification for the case of optoelectronic components4 GJB 5439-2005 General specification for piezoresistive Acceleration sensors5 GJB 5440-2005 General specification for overload sensors6 GJB 5441-2005 Measurement methods for solid-state lasers7 GJB 5442-2005 General specification of military mobile multi-function power supply·150·

Electronics & InformationSerialNo.Table 3 the Directory of Electronic Industry Standards Approved and Released in 2005Standard No.Name of standardImplementation dateRecommended,guided orcompulsory1 SJ/T11299.1-2005Specification for enhanced versatile disk system-Part 1:Physical specification for enhanced versatile disk2005-2-28 Recommended2 SJ/T11299.2-2005Specification for enhanced versatile disk system-Part 2:Specification for enhanced versatile disk file system2005-2-28 RecommendedSpecification for enhanced versatile disk system-Part 3:3 SJ/T11299.3-2005 Specification for enhanced versatile disk AV data coding and 2005-2-28 RecommendeddecodingSpecification for enhanced versatile disk system-Part 4:4 SJ/T11299.4-2005 Specification for multi-channel enhanced ambiophony AV 2005-2-28 Recommendedcoding and decoding5 SJ/T11300-2005 General specification for thermal transfer ribbon 2005-9-1 Recommended6 SJ 11301-2005Information technology-Universal multiple-Octet codedcharacter set (basic multilingual plane)-12-dots matrix font 2005-9-1 Compulsoryof Chinese ideogram7 SJ 11302-2005Information technology-Universal multiple-Octet codedcharacter set (basic multilingual plane)-14-dots matrix font 2005-9-1 Compulsoryof Chinese ideogram8 SJ 11303-2005Information technology-Universal multiple-Octet codedcharacter set (basic multilingual plane)-16-dots matrix font 2005-9-1 Compulsoryof Chinese ideogram9 SJ/T-11304-2005Satellite positioning vehicle information service system Part2005-9-11: Function descriptionRecommended10 SJ/T11305-2005Satellite positioning vehicle information service system Part2005-9-12: Information protocol for vehicle station and service centerRecommendedConnectors with assessed quality, for use in d.c.,11 SJ/T11306-2005low-frequency analogue and in digital high-speed dataapplications-Part 4: Sectional specification-printed board2005-9-1 Recommendedconnectors12 SJ/T11307-2005Connectors with assessed quality, for use in d.c.,low-frequency analogue and in digital high-speed dataapplications-Part 4: Printed board connectors-Section 001:2005-9-1 RecommendedBlank detail specification13 SJ/T11308-2005Connectors for electronic equipment-Part4-101: Printedboard connectors with assessed quality-Detail specificationfor two-part connector modules, having a basic grid of 2.0 2005-9-1 Recommendedmm for printed boards and backplanes in accordance withIEC 6091714 SJ/T11309-2005frequency analogue and digital high speed dataapplications-Part 4-104: printed board connectors withassessed quality-detail specification for two-part modular 2005-9-1 Recommendedconnectors, basic grid of 2.0 mm, with terminations on amultiple gird of 0.5 mm15 SJ/T11310-2005Information device intelligent grouping and resource sharing2005-9-1Part 1: Core protocolRecommended16 SJ/T11311-2005Information device intelligent grouping and resource sharing2005-9-1Part 4: Device validationRecommended17 SJ/T11312-2005Specification for home backbone-network communicationprotocol2005-9-1 Recommended18 SJ/T11313-2005Specification for conformance test on homebackbone-network interface2005-9-1 Recommended19 SJ/T11314-2005 Specification for home sub-network communication protocol 2005-9-1 Recommended20 SJ/T11315-2005Specification for conformance test on the interface for home2005-9-1control sub-networkRecommended21 SJ/T11316-2005 Home network system architecture and reference model 2005-9-1 Recommended·151·

China Business Guide22 SJ/T11317-2005 Home network device description file specification 2005-9-1 Recommended23 SJ/T3231-2005 Glass powder for soldering with low-melt point 2005-9-1 Recommended24 SJ/T11319-2005Quantity test method of the oxidation sludge in the tin solder2005-9-1under dynamic conditionsRecommendedSerialNo.Table 4 the Directory of Military Standards of the Electronic Industry Approved and Released in 2005Standard No. Name of standard Release dateImplementationdate1 SJ20919-2005Computational method for radar cross-sections ofhomogeneous spheres2005-3-31 2005-4-12 SJ20920-2005General specification for the ionospheric refractioncorrection system for exterior ballistic measurement by 2005-3-31 2005-4-1differential Doppler3 SJ20921-2005General specification for military air traffic controlsystem2005-3-31 2005-4-14 SJ20922-2005General specification for military frequency hopped HFmodem2005-3-31 2005-4-15 SJ20923-2005Method of objective speech quality assessment based ona perceptual measure for military communication 2005-3-31 2005-4-1equipments6 SJ20924-2005Requirements for physical design of securecommunication and information security equipment2005-3-31 2005-4-17 SJ20925-2005 General specification for military low leaking shelter 2005-3-31 2005-4-18 SJ20926-2005General specification for military intercom local areanetwork2005-3-31 2005-4-19 SJ2057A-2005 General specification for metal shielding mash gaskets 2005-3-31 2005-4-110 SJ20755A-2005General specification for military ventedelectromagnetic shielding window2005-3-31 2005-4-111 SJ20927-2005 General specification for fibre optic voltage sensor 2005-6-27 2005-12-112 SJ20928-2005 Detail specification for ceramic leadless chip carrier 2005-6-27 2005-12-113 SJ20929-2005General specification for high directivity directionalcouplers2005-6-27 2005-12-114 SJ20930-2005General specification for direct reading rotary vaneattenuators2005-6-27 2005-12-115 SJ20931-2005 General specification for microwave signal generators 2005-6-27 2005-12-116 SJ54409/4-2005Detail specification of high temperature gauge pressuresensor for series CY-YZ-0052005-6-27 2005-12-117 SJ54409/5-2005Detail specification of high temperature deferentialpressure sensor for series CY-YZ-0062005-6-27 2005-12-118 SJ54409/6-2005Detail specification of high temperature absolutepressure sensor for series CY-YZ-0072005-6-27 2005-12-119 SJ54409/7-2005Detail specification of normal temperature absolutepressure sensor for series CY-YZ-0082005-6-27 2005-12-1Section III the Domestic patent authorization in 2005I. ReviewIn 2005, the Patent Office of the State Intellectual Property Office authorized 3714 electronic invention patents in total,growing by 519 compared with the 3195 electronic invention patents in 2004, and the growth rate was 16.2%, which showedthat the authorization growth of electronic invention patents in 2005 had gradually slowed down since the explosive growthin 2004.Of the electronic invention patents authorized in 2005, 524 are measuring and testing patents, 628 basic electriccomponent patents, 541 computer hardware and software patents, 976 electronic communications patents, 1045 otherinvention patents. Except that the authorization quantity of electronic communication patents reduced slightly, the patent·152·

Electronics & Informationauthorization quantities of basic electric component, computer hardware and software, measuring and testing and others allachieve growth at various degrees.The speciality distribution of electronic invention patents authorized domestically in 2005 is illustrated in Figure 1; thegeneral information of electronic invention patents authorized domestically from 2001 to 2005 is illustrated in Figure 2; thegeneral distribution of electronic invention patents authorized domestically from 2001 to 2005 is given in Table 1; thedistribution of each speciality of the electronic patents authorized domestically from 2001 to 2005 is illustrated in Figure 3, 4,5, 6 and 7.Figure 1 the Speciality Distribution of Electronic Invention Patents Authorized Domestically in 2005Computer hardwareand software15%Basic electriccomponents17%Measuring and testing14%Others28%Electroniccommunications26%Figure 2 the General Information of Electronic Invention Patents Authorized Domestically from 2001 to 200540003500300025002000150010005000589636Figure 3 the Domestic Authorization Information of Measuring and Testing Invention Patents from 2001 to 20051703319537142001 2002 2003 2004 200570060050040030020010006284704001421602001 2002 2003 2004 2005·153·

China Business GuideFigure 4 the Domestic Authorization Information of Basic Electric Component Invention Patents from 2001 to 20056005004003002001000524332179 185 2122001 2002 2003 2004 2005Figure 5 the Domestic Authorization Information of Computer Hardware and Software Invention Patentsfrom 2001 to 20056005004003002001000541496363901012001 2002 2003 2004 2005Figure 6 the Domestic Authorization Information of Electronic Communications Invention Patents from 2001 to 2005120010008006004002000106297640490662001 2002 2003 2004 2005Figure 7 the Domestic Authorization Information of Other Invention Patents from 2001 to 2005120010008006004002000104583532488 1242001 2002 2003 2004 2005·154·

Electronics & InformationII. Cases of electronic patent infringementOn January 3, South Huitong formally received the litigation document of Hitachi Global Storage Technologies Co., Ltd.On December 29, 2004, Hitachi GST indicted South Huitong had infringed its patent on the micro hard disc in the northerndistrict court of California, USA, and demanded to pay its economic damages. Moreover, it applied to the court for apermanent compulsory injunction to prohibit the manufacturing, usage, import, sale and distribution of the productssuspected with right infringement of South Huitong and related companies. The appellees also included GSMagic,Inc. andthe joint research institution of South Huitong located in California, USA.On January 6, SigmaTel asserted Zhuhai Torch Force Design of Integrated Circuit Co., Ltd. had infringed multiplepatents in the design of System-on-Chip (SoC) controllers for the portable MP3 players in Austin Federal Court of Texas,USA. In addition, SigmaTel sought payment of damages from Zhuhai Torch Force Design of Integrated Circuit and aninjunction to prohibit the design, manufacturing and selling the infringing MP3 IC's of Zhuhai Torch Force Design ofIntegrated Circuit in the U.S. Additionally, SigmaTel is strongly considering asking the United States International TradeCommission (ITC) to institute an Investigation pursuant to Section 337 in early 2005 based on the importation of theinfringing MP3 ICs.On January 20, Mosaid of Canada asserted Hyundai of Korea had infringed its six invention patents related to DRAM inthe district court of Taxes, USA, and demanded Hyundai to stop manufacturing and selling the infringing products. Thecompany became reconciled with Sumsung on the previous day, and the latter agreed to pay undisclosed amount of patent usefees to Mosaid to achieve the patent use right in the upcoming five years.On January 21, HP became reconciled with Intergraph on the case in which Intergraph asserted HP had infringed thepatents on processors. HP paid US$141M of patent fees to Intergraph and the two parties would initially cancel all of the suitsin the USA and Europe; meanwhile, the two parties reached patent cross license agreement, thus, HP could use all the patentsof Intergraph, while Intergraph could only use HP’s patents related to its current products. Intergraph had become reconciledwith many manufacturers on the infringement of its Clipper chip patents. In September, 2003, Taxes Instruments paidUS$18.00M to Intergraph; and in March, 2004, Intel paid US$225M to Intergraph.On January 25, Rambus asserted the EMS memory suppliers in the district court of Northern California, USA, andindicted Hynix, Infineon, Nanya and its subsidiary company-Inotera Memories had infringed its 18 patents in the fields suchas DDRII, GDDR2, GDDR3 and so on.On January 30, TSMC declared it had become out of court settlement with SMIC on the patent infringement and relatedissues. According the settlement agreement, SMIC would pay TSMC about US$175M to settle the suit, of which, it wouldpay US$30.00M each year in the first five years, and US$25.00M in the sixth year; and TSMC would withdraw all of thelawsuits related to SMIC including all of the suit cases in the United States Federal Court, California State Superior Court,US International Trade Commission and Taiwan Court. The term of patent cross license between the two parties would last toDecember, 2010.TSMC didn’t authorize SMIC the right to use the business confidential, but TSMC agreed not to assert the previousimproper use of its business confidential. If SMIC broke its promise, the use of patent right and the agreement would beterminated; and the previous case was likely to be put forward again; moreover, the settlement of right fund could be speededup.On February 5, Royal Philips Electronics conducted the defense on the suit initiated by Wuxi Multimedia in San DiegoCourt of California, USA in June, 2004. On June 15, 2004, Chinese DVD-player manufacturers entrusted Hong Kong WuxiMultimedia to assert that the patent pool license policy of the DVD 3C patent alliance composed of Sony, Philips, andPioneer had violated many laws of California, USA. In December 2004, Orient Power (Wuxi) Digital Technology Co., Ltd.(“OPWDT”) became the add accuser.On February 16, BYD declared it had become reconciled with Sanyo on the patent infringement case of BYD and BYDAmerica Company in September, 2002. Sanyo agreed to withdraw the patent suit, and BYD consented to withdraw thecounterclaim to Sanyo. On September 23, 2002, SanyoEnergy (USA) Corporation under the banner of Sanyo asserted BYD·155·

China Business Guideand its subsidiary company-BYD America had infringed its patent to the California District Court. Sanyo demanded the USAto prohibit the import and sales of the lithium battery made by BYD and asked BYD to pay its damages.On February 24, Thomson lodged a complaint to US International Trade Commission (ITC) in accordance with Article337 of US tariff Act that the liquid crystal TV, LCD and the relevant parts made and sold by BenQ had infringed its patentright, and asked to conduct investigations to BenQ’s headquarters-Taiwan Headquarters, Suzhou manufacturing base of BenQand its American sales offices, and AUO, the partner of BenQ, was also listed into the investigation list.In March, Ericsson indicted Sendo had infringed its patent right. Ericsson claimed that Sendo had infringed all of thepatents related to GSM and GPRS technologies participated in by Ericsson. Ericsson requested the court to issue injunction toprohibit Sendo to sell its mobile telephone products and develop related marketing campaigns. The actual economic loss thatEricsson asked Sendo to pay was not open outward. But Sendo also made complaints on Ericsson to European CompetitionCommission. Sendo claimed that the conditions for the third party to use the patent technology of Ericsson set by Ericssonwere “unfair, anti-competition, over-strict, differential treatment up to compulsorily added excessive license fees”. In addition,Sendo also thought Ericsson developed unreasonable extension to the IPR policy of European Telecommunications StandardsInstitute.On March 21, Rambus and Infineon released a joint declaration which said that the two parties had withdrawn all of thecurrent suits, and Rambus agreed to withdraw the suit to Siemens-Infineon’s former parent company. According to theagreement, Infineon got the legal authorization of the current and future chip technologies of Rambus. As the global licensefees of Rambus’s current and future patents, Infineon would pay US$5.85M to Rambus per quarter from November 15 to2007. Following that, if other chip manufacturers got Rambus’s patent license, Infineon should pay another US$100M. Asreturn, Infineon would get the “most favored party treatment” of Rambus and the choice right of Rambus’s other technicallicenses.On March 23, Fremont Court, California, USA, judged that Japan Toshiba and Toshiba America Electronic Componentsinfringed the 6 American patents and other business secrets held by Lexar including 5,479,638 and so on. The court judgedthe accused to compensate US$465M to Lexar. Toshiba used to be the strategic partner of Lexar, and it entered the board ofdirectors of Lexar via investing US$3.00M to Lexar in 1997, thus, it could touch a lot of business secrets including Lexar’spatent applications.On March 25, Rambus announced it had won the patent suit to Hynix Semiconductor of Korea, and the judges adjudgedthe latter to pay it US$306.5M. The verdict had great significance to Rambus since it was likely to drive other EMS memorymanufacturers infringing its patents to reach settlement with it.On April 2, LG Electronics and Matsushita Electric Industrial Co., Ltd. reached a settlement agreement on the plasmadisplay panel technology dispute. The two sides would no longer take such actions as prohibiting the product imports andlegal suits and etc in Korea and Japan. The two companies also signed a patent cross licensing agreement, involving in thepatents of PC, DVD standards and plasma display panel technology. The two sides also decided to set up a cooperative andcollaborative commission to conduct detailed negotiations on the mutual free use of the above patent technologies, and beganto discuss the joint development of the techniques related to the next generation blue light digital video recorder and the dealand cooperation on such sections as further expanding the electronic parts and electronic materials and so on. In November2004, Matsushita Electric Industrial Co., Ltd., prosecuted to the Tokyo District Court and requested to temporarily prohibitthe domestic sales of the plasma display made by LG and asked the Tokyo Customs to ban the import of the plasma displaymade by LG. In response, LG also prosecuted to Korean court and requested Korea Trade Commission to prohibit the importand sales of the plasma display made by Matsushita.The agreements on the mutual free sharing of the patents on plasma display panels, digital multi-purpose discs andcomputers were reached.In May, HP and EMC reached a settlement of the suit which had lasted for five years. HP would pay a net amount ofUS$325M of compensation fund to EMC. The payment pattern was that HP would purchase EMC’s products such asVmware and so on via resale or internal use in the future five years. In addition, EMC and HP also signed a five-year patentcross license agreement. The dispute on the software patent rights between the two sides originated from HP’s acquisition ofStorageApps Inc. in 2001. StorageApps Inc. was a storage management company, and EMC proposed the patent infringement·156·

Electronics & Informationsuit of it as early as in October 2000. After it completed its acquisition of StorageApps Inc., HP inherited all of the company’sintellectual property, software license agreements, user contracts and other assets.On May 23, Royal Philips Electronics prosecuted the patent infringement and breach of the contracts of Hong KongOrient Power Electronics Group (an AV electronic product manufacturer), the main principal of the group and its13 holdingsubsidiary companies in Hong Kong High Court and requested to pay the US$60.00M of unpaid patent fees. Philips saidOrient Power Electronics avoided paying the patent use fees generated from its use of the technical invention in such fields asCD players and DVD players for many years, and it hid purposely the electronic product quantity made by means of Philips’patents, involving in US$50.00M.On June 6, Rambus lodged a suit of Sumsung to the district court of Northern California, USA, and the suit addedSumsung into the accused based on the case which was asserted to other EMS memory manufacturers on January 25.Rambusclaimed that Samsung's products infringed its patents including SDRAM, DDR memory, DDR2 and GDDR2 and GDDR3memory, which involved in a total of 35 patents.On July 25, Sony demanded China's 6 color TV manufacturers including Xoceco, Konka, Changhong, Hisense, TCL andHaier to pay the patent use fees related to the 22 color TV sets technologies owned by Sony. The above patents involved in 18traditional picture tube (CRT) color TV technologies and 4 digital TV technologies.On August 8, Matsushita Electric Industrial Co., Ltd. lodged a suit on the three companies, i.e., MediaTek of Taiwan,OPPO Digital, Inc. of the USA and Micro-StarInternational (MSI) of Taiwan to the US district court of northern California.Matsushita requested MediaTeck who was engaged in the business such as the design of CD-ROM chips to stop theproduction and sales of the infringing DVD chips, and requested OPPO Digital, Inc. and MSI to stop manufacturing andselling the DVD products using the chips manufactured by MediaTek. Matsushita also requested the above-mentioned threeaccused to pay the damages and the court to judge the accused punitive damages. The involved patent Numbers areUS5548249, US5970238 and US6728475.In September, Thomson of France announced that all of the MP3 player manufacturers who used the patents related toits MP3 technologies must pay it 75 cents per unit as the patent license fees. The target companies of collecting patent feesare IC design companies, Brand MP3 player and ODM/OEM manufacturers. Fraunhofer, a German R&D institution, initiatedthe research on MP3. In 1993, Thomson and the institute confirmed the format of MP3, and decided to use “MP3” as theextension name of the new audio coding technology on July 14, 1995.On November 4, Qualcomm, Inc. prosecuted to the USA San Diego federal court and accused Nokia and Nokia Grouphad infringed its 11 patents and one patent of SnapTrack. The patents involved in the suit included the core patents that Nokiamanufactured or used the GSM, GPRS and EDGE cellular standard devices as well as the other patents infringed by Nokiaproducts. Qualcomm, Inc. alleged that Nokia infringed its patent rights during the process of manufacturing and selling GSMseries standard product and it requested the court to judge Nokia to stop selling the infringing products and pay its economicdamages.On December 2, Sony submitted the application for withdrawing a suit to Tokyo district court and revoked all of theaccusations to BYD. On November 7, Japan’s Sony charged BYD for exhibiting two categories of lithium batteries onJapan’s CEATEC exhibition fairs in the year 2001 and 2002, which infringed its two Japanese patent rights, and it requestedto prohibit the sales of BYD’s two categories of lithium batteries in Japan. The involved patents are JP2646657 andJP2701347. BYD proposed the request of declaring the invalid patents to Japan Patent Office and requested to declare Sony’spatents with patent No. JP2646657 and JP2701347 invalid. On January 25, Japan Patent Office judged that Sony’s Patentwith Patent No. 2646657 was invalid. On March 2, Sony appealed to Japan Intellectual Property High Court and requested torevoke the judge of Japan Patent Office and keep Patent 2646657 valid. On November 7, Japan Intellectual Property HighCourt made the verdict to reject the appeal of Sony and keep the judge made by Japan Patent Office that declared Sony’sPatent 2646657 was invalid.On December 6, Thomson and BenQ announced they had reached a settlement agreement on the litigation of the patentinfringement related to color LCDs, and color liquid crystal TV receivers prosecuted by Thomson on February 24. Theagreement included that Thomson revoking all of the unsettled litigations and the appeals to the US (International) TradeCommission of BenQ, the settlement ways of all the previous disputes as well as authorizing BenQ the business license and·157·

China Business Guideetc. And BenQ also agreed to revoke the unsettled litigations of Thomson and the appeals to the US (International) TradeCommission.On December 10, the US San Jose federal court of California judged that Starent Networks didn’t infringe the mobilephone data switch patent of UT Starcom. UT Starcom prosecuted litigation to San Jose federal court and accused StarentNetworks had infringed its patents, which was involved in a method that could enable mobile phones to change placeswithout Internet service interruption.【Statistics data】Table 1 the Overall Distribution of Electronic Invention Patents Authorized Domestically from 2001 to 2005Category of products 2001 2002 2003 2004 2005 TotalMeasuring and testing 179 185 212 332 524 1432Basic electric components 142 160 400 470 628 1800Computer hardware and software 90 101 363 496 541 1591Electronic communications 90 66 404 1062 976 2598Others 88 124 324 835 1045 2416Total 589 636 1703 3195 3714 9837·158·

Electronics & InformationChapter VI Market OperationSection I. Economic Performance of Electronic Information Industry in 2005I.ReviewWith the goal of making China a powerful electronic country, Chinese electronic information industry in 2005 madedevelopment as the top priority and strived to push forward structural adjustment, self-innovation and widening market. Withbalanced economic growth, continually expanded scale and gradually rebounded efficiency, the whole industry hasincreasingly formed well-known brands, superior enterprises and industrial bases, and further improved its comprehensivestrength and international status.In 2005, economic performance of China's electronic information industry was in order and its annual sales income was3.8417 trillion yuan, with a year-on-year increase of 24.8%. Among that, software and systems integration revenues were390.6 billion yuan, with a year-on-year increase of 40.5 %; industrial increase value was 901.1 billion yuan, with ayear-on-year growth of 28.4 %; profit tax was 196.4 billion yuan, with a year-on-year growth of 15.3 %, and import andexport were 488.7 billion US dollars, with a year-on-year growth of 25.8 %.Steady Development Speed On the basis of rapid growth in 2004, electronic information industry continued to maintaina steady development in 2005, and its monthly growth rate reached more than 20%. Its industrial increase value accountedfor 13.6 percent of that of whole nation industries, and the growth rate of this industry is 12 percentage points higher than thatof whole nation industrial average level, with 20.8 percent of contribution rate to the growth of whole nation industries (SeeFigure 1).Keeping Top Scales In 2005, sales income of electronic information product manufacturing industry was 3.45 trillionyuan, its scale was in the first place of all industries, and other economic indicators are listed in the top places (See Figure 2).Figure 1 Monthly Growth of Electronic Information Industry in 2005Unit:% Electric Information Industry National Industries302520151050Jan.toFeb.Jan.toMar.Jan.toApr.Jan.to MayJan.toJun.Jan.toJul.Jan.toAgu.Jan.toSep.Figure 2 Sales Income of All Trades in 2005Jan.toOct.Jan.toNov.Jan.toDec.Unit:Trillion yuan3.532.521.510.50Electric Mechanics Metallurgy Weave Chemicals Transportation·159·

China Business GuideIncreasing Comprehensive Strength In 2005, electronic information enterprises were increased rapidly and there were67,000 ones in the whole industry, among which 16,007 ones were up-scale manufacturing enterprises, 39,816 ones weredown-scale manufacturing enterprises and 11,448 ones were software enterprises. Scales of enterprises continued to expandand operating income of top 100 electronic enterprises in the full year was more than 880 billion yuan, an increase of over 15% compared with that in the same period of last year, and there were over 20 enterprises whose operating income was morethan 10 billion yuan (See Figure 3).Figure 3 Number of Up-scale Manufacturing Enterprises from 2001 to 20052000016000Number of Enterprises12000800040000Gradually Improved Economic Efficiency In 2005, economic efficiency of electronic information industry wasgradually rebounded. Profit in the total year was 140.8 billion yuan, with a year-on-year increase of 13.4 %; 55.6 billion yuantaxes was completed, with a year-on-year increase of 20.6 %; loss amount of the entire industry accounted for 0.8 percent ofsales revenues, which was 0.3 percentage points lower than that in the first half year (See Figure 4).Unit:%86420-2-4-6-8Jan.toApr.Figure 4 Profit Growth of Electronic Information Industry in 2005Harmonious Production and Marketing In 2005, the rate of production and marketing of the whole industry was 98%.Judged from products monitored mainly by Ministry of Information Industry, most production and marketing rates were overthe industry average level. Declined gradually, storage volume of finished products of the entire industry from January toDecember was 143.8 billion yuan, with a year-on-year growth rate of 10.5 %, 1.8 percentage points lower than that in thefirst half year (See Table 1).2001 2002 2003 2004 2005Jan.toMayJan.toJun.Jan.toJul.Keeping First in Export In 2005, foreign trades of electronic and information products continued to maintain a rapidgrowth, and continued to rank the first in the exports of the whole country. Annual import and export volume of electronicand information products reached 488.73 billion US dollars, accounting for 34.4 percent of the total national foreign trades.Among that, exports were 268.17 billion US dollars, accounting for 35.2 percent of the total national exports, and its growthrate reached 29.2 %; imports were 220.56 billion US dollars, with a year-on-year increase of 21.9 percent, accounting for33.4 percent of the total national imports (See Figure 5).Jan.toAug.Jan.toSep.Jan.toOct.Jan.toNov.Jan.toDec.·160·

Electronics & InformationFigure 5 Exports of Electronic and Information Products in Each Month in 2005Unit:100 million US $35030025020015010050159.7156.2285 293253 263230.6215.3 206 215.6214.61910Jan. Feb. Mar. Apr. May Jun. Jul. Agu. Sep. Oct. Nov. Dec.Steady Growth of Investment in Fixed Assets In 2005, industrial projects of more than 5 million yuan were investedwith 1 46.8 billion yuan, with a year-on-year increase of 21.7 percent, and the growth rate was 12.4 percentage points lowerthan that in the same period in 2004. Three types of foreign-funded enterprises were still main investors, sharing 63.4 percentof the total investment. Investment growth rate of domestically-funded enterprises was higher and increased 37.9 percent inthe whole year, 15.7 percentage points higher than the growth rate of 2004. Investment was concentrated in the areas ofelectronic components and apparatuses industries, accounting for 55 percent of the total investment, of which investment incomponents grew rapidly, with the rate of 48.4 % and investment in apparatuses dropped by 11.6 percent than that in 2004.Chinese eastern regions were primary invested areas and completed investment of 123 billion yuan in eastern 12 provinces,accounting for 83.8 percent of the total industry investment; and investment in central and western regions was accelerated,with the growth rate of over 40% (See Figure 6).Figure 6 Monthly Investment Growth Rate of the Entire Industry in 2005Unit:%602005 200450403020100Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.Increasingly Deeper Innovation of Scientific and Technological New products developed steadily, and productionrate of new output in the whole industry was 20.6%, increased by 0.2 percentage points compared to that in 2004. Investmentin research and development and the number of patents were constantly improved, and R & D investment of the wholeindustry was more than 80 billion yuan. R & D investment of top 100 electronics and information enterprises continuouslyaccounted for a higher proportion of sales revenues, and R & D investment of 15 enterprises accounted for more than 5percent of their sales revenues.·161·

China Business GuideCreating Many New Employment Posts With the rapid development, electronic information industry created a largenumber of new employment opportunities. In 2005, there were 7.59 million practitioners in the entire industry, with 5.51million in up-scale manufacturing enterprises, 1.2 million people in down-scale manufacturing enterprises and 880,000people in software industry. Employees’ qualities were improved continuously, and in 2005 the proportion of employees withjunior college was 28%, 2 percentage points higher than that in 2004.Further Contribution on GDP In 2005, industrial growth value of electronic information industry accounted for 4.94percent of GDP, increased by 0.55 percentage points than that in 2004. Its growth rate was 18.5 percentage points higher thanthat of GDP, and its contribution rate to GDP growth reached 8.8 %.II. Main Characteristics(I)Industry development and efficiency growth tended to be low at first then highThe growth rate tended to improve steadily in the whole year. In the first three quarters, monthly increase degree of salesrevenues and industrial increase value of electronic information industry maintained at about 21 %. In the fourth quarter, bothgrowth rates were over 24 % and averagely increased more than 3 percentage points over that in the first three quarters.Because of the rising cost of raw materials, cyclical lowness of some industries, excessive stocks dealt by enterprises andseveral other reasons, in terms of benefits, profits of the whole industry started to increase negatively since the second quarter,especially efficiency of the communications equipment industry and electronic devices industry declined quickly. As themarket economy returned to be prosperous and enterprises inventory were gradually reduced, economic benefits of the wholeindustry began to rebound in the third quarter, and negative growth was changed in October.(II)Structural adjustment was sped up and proportions of high-end products were increasedIncreasing by the speed which was higher than the average growth level of the whole industry since 2005, computerindustry and electronic components industry were the main force of stimulating industrial growth. In the whole year, up-scaleenterprises of the two industries completed sales income of 1.5123 trillion yuan, with a year-on-year increase of 29%, fourpercentage points higher than the growth rate of the whole industry and completed profits of 48.2 billion yuan, with ayear-on-year increase of 21%, seven percentage points higher than the growth rate of the whole industry. As enterprisescontinued to accelerate the pace of developing new products and market, product structure was gradually upgraded, theproportion of high-end products continued to increase. LCD and plasma products increasingly became a hot point and growthpoint of color TV industry and both their annual production growth rates were over 200%. In the computer industry, theproportion of laptop computers was nearly 60% of that of microcomputers, five percentage points higher than that in 2004( See Figure 7).Figure 7 Proportions of Electronic Information Manufacturing Industry in 2005ElectricInformationMechanicsMeasureApparatusElectriApparatusFamilyAudiovisualElectricComponentElectricSpecializedEquipmentotherRadarComputerCommunicationDecivesRadio andTelevisionFacilities·162·

Electronics & Information(III)Software industry grew significantly and exports continued its rapid developmentIn 2005, software industry realized sales income of 390.6 billion yuan, with a year-on-year increase of 40.5 %, amongwhich software product revenues were 193.15 billion yuan, with a year-on-year increase of 26.4 %, accounting for 49.5percent of all revenues of the software industry, systems integration revenues were 105.93 billion yuan, with a year-on-yearincrease of 84.7 %; and software services revenues were 91.55 billion yuan, with a year-on-year increase of 201.9 %.Software exports reached 3.59 billion US dollars, with a year-on-year increase of 28.2%. Beijing, Guangdong, Shanghai,Jiangsu were key areas of software industry, and Beijing was the largest, and its revenue reached 91.4 billion yuan, with ayear-on-year increase of 42%; Jiangsu grew fastest and its income reached 41.6 billion yuan, with a year-on-year growth rateof 98.9%. Software bases, with 11 national software industry bases and six national software export bases, were developedrapidly. Revenues of software enterprises in the bases accounted for over three fourth of the total sales income of nationalsoftware industry. (See Figure 8).SoftwareServiceFigure 8 Composition of Software Revenues in 2005Product IncomeSysremIntegration(IV)International level was further enhanced and three types of foreign-funded enterprisesbecame increasingly prominentIn 2005, under the increasingly strong tendency of shifting global electronic information industry to China,multinational companies, on the basis of deepening strategies in China, strengthened the integration of global resources andits momentum of realizing wholly foreign-owned enterprises in China and building regional headquarters and research anddevelopment centers was further evident. Three types of foreign-funded enterprises are increasingly important in theelectronic information manufacturing industry, and in the whole year they created sales income of 2.4021 trillion yuan,industrial increase value of 502.6 billion yuan, profits of 82.2 billion yuan and exports of 234.1 billion US dollars,respectively accounting for 77% 77%, 77% and 87% of up-scale industries, which are all higher than those in 2004. At thesame time, local enterprises also strengthened the exploration of international operations and achieved scale expansionthrough transnational mergers and acquisitions, aiming to establish a new competitive advantage in the global areas.(V)Concentration degree of industry continued to improve and regional aggregation effectsbecame more and more obviousThe eastern coastal areas were main development regions of electronics and information industry and provinces andmunicipalities whose scales ranked the top eight were in eastern regions. Especially in the Yangtze River Delta, Pearl RiverDelta and surrounding regions of Bohai, proportions of labor force, sales income, industrial increase value and profits wereall more than 80 percent of the whole industry and higher than those respectively in 2004. Construction of industrial basesand industrial parks were furthered, industry scale and total profits taxes of nine listed national electronic informationindustry bases accounted for more than 3 / 4 of those of the whole industry, industrial clustering effect and dominant positionof bases become more and more obvious.III. Main Problems(I)Increasing pressures on upgrading structural adjustment and efficiency growth lagged far·163·

China Business GuidebehindBeing a bottleneck of restricting industrial development, structural contradictions of electric information industry areirrational industrial structure, low proportions of software and information services, significant gaps in the whole level ofintegrated circuits industry, relative lag of basic electronic product development, in the medium and low part of globalindustry chains and low overall industry efficiency. In 2005, low technical levels, relatively surplus production capacity,increased inventory and other factors caused that profits of some trades declined greatly and structural upgrading facedserious situation. Especially, the whole CPT industry shrank because of developed flat panel display technology,technological upgrading and increasing pressure on resources integration, and economic benefits of local mobile phoneindustry fell sharply because of a relatively surplus production capacity and it also need to upgrade structure to a largedegree.(II)Independent innovation ability was weak and technological dependence had not beenchangedThe industry urgently needs a breakthrough in the core areas and the development of key components. The overall levelof products and technical applications is not high, and the technological innovation system with enterprises as the mainstayhas not been taken shape, so technical cooperation of production, research and development and science and technologyintermediary service levels must be enhanced. At the same time, independent innovation ability and awareness of enterprisesare still relatively weak, the situation of heavily depending on foreign key technology and components has not beenfundamentally changed, and pressures of intellectual property and patent fees are constantly increasing, which madeincreasingly and prominently negative impact on enterprises’ production and operation.(III)Relatively slow development of local enterprises whose gap with foreign-fundedenterprises was wideningGaps in whether development pace or economic benefits between local enterprises and foreign-funded enterprises areincreasing. Especially the growth rate of up-scale state-owned enterprises’ sales income in 2005 was only 3.2 % which wasfar lower than that of three foreign-funded enterprises, i.e. 25.8%. Profits of state-owned enterprises were 47 billion yuan,decreased by more than 50 percent compared with that in the same period in 2004, only 1 / 20 of three types offoreign-funded enterprises’ profits. At the same time, it is worthy to be paid attention that revenues and profit increase ofthree types of foreign-funded enterprises and their contributions to domestic economy are disproportionate, which is moreobvious. In 2005, among up-scale industries, three types of foreign-funded enterprises paid taxes of 15.5 billion yuan, with ayear-on-year decrease of 8%, state-owned enterprises paid taxes of 9.2 billion, with a year-on-year increase of 21%. Rate oftaxes and profits in three types of foreign-funded enterprises is less than 20%, over 14 percentage points lower than averagelevel of the whole industry.(IV)Steps of “going abroad” were relatively stagnant and the ability to deal with trade frictionswas poorInternational competition of local enterprises was not strong, and the level and extent of participating in internationalcompetition in the global areas were not high, so steps of “going abroad” were lagged far behind production exports. Manyenterprises had explored actively in international operations, transnational mergers and acquisitions, foreign investment, butshortage in international experience, funds and talents and many other problems have been exposed, and international debtproblem caused by mergers and acquisitions also affected the growth of overall industry efficiency. Meanwhile, facinggrowing trade frictions, domestic industry must strengthen the awareness and capacity of cope with difficulties as a whole,especially must change the relatively weakness in using international rules and practices to protect industry interests.·164·

Electronics & Information【Statistics data】Table 1 Output Status of Main Products in 2005Name of Products Unit Number Year-on-year Increase (%)Handset of Mobile Communication 10,000 sets 30354 30Program-controlled Exchanger 10,000 lines 7720.9 1.3Basic Station Equipment of Mobile Communication 10,000 channels 724.5 64.9Color TV 10,000 sets 8283.2 11.5Microcomputer 10,000 sets 8083.8 35.3Server 10,000 sets 318 88.9Displayer 10,000 sets 16057.6 58.2Integrate Circuit Hundred million pieces 265.8 12.9Section II. Review on the Development of the 20th Session Top 100 ElectronicInformation EnterprisesAccording to operating incomes in 2005, Legend Holdings Ltd. was ranked at the first of the 20th top 100 electronicsand information enterprises in China for its business income of 108.2 billion yuan. Haier Group (103.9 billion yuan businessincome) and BOE Technology Group Co., Ltd (54.8 billion yuan business income) were ranked second and third respectively.Enterprises ranked from fourth to thenth were the following: TCL Corporation, Huawei Technologies Co., Ltd., MideaHoldings Ltd., the Hisense Group Co., Ltd., Shanghai SVA (Group) Co. Ltd., Panda Electronics Group Co., Ltd. and PekingUniversity Founder Group Co., Ltd.There were 16 newcomers of the top 100 electronics and information enterprises among which Gree Electric AppliancesCo., Ltd.(Chongqing), Chen Hsong Copper Group and other 15 companies were listed in the rank for the first time and 16enterprises were cancelled from the rank because of reorganization and other reasons.Sort activities of top 100 electronics and information enterprises have been carried out since 1987, and there are morethan 20 sessions up to now. Through 20-year development, China's top 100 electronics and information enterprises wereshifted from initial scale-oriented development to intensive development of innovating independently, strengtheningstructural adjustment, speeding up multinational operations and enhancing the overall strength, and significant characteristicsare as follows.(V)Comprehensive competitive strength has been improved continuouslyTotal business revenues of the top 100 electronics and information enterprises in this session are 964.3 billion yuan,which is 18.2 % higher than that in the previous session, accounting for 25.1 % of the total industry, with profits of 24.8billion yuan, accounting for 19.0% of the total profits; taxes handed over were 28.9 billion yuan, accounting for 66.4% of thetotal. 100 enterprises, accounting for less than 0.2‰ of the total industry enterprises, created 1 / 4 of the total operatingincome, 1 / 5 of total profit and 2 / 3 of all revenues.There are 22 enterprises among the top 100 ones whose operating incomes are over 10 billion yuan, and that of LegendHoldings Ltd and Haier Group are more than 100 billion yuan, which is close to the qualification of top 500 Global Fortune.Twenty years ago, sales income of Shanghai TV factory ranking the first of top 100 enterprises in the first session was only576 million yuan, 10 years later (1997) sales income of Changhong Group was over 10 billion yuan, and in 2004 that ofHaier Group was more than 100 billion yuan. The basic sales income qualification of the first session 100 enterprises was40.27 million yuan, which was increased to 1.47 billion yuan 20 years later. In the current top 100 enterprises in China, thesum of top ten enterprises’ business income were 526.4 billion yuan, accounting for 54.6% of the total 100 enterprises’business income; their profits were 9.94 billion yuan, accounting for 40% of the total profits of 100 enterprises, among whichShenzhen Huawei's net profit was 5.15 billion yuan, ranked the first among the top 100 enterprises. Profit rate of GuangzhouRadio Group’s operating income was 24.7%, which was the highest business income of the top 100 enterprises.China's top 100 enterprises have become the main force to produce and sell electronic products. In 2005, sales of colorTV in top 100 enterprises were 67.08 million, accounting for 81.0% of that in the whole industry; sales of program-controlled·165·

China Business Guideexchangers in top 100 enterprises were 34.04 million, accounting for 49.1 % of that in the whole industry; sales of computerin top 100 enterprises were 16.65 million sets, accounting for 20.6 % of that in the whole industry; 13.12 million fridges,accounting for 40%; 27.626 million air conditioner, accounting for 41 percent of that in the whole country.Regional industrial clusters with the core of top 100 enterprises are formed. There are77 enterprises of the current top100 enterprises in Yangtze River Delta, Pearl River Delta and Bohai Bay areas, where sales revenues, profits and taxesrespectively accounted for 91%, 95% and 92% of those in the top 100 enterprises. Sales revenues, industrial added value andtotal profit in three major electronic information industry bases with the backbone of top 100 enterprises accounted for morethan 85% of all those in the whole industry, therefore, industrial concentration degrees and competitiveness have been furtherenhanced.(VI)Technical innovation capability has been enhanced significantlyResearch and development staff of the current top 100 enterprises are 93,600, accounting for 9.6 % of the total numberof employees. Research and development funds were 35.6 billion yuan, accounting for 3.7 percent of business income,significantly higher than the average industry level of 2.1%. Shenzhen Huawei invested 4.75 billion yuan into the researchand development, accounting for 10.1 percent of business income; research and development costs of more than 10 top 100enterprises, such as ZTE Corporation, Shanghai Bell, Guangwu Group, Shanghai Huahong, Neusoft, Sichuan Jiuzhou andothers, account for more than 6 percent of business income, which basically meet the investment level of internationalhigh-tech enterprises.(VII)Well-known brands are increasingly growing to maturityBrand Strategy is an important mode of international competition. Brand advantages of top 100 electronics andinformation enterprises are sped up under the formation of the survival of the fittest. The brand strategy is implemented tofocus market shares of major electronic information products on name brands. According to information released by NationalBureau of Statistics, brand market shares of top 10 sales of fax machines, color televisions, refrigerators, and other electronicproducts last year were over 80%, what’s more, brand market shares of top 10 sales of printers sales were over 90%.(VIII)Work on standards has been continuously acceleratedTop 100 enterprises actively participate in the formulation of international standards, for example, Shenzhen Huawei hasjoined 70 ISOs and acted as vice-chairmen in five ISOs. In the direction of industrial policies, the relationships betweenstandards and market, standards and the Government, the Government and enterprises were gradually straightened out. Manytop 100 enterprises united to regulate independent technological standards to solidify its own intellectual property rights, andstrengthened the integration of formulation of industry standards and industrialization in order to speed up industrialdevelopment. In 2005, Haier, Huawei and other enterprises set up the AVS Industry Alliance through which domestic marketwas regulated and international competitiveness was reflected to the external.(IX)International operation is stepped up to a new levelAs a backbone of China's electronic information industry, top 100 enterprises has accelerated the international pace.Export delivery values made by the current top 100 enterprises are 245.8 billion yuan, increase by 33 % over that of theprevious top 100 enterprises. Export delivery value of nine enterprises, Lenovo, Haier, TCL, the Shenzhen Huawei,Guangdong Midea, SVA , Nanjing Panda Electronics, Shenzhen Huaqiang and Great Wall Technology, are over 10 billionyuan, and Export delivery value of Shenzhen Huawei amounted to 17.3 billion yuan, which is listed in the first place of top100 enterprises.(X)Structural adjustment is pushed forward orderly·166·

Electronics & InformationRanking work of top 100 electronic information enterprises has been made for 20 years, and economic structureadjustment of top 100 enterprises is promoted in an orderly way. Firstly, industrial layout is adjusted reasonably to focus ontop 100 enterprises and speed up the construction of national electronic information industry bases and industrial parks.Groups of industry growth belts whose combined effects and radiation effects are obvious, industrial chains are relativelycomplete and leading roles are strong have been initially formed. Secondly, product structures are adjusted constantly. morethan 90 % of enterprises in the first session of top 100 enterprises in China engaged in color TV production and componentparts manufacturers, reflecting the actual situation, “Live with Color TV”, of China's electronic industry. In 1996 (the 10 thsession), product structures of the top 100 enterprises has been adjusted into diversified structure with synchronousdevelopment of communications, computer, new components, appliances. In the 20th session of top 100 enterprises in China,the proportion of enterprises engaging in R & D of integrated circuits, software, computers, communications products,systems integration, new displayers and new components is more than three quarters. Third, unreasonable regional structuresituation has been improved. Although the top 100 enterprises are still mainly concentrated in eastern regions, significantportions of revenues of the top 100 enterprises in eastern regions are from central and western regions.Top100 enterpriseshave become a dominant force of implementing regional gradient transfer in the electronic information industry.(Refer to Page-Section two of Chapter VIII of lists of the 20th session top 100 China's electronic information enterprisesof)Section III. Development Situation of China's Color TV Industry in 2005I.ReviewWith the development of color TV industry for over 20 years, China has become the largest TV production and salespower in the world, and its color TV output has accounted for over 50% of the total production in the world. In 2005, colorTV industry entered a new historically innovative period in which market demand for CRT color TV slowed down and newflat-panel TV market was in the expansion period. Under such circumstances, overcoming many difficulties of rising pricesof electronic materials, tensions of coal, electricity and oil, descending export drawback rate, rising labor costs, outsideanti-dumping and many other negative factors, China's color TV enterprises positively adjusted product structure, madeefforts to reduce the production and operation costs, developed new international and domestic markets, continued tomaintain a steady development and achieved good results.In 2005, China's color TV industry produced 82.8322 million color TVs, with a year-on-year increase of 11.5 %; 80.447million color TVs were sold, with a year-on-year increase of 10.69 %; 39.7465 million color TVs were exported, with ayear-on-year increase of 43.36 %, the amount of exports were 5050.8452 million US dollars, with a year-on-year increase of57.55 %. According to the production, sales and exports of color TVs since 2000, the growth rate of China's color TVindustry began to decline gradually since 2003, but still maintained a double-digit growth and withstood the test of unsteadydevelopment of the industry (See Table 1 and Table 2).(I)Rapid growth of flat screen televisions became a new economic growth pointThe year of 2005 was called as “Year of Flat Screen TVs” by household electrical appliance industry. After a period ofmarket development period in China, flat screen TVs were well known by people, its technology has become increasinglymature, and its costs were reduced substantially, and entered the rapid growing period. Judged from data of color televisionmanufacturers monitored mainly by Ministry of Information Industry, all flat screen TVs’ production, sales and exports inrecent years tended to grow rapidly (See Table 3 and Table 4).(II)Urban market shares of flat screen TVs were more than that of traditional CRT TV for thefirst·167·

China Business GuideSince 2005, flat panel TV manufacturers dropped prices of flat panel TVs substantially, created new products to seizemarket shares. In 2005, before and after May Day Golden Week, Sharp cut 30% prices down, then Philips, Sony, Toshiba andother brands followed to cut prices down immediately. Hisense cut down all prices of over 30 styles of flat panel TVs, and30-inch LCD of TCL was cut down to below 8,000 yuan. In two or three months, the decrease degree of LCD and plasmacolor TV prices was the largest with the unit of 1,000 yuan and number of cutting prices was the most concentrated, andlowered almost 1,000 yuan every week. According to data made by the market research companies on color TV salessituation in national 200 cities, retail sales of flat panel TVs increased monthly and exceeded retail sales of CRT TVs in May,2005. Market shares calculated with retail sales reached 53 %.(III)Color TV enterprises entered a new hot competitionAt present, China's color TV industry has entered an important strategic opportunity period of restructuring, and colorTV enterprises are actively looking for partners to seek further development. TCL, Changhong, Konka, Skyworth and othermajor color TV enterprises cooperated with foreign companies at deep levels. TCL set up a joint digital video laboratory withGenesis, and combined with TV section of French Thomson Company and formed TTE Corporation. Skyworth Group andJapan Seiko Epson Corporation formed a strategic alliance to jointly develop three LCD rear-projection television market.Texas Instrument Company established a good relationship to cooperate technically with Konka, Changhong and Skyworth.Such a strategy of cooperating with international technology giants and building the alliance is conducive to China's color TVenterprises to upgrade their technologies. At the same time, cooperation between domestic enterprises was sped up.Changhong Group signed strategic cooperation agreements respectively with five enterprises, such as Shanghai ZhaohuaScience & Technology Co., Ltd, COSCO Logistics Co., Ltd, Guangzhou Kingfa Co., Ltd and others. Cooperating throughvarious means of joint ventures, alliances, establishment of strategic partnership and others to obtain dominant positions inresearch and development of technology, channel marketing and other aspects was a new starting point for China's color TVindustry and showed that relationships between Chinese color TV enterprises were gradually changed from traditional andsingle market competition to harmonious relations of competition and cooperation.(IV)Investments in research and development were increased and core technologies of TVmanufacturers were broken throughUnder the circumstances of increasingly fierce competition in homogenizing products and sharing markets, Chinesecolor TV enterprises followed international advanced technologies to accelerate scientific researches of HDTVs, flat screenTVs and development process of new products. Many companies, such as Sichuan Changhong Electronic Co.,Ltd., HisenseGroup Limited Company, Xiamen Overseas Chinese Electronic Co., Ltd, Konka Group Co., Ltd, Skyworth Group CompanyLimited, TCL Group, Haier Group and so on, invested a lot of money and human resources and created an optical andmicro-display technology and research institute, and successfully introduced three piece type LCOS rear-projectiontelevisions into the market. Hisense Group invested more than 100 million yuan into the laboratory specialized for flat screenTVs; Xiamen Overseas Chinese Electronic Co., Ltd invested nearly 200 million yuan in reaching and developing high-endTVs in recent years; Konka Group Co., Ltd have a fairly complete LCD TV product lines. Skyworth Group CompanyLimited would also invest a large number of funds in the R & D of Monolithic LCOS rear-projection televisions and establishproduction bases of single-chip LCOS optical engine and complete machines.Hisense Group successful developed “Xinxin” chip, whose prices were cheaper about five US dollars than similarforeign products, and which could be used as control chips of video media players’ terminals including CRT TV, LCD TV,plasma TV and others. It ended the history of China's color TV production’s dependence on foreign chips and madeproducers changed from manufacturers to technology-patent owners. Hisense Group has become the largest chip supplier inChina.(V)Exports were transferred into high-end products, and color TV products faced newdevelopment opportunities·168·

Electronics & InformationIn 2005, China's color TVs exports returned to grow rapidly. From January to December, 39,746,500 color TV sets wereexported from China, with a year-on-year increase of 43.36 %, and export value was 5,050,845,200 US dollars, with ayear-on-year increase of 57.55 %. Among the total, export volume of CRT color TVs was 25,642,900 sets, and the exportvalue was 223,0162,000 US dollars, decreased by 1.62 %; export volume of LCD color TVs was 7,290,800 sets, and theexport value was 2,102,792,500 US dollars, with a year-on-year increase of 237.97 %; export volume of plasma color TVwas 243,000 sets, and the export value was 287,039,500 US dollars, with a year-on-year increase of 91.84 %. Export volumeof flat panel TVs accounted for 18.95% of the total export volume, however, export value of flat panel TVs accounted for47.32% of that of all color TVs, and the export value of a flat panel TV equaled to the value of 3.6 CRT color TVs. Rapidlyresumed growth of China's color television exports mainly resulted from international markets developed constantly by majorChinese color TV enterprises. TCL Group established sales companies or business offices in more than 10 countries andregions of the world, set up color TV manufacturing bases in Vietnam and India, and vigorously explored overseas market,which laid the foundation for TCL group’s internationalization. Color TV sets of Konka Group were also sold in the Australia,India, Russia and other more than 60 countries and regions. Other enterprises also accelerated their steps of developing newinternational markets, held or participated in international exhibitions in Russia, Eastern Europe, Africa and other places. Thispushed communication and cooperation between China's color TV industry and foreign TV industry so that restrictions ofexporting China's color TV in new international trade protectionism were broken.(VI)Industrial independent coordination development capabilities were enhancedAt present, industry scale and corporation scale of China's color TV have been the first in the world, color TVenterprises have been transformed from being scattered to being concentrated and began to realize internationalization. Interms of insufficient international market experience, excessive competition, anti-dumping in the foreign countries, technicaltrade barriers, intellectual property protection, weak supporting financial logistics and many other issues of Chinese color TVenterprises, Beijing Summit participated by main leaders of all key enterprises in electric video industry was held in thehistory of China's color TV industry for the first time in the first half of 2005. The summit decided to establish InternationalMarket Coordinating Committee of China Video Association to discuss and regulate self-discipline behavior criterions, createnational industry chains of Chinese color TVs, improve international markets reputation and play the advantage of making inChina, and decided to integrate overseas resources of member enterprises to avoid redundant construction, control overseasinvestment risks, overcome overseas trade obstacles in intellectual property rights, anti-dumping and trade barriers and others.Three coordinating committees of technical standards, intellectual property rights and domestic market were decided to set up,which is conducive to jointly face and solve various issues in various special fields of China's color TV industry throughharmonious competition.II. Prospect of Development in 2006In 2006, environments of policy, market, industry, technology faced by China's color TV industry will continue to begood. First, China's national economy will continue to maintain a rapid growth, urban residents’ income will grow faster,farmers’ income will increase year by year, and purchasing power of the market will continue to grow. Second, acceleratingurbanization process, increasing proportions of urban population and more than 25 million new commercial houses willprovide a broad market space for color TV products. Third, increasingly rational market competition and increasinglystandard market order will help enterprises to further expand production and sales. Fourth, domestic enterprises will continueto expand scales, brand advantages are taking shape, quality and efficiency will be constantly improved, levels of R & D willbe increased and new products are on the market continuously. Fifth, standards of China's high-definition digital TVs will become out and 2008 Olympic Games is forthcoming, which will stimulate the market of China's color TV products to grow.Sixth, China's color TV products will increasingly influence international market and exports will continue to maintain anover double-digit increase and will grow faster.·169·

China Business GuideTo sum up, it is expected that the growth rate of China's color TV volume in 2006 will remain at more than 10% andmarket shares of high-end color TVs will be increased further.【Statistics data】Table 1 Production and Sales of China's Color TV Products from 2000 to 2005Year Output(10,000 sets) Increase(%) Sales(10,000 sets) Increase(%)2000 3843.4 8.93 4055.9 15.982001 3952.2 2.83 4018.5 -0.922002 5200.0 31.57 5260.0 30.892003 6521.0 25.4 6500.0 23.572004 7328.8 12.0 7268.0 11.822005 8283.22 11.5 8044.7 10.69Table 2 Exports of China's Color TV Products from 2000 to 2005Year Export Volume(10,000sets) Increase(%) Export Value(10,000 US$) Increase(%)2000 1028.9 81.6 111486.19 76.332001 1162.8 13.0 140641.93 26.152002 1881.80 61.83 213895.01 52.082003 2277.15 21.01 255641.15 19.522004 2772.48 21.75 320593.99 25.412005 3974.65 43.36 505084.52 57.55Table 3 Exports of China Flat Screen TV from 2003 to 2005Year Export Volume(10,000sets) Increase(%) Export Value(10,000 US$) Increase(%)2003 220.4 18520.642004 319.05 44.76 77180.5 316.732005 753.38 136.13 238983.2 209.64Table 4 Flat Screen TVs’ Production and Sales Increase of Manufacturers Monitored Mainly by Ministry of InformationIndustryYear Production Increase(%) Sales Increase(%)2003 318.3 312.92004 215.3 211.62005 418.6 425.4Section IV. Review of China's Computer Industry Development in 2005China electronic computer industry was expanded further in 2005 and continued tomaintain a rapid development.(I)Industry scale continued to expand and ranked first in the industrySales income of China's electronic computer industry in 2005 was1.0453 trillion yuan, with a year-on-year increase of26.6 percent; export delivery value was 798.9 billion yuan, with a year-on-year increase of 28.7 percent, which respectivelyaccounted for 33.7% and 43.4% of the two of electronic information manufacturing industry and the scale of computerindustry was ranked the first of the entire industry for three consecutive years (See Table 1).(II)Output and sales rates of products maintained good levelsWith the deeper degree of domestic information and better levels of forecast and analysis of market by enterprises, theproportion between sales and inventory volume of the electronic computer industry was 2.2 percent in 2005, which werelower two percentage points than average level of the whole industry. According to the situation of key enterprises monitoredby Ministry of Information Industry in 2005, all product and sale rates of desktop PC but that from January to April were·170·

Electronics & Informationmore than 100%, while all product and sale rates of notebook computers but that from January to February were lower thanthose of desktop PC (See Table 2 and Figure 1).Figure 1 Production and Sales Rates of Desktop PCs, Notebook Computers and Microcomputers in 2005104Desktop PC10198Notebook ComputerMicrocomputer95Jan. toFeb.Jan. toMar.Jan. toApr.Jan. toMayJan. toJun.Jan. toJul.Jan. toAug.Jan. toSep.Jan. toOct.Jan. toNov.Jan. toDec.( III ) Large-screen LCD monitors and large-capacity hard disk gradually became thedevelopment direction of desktop PCLCD was the hot point of desktop PC market in 2005. In the current market of desktop PC, the proportion of LCD andCRT monitors matched on PC reached approximately 7:3, for example, all Shenzhou desktop computers were matched withLCD in 2005, and all Lenovo home computer series but exceptional models, were equipped with LCD.(IV)Increase rate of desktop PC slowed down and notebook computers accounted for a largerproportion of micro-computersGrowth rate of desktop PC output in 2005 was only 9.1 percent, lower 26.2 percentage points than the average growthrate of microcomputers. Prices of notebook computers and prices of desktop PC are closer, so notebook computers areincreasingly preferred by consumers. Output of notebook computers in 2005 was 45,648,000 sets, with a net increase of1,8149,000 compared with that in 2004, notebook computer accounted for 56.5% of microcomputers, increased by nearly 11percentage points compared with that in 2004 (See Table 3).(V)Intensified market competitionCompetition in the computer market was much fiercer in 2005, and computer enterprises continued to adjust theircompetitive strategies to maintain market shares.First, personalized products were put out continuously. With the mature computer market, manufacturers constantlyintroduced personalized products to meet different consumers’ needs. For example, Haier introduced notebook computerswhich can care eyes, Toshiba, Lenovo, and other manufacturers put out safe notebook computers, and Asustek Computer Inc.introduced wide-screen notebook computers on which television can be watched.Second, price competition was further intense. In the domestic market, most foreign brands further expanded marketshares by the method of cutting prices. Low-end notebook computers worth from 5999 yuan to 6,999 yuan were introducedby Dell in 2005, then Hewlett-Packard, Toshiba, Acer and Asustek also followed closely to cut price to 5,999 yuan. In theinternational market, the average export price of each desktop PC was lowed from 644 US dollars at the beginning of the yearto 617 US dollars, with a decrease of 27 US dollars.Third, the market patterns were adjusted continuously. Domestic computer market patterns were adjusted continuouslyin 2005, and individual traditional household appliances industries, such as Haier, LG, TCL, Amoi and other enterprises,entered the notebook computer market, but the original South High-tech Co., Ltd, BOE and other enterprises are forced towithdraw from the market.·171·

China Business Guide(VI)Demands in the domestic market increased and growth rate of exports slowed down47,585,000 sets of microcomputers were exported in the whole industry in 2005, with a year-on-year increase of 57.7%,almost 20 percentage points decreased over that in 2004, and export value of the whole year was 33.62 billion US dollars, anincrease of 42.7% compared to that in the same period of 2004, 31.4 percentage points decreased over that in 2004. Thedomestic sales proportion of notebook computers was raised from 8 percent in 2004 to 9.5 percent in 2005, while 82.3%desktop PCs were sold in domestic areas, nearly 10 percentage points higher than that in 2004 (See Table 4).(VII)Regional concentration was further enhancedChinese micro-computers were mainly produced in Jiangsu province, Shanghai and Guangdong province, where total68,364,000 micro-computers were produced, accounting for 84.6% of the total PC output in the whole country. In terms ofmajor regional distribution in China of PC production, 80,665,000 sets of PC were put out in the eastern region, accountingfor 99.7% of the total PC output in China, and shares of the central and western regions were less than one percentage point.(VIII)Further reliance on foreign-funded enterprises of computer industrySales income of three types of foreign-funded enterprises of the computer industry in 2005 was 978.3 billion yuan,accounting for 93.59% of that in the computer industry, increased by 0.62 percentage points compared to that in 2004, with95.9% contribution rate to the computer industry. In three types of foreign-funded enterprises, 22.07 billion yuan profit wasmade, accounting for 93.7% of that in the industry. However, three types of foreign-funded enterprises paid decreasing taxes,completing in 2005 3.21 billion yuan taxes, with a year-on-year decrease of 13.2 percent (See Table 5).【Statistics data】Table 1 Sales Income of the Computer Industry from 2003 to 2005Unit: 0.1 billion yuanSales Income 2005 2004 2003The Whole Industry( Up-scale) 31009 24127 17167Electric Computer Industry 10453 8257 5796Proportion (%) 33.7 34.2 33.8Table 2 Production and Sales of Microcomputers in 2005Production Volume(10,000 sets)Sales Volume(10,000 sets)Rate of Production andSales 产 销 率 (%)Microcomputer 8083.8 7881.7 97.5Desktop PC 3518.9 3525.9 100.2Notebook Computer 4564.9 4382.3 96.0Table 3 Alterative Proportions between Notebook Computers Output and Total Output of Microcomputerfrom 2003 to 2005Year 2005 2004 2003Microcomputer(10,000 sets) 8083.8 5974.8 3170Notebook Computer(10,000 sets) 4564.9 2750 1287Proportion of Microcomputer Accounted by Notebook Computers (%) 56.5 46.0 40.6Table 4 Exports of Desktop PCs and Notebook Computers from 2003 to 20052005 2004 2003Export /Production (%) 58.9 67.2 38.3Export Value(100 million US $) 336.2 235.1 135Export Value of Notebook Computers (100 million US $) 299 207.7 113.1Increase Rate(%) 43.9 83.6 413.7Export Value of Desktop Computers (100 million US $) 37.1 27.4 22Increase(%) 34.9 24.6 55.5·172·

Electronics & InformationTable 5 Completion of Key Indicators of All Economic Types of Computer EnterprisesElectronic computer manufacturing Sales Ratio (%)Proportion of the Proportion of theTotal Profits(%) Total Taxes(%)Domestic-funded Enterprises 6.41 6.26 24.74Investment from Hongkong, Macao, Taiwan Investors 23.86 18.02 36.19Investment from Foreigners 69.73 75.72 39.07Section V. Review of the Development of China's Software Industry in 2005I. ReviewIn 2005, manufacturing sector of electronic information industry increased slowly, however, China's software industrymaintained a rapid development, with increasing industry scale, steadily increased software exports and continuouslyadjusted industrial layout and industrial structure. So software industry became an important force to pull the rapid growth ofthe whole electronic information industry.(I)Software industry scale continued to expand and accounted for more than 1 / 10 ofelectronic information industryIn 2005, China's software industry completed software revenues of 390.6 billion yuan, with a year-on-year increase of40.5 percent, 15.7 percentage points higher than the sales growth increase of electronic information industry in the sameperiod and continued to be one of the fastest growing fields of electronic and information industry. In the period of “10thFive-Year Plan” from 2001 to 2005, the software industry’s average growth rate was over 40 percent, its scale was increasedmore than four times, its proportions of upscale electronic information industry were increased from 6.3 percent in 2001 then11.2 percent in 2005, and it played an important role in improving industrial structures of the entire electronic informationindustry.(II)Industrial structures were further adjusted and proportions of software services and systemsintegration were increasedFrom 2005, software products accounted for decreased proportions of China's software industry's total revenues, whilethe proportion of software services increased. In 2005, software products income of 193.15 billion yuan was completed bythe entire industry, with a year-on-year increase of 26.4% and proportions of the total income decreased from 63.5 percent atthe same period of last year to 49.5 percent. Systems integration revenues were 105.93 billion yuan, with a year-on-yearincrease of 84.7 percent. Software service income was 91.55 billion yuan, with a year-on-year increase of 201.9 percent,which was the fastest growing segment of the software industry, and its proportion accounted for the total income increased10.8 percentage points (See Table 1).The growth rate of China's software service revenues have been faster since 2005, which was because of the followingreasons: Firstly, as the domestic software market and software industry gradually became matured, the era of purchasingsoftware products cosmically, constructing software platform and developing software extensively were ended, and demandsfor software services of redeveloping software, maintenance, software consulting and others were growing rapidly; Secondly,with enhanced international competition awareness of domestic software enterprises, software outsourcing services weredeveloping rapidly; Thirdly, more and more enterprises provided online services through internet and income from internetservices was increased significantly. According to the analysis, through the “Technical Yea”, “Flux Year” and “Brand Year”,China's internet companies finally entered “Income Year” in 2005, because series of services, including portals of internetstations, charged mails, wireless message, virtual ISP, search engines, classified information, online games, e-commerce,e-learning, e-business solutions and others, have become sources of substantial revenues of network companies.(III)Export growth rates of software were lowered but growth potential was tremendous·173·

China Business GuideSince 2005, exports scale of China's software continued to be greatly expanded but export growth rate slowed down.Software exports value of 3.59 billion US dollars were completed in the whole year, with a year-on-year increase of 28.2percent, which was 11.8 percentage points lower than the increase degree (40%) at the same period of last year and also onepercentage point lower than the export growth rate (29.2 percent) of electronic information manufacturing at the same periodof last year. Software export growth rate slowed down because a higher exports cardinal number was formed in 2004, and onthe other hand, embedded software products were main export products in China's software industry and shares ofsoftware-only products with their own intellectual property rights and software outsourcing were smaller, and as the exportgrowth rate of electronic information industry was slowed nearly 17 percentage points in 2005, that of embedded softwareproducts was lowered to a certain degree (See Figure 1).Unit:100 million US $40302010059.6%7.5Figure 1 Developing State of Software Exports from 2001 to 2005Export Value of SoftwareYear-on-year Growth Rate35.9100%28201528.2%33% 40%2001 2002 2003 2004 2005Although the growth rate of China's software exports in 2005 dropped to a certain extent, potential for the growth ofsoftware export in the future would still be very large. First, international competitiveness of software companies wascontinuously enhanced. At present, China software export groups relying on six major export bases have been formed, withcontinuously enriched marketing experience of software export enterprises, increasingly strong R & D capability andcontinuously improved standards of quality management. According to incomplete statistics, 17 Chinese software enterpriseshave obtained CMM5 (including CMMI5) international certification. Second, exports of Chinese software products withindependent intellectual property rights are becoming new growth points. For example, CAD packaged software ofGuangzhou ZwCAD Software Co., Ltd, the typesetting system of Founder Technology Group Co., Ltd, enterprisemanagement software of UFIDA Software Co., Ltd. and others are representatives of export products with independentintellectual property rights. Third, in the face of fierce competition in the domestic market, many software companies beganto actively adjust strategies, turned to international market and entered the field of software outsourcing services. China'ssoftware outsourcing market was mainly concentrated in Japanese market a few years ago. India's software outsourcingindustry is short of talents in recent years so that its prices are increased, and consumers from Europe and United States havebegun to care China's software outsourcing industry. It is predicted that sizes of Europe and the United States softwareoutsourcing markets will be increased by more than 50 percent in the next few years.(IV)Software companies were expanded continuously and their strengths were strongerThe qualification of being elected as top100 largest enterprises of China's software industry was increased from 210million yuan in 2004 to 230 million yuan in 2005. There were 26 enterprises, 5 more than that in 2004, whose softwarerevenues were over 10 million yuan in 2005. At the same time, sales income of first 100 software enterprises chosen in 2004were over 100 billion yuan in 2005, with a year-on-year increase of 16.4 percent and their exports reached 1.59 billion USdollars, accounting for 45 percent of the total export amount of the software industry.(V)Further improved regional concentration of the software industry and gap of the softwareindustry between Chinese east areas and west areas is still widening·174·Unit:%1209060300

Electronics & InformationThere were 10 provinces and cities, an increase of three over the same period in 2004, whose software revenues wereover 10 billion yuan in 2005, which were Beijing, Guangdong, Jiangsu, Shanghai, Zhejiang, Shandong, Liaoning, Shaanxi,Fujian and Tianjin (the final three are new added regions).The total software revenues of 10 provinces and municipalitiesreached 342.93 billion yuan, accounting for 87.8% of the entire national software revenues, while software revenues of theremaining 19 provinces and cities only accounted for 12.2%, which showed that the regional concentration of softwareindustry was further enhanced. Judged from the regional distribution of the 10 provinces and cities whose software revenueswere over 10 billions, nine provinces and municipalities are in the east of China, only Shaanxi province is in the west ofChina, which showed that gap of the software industry in Chinese east areas and west areas was widened continuously(SeeTable 2).II. Prospect for Development in 2006In 2006, the world economy will still maintain the trend of growth, and the potential of demanding for informationtechnology in China's domestic market will be great, so domestic and international market environments will continue to begood for the fast growth of software industry. At the same time, with the good environment planned and complemented by“11th Five-Year Plan”, industrial policies will be more focused on resolving problems of comparatively small scale, lowprofit margins, shortage of core technologies, structural imbalance of software industry talents and others which are obstaclesfor software industry’s further development. Software industry will enter a new stage of integrated and innovativedevelopment.The implementation of “11th Five-Year Plan” and further fulfillment of software industrial policies will create a goodpolicy and social environment for software industry’s development. In the first year, 2006, of “11th Five-Year Plan”, policiesof promoting the development of software industry, regulated in the decree No. 18 and decree No.47 of the State Council ofP.R.C., will be further implemented, which will greatly mobilize enthusiasm of various departments, local governments andenterprises to create good policy and social environments for the development of their software industries.(I)New industrial policies will pay more attention to cultivate large software enterprises andsupport independent innovationChina's software industry has developed for many years and its scales have reached the aim that sales volume ofsoftware market reached 250 billion yuan in 2005, which was put forward in the decree No. 47, but the industry was short oflarge software enterprises and products with core technologies and independent intellectual property rights, which becomeurgent problems of preventing China's software industry from further development. In the new development situation ofsoftware industry at the beginning of 2006, Chinese Ministry of Information Industry issued regulations of special policysupports for international business and research and development of some large enterprises to accelerate large enterprises’development, and four ministries jointly issued “Management Measures of Evaluating Key Software Enterprises in NationalPlanning and Layout” on January 1, 2006 which prescribed to raise requirements of key software enterprises which enjoyedfavorable taxes. Both the above regulations and prescribes show that the sate will increase supports to large softwareenterprises, national industrial policies will tend to more focus on fostering excellent software enterprises and encouragelocal large enterprises to innovate independently and internationalize.(II)A large number of foreign funds will be invested into China's software market and domesticsoftware enterprises will face up with both challenges and opportunitiesWith increasingly matured and continuously expanded China's software market, foreign-funded software enterprises’investment in China has tended to grow rapidly. For example, Microsoft, SAP and other large multinational softwarecompanies spent a period of time to experiment and then gradually entered the stage of large-scale investments throughvarious forms to increase efforts to enter Chinese market. From the end of 2003, Microsoft has signed and became strategic·175·

China Business Guidecooperation partners with China National Software & Service Co., Ltd., Powerise Group, Digital China Co., Ltd, langChaoGroup and others, preparing for its entire layout in China, which will be tremendous tests for domestic software enterpriseswhose scales, technologies, capitals and managements are far from with multinationals.Of course, it may not be all challenges but an opportunity for China's software enterprises that foreign capital wasintroduced into China's software market and cooperation between foreign-funded software enterprises and domestic softwareenterprises. For example, at the beginning of 2006, Insigma Technology Co., Ltd. joined together with foreign-fundedsoftware enterprise, State Street Corporation, to jointly exploit financial outsourcing market of Europe and the UnitedStates, in which State Street Corporation gained 90 percent of stock rights of Zheda Innovation UniverseSoft Ltd, meanwhile,and Insigma Technology Co., Ltd. carried on a series of core technology platform systems and outsourcing orders of InsigmaTechnology Co., Ltd.(III)Information-based enterprises, online games, mobile software will continue to be hotpoints in the software market, and more attention will be paid to network security and networkservicesAs the strategy of “using information technology to stimulate industrialization” has been promoted, information-basedfields of traditional enterprises, in particular information technology market of small and medium enterprises will continue tobe important markets of the software industry in 2006. According to statistics, by the end of 2003 more than 99% of allChina's state-owned enterprises and up-scale non-state-owned industrial enterprises were small and medium enterprises, 90percent of which haven’t realized informationization.China's online game market has flourished since 2001, developed annually in a very high speed and its industrial scalesgrew by 10 times with over 3 billion yuan production value and more than 300 enterprises engaging in the development andoperation of online games. But enterprises of this area are mainly small enterprises, almost no large enterprises in this field,so in the face of a huge market space and growth potential more software enterprises are expected to enter this field in 2006.With the promotion and popularization of the next generation of communication technology, mobile devices and smartphones are becoming other forms of computer terminals. Mobile software development and value-added services of theabove mobile terminals are the new development direction of software industry. At present, with 393 million of China'smobile phone users and continuous annual increase of 50 million to 60 million, scope of mobile software market willcontinue to grow.Increasingly complex users’ application systems and network environment have caused network security environmentdeteriorated. Many incidents harmful to network security occurred in 2005, even banking network systems which havestronger prevention measures were intruded. In June, hackers intruded Master, VISA and other UnionPay bank organizationsso that over 40 bank cards users’ information was lost, which become the widest range of victims in network securityincidents. Therefore, the software industry will focus on meeting users’ demands for comprehensive network security in2006.Internet-based software services will continue to comprehensive in 2006. New network services contents and forms willemerge and ways and scopes of internet software services will be expanded. Product providers and solution providers willgradually provide more convenient services through internet so that internet software products and services will be furtherintegrated.【Statistics data】Table 1 Changes of Software Industry Revenues from 2004 to 2005Unit:%2004 2005 Changes of ProportionRevenue of Software Products 63.5 49.5 -14Revenue of System Integration 23.9 27.1 3.2Revenue of Software Services 12.6 23.4 10.8·176·

Electronics & InformationTable 2 Increase of Top Ten Provinces and Cities in Software RevenuesUnit:%No. Provinces and Cities Countrywide Proportion Year-on-year Increase1 Beijing 23.4 42.02 Guangdong 14.6 43.33 Jiangsu 10.6 98.94 Shanghai 10.0 67.65 Zhejiang 7.0 13.46 Shandong 6.4 4.27 Liaoning 5.5 52.08 Shanxi 4.0 11.49 Fujian 3.5 19.010 Tianjin 2.8 30.0Total 87.8 39.8Section VI. Review of the Development of China Mobile Phone Industry in 2005I. ReviewStimulated by exports and domestic demands in 2005, Chinese mobile phone industry continued to grow rapidly. With afine coordination between production and sales, exports of Chinese mobile phones continue to grow substantially. Accordingto statistics made by Chinese Ministry of Information Industry, 303.54 million mobile phones were produced and 303.86million ones were sold in the whole year of 2005, with respective year-on-year increases of 30% and 31.9%, and 228 millionwere exported, an increase of 56% compared with that in the same period in 2004.(I)As the global mobile phone manufacturing base, China further consolidated its statusWith the rapid development of mobile communication business, Chinese mobile phone industry continued to expand itsscales. The output of mobile phones in the whole industry in 2005 was 303.54 million sets, with a year-on-year increase of 30percent, and 303.86 million mobile phones were sold, with a year-on-year increase of 31.9 percent. Among the total outputand sales, output of GSM handsets were 274.12 million, with a year-on-year increase of 28.9%, sales were 274.42 million,with a year-on-year increase of 30.9 percent; output of CDMA mobile phones were 29.42 million, with a year-on-yearincrease of 41.8%, sales of 29.43 million, with a year-on-year increase of 42.4%. At the same time, 58.6 million new mobilephone users were increased and the total number of mobile phone users was 393.4 million. With the rapid risingpopularization rate of mobile phones, 30.3mobile phones was owned by per 100 people in 2005, which were more 4.4handsets than that in 2004. According to data of IDC, the worldwide production volume of mobile phones in 2005 was 825million, of which about 36.8 percent mobile phones were produced in China, increased by 1.7 percentage points compared tothat in 2004.Therefore, the position of China as a global mobile phone manufacturing base was further consolidated.(II)Exports of mobile phones continued to maintain a rapid growth, which mainly stimulatedthe industrial developmentIn 2005, 228 million mobile phones were exported from China, with a year-on-year increase of 56%, and the exportvalue amounted to 20.635 billion US dollars, with a year-on-year increase of 45.7 percent. In the same period, 12.67 millionsets of mobile phones were imported, 97% of which were produced and matched with complete sets of parts, with ayear-on-year decline of 0.6 percent, and imports amount was 1.193 billion US dollars, decreased by 19.2%. The favorablebalance of 19.442 billion US dollars were achieved in 2005, an increase of 6.757 billion US dollars compared with that in thesame period of 2004. Export volume of industry-wide mobile phones in 2005 accounted for 75 percent of sales, increased by11.7 percentage points than 63.3% of 2004.Exports of cell phones in China still mainly relied on foreign-funded enterprises. In 2005, export amount offoreign-invested enterprises accounted for 94.2% of the total of the whole China, of which more than 10 million mobile·177·

China Business Guidephones were exported in six enterprises in the whole year, two enterprises more than that in 2004, which accounted for 66percent of total exports. Among them, Motorola exported 61.559 million mobile phones, with a year-on-year increase of84.4%, accounting for 85% of sales; Nokia exported 32.75 million mobile phones , with a year-on-year increase of 12.5percent, accounting for 51.2 percent of sales; Sony Ericsson Putian exported 17.44 million mobile phones, with ayear-on-year increase of 62.1%, accounting for 81.3% of sales; Siemens exported 13.85 million mobile phones, with ayear-on-year decrease of 3.3%, accounting for 97.9% of sales; Tianjin Samsung exported 11.3 million mobile phones , with ayear-on-year increase of 72.4 percent, accounting for 57.6% of sales; Hangzhou Motorola exported 13.5 million mobilephones, with a year-on-year increase of 169.5 percent, accounting for 95.8% of sales.“Going abroad” strategy of domestic brand mobile phone enterprises made a substantive breakthrough. In 2005,domestic brand cell phone companies continued to strengthen efforts to develop the international market, the export volumeexceeded 10 million sets and reached 13.21 million in the whole year, an increase of 106.2% compared with that in the sameperiod in 2004. Ningbo Bird Co., Ltd continued to be the leader among exporters of domestic brand mobile phone enterprisesand made good achievement through launching a dual-brand strategy to strengthen widening international market andthrough cooperating with overseas operators to speed up the pace of developing overseas markets. In 2005, Ningbo Bird Co.,Ltd exported 6.05 million mobile phones, with a year-on-year increase of 79.2 percent, accounting for 46% of export volumeof domestic brand mobile phone enterprises. Hutchison 3 G and ZTE signed a contract about the bulk purchase of 3GWCDMA mobile phones, which showed that ZTE became a terminal vendor of worldwide 3G.Judged from the industrial development in recent years, the export ratio of China's mobile phones was increased year byyear, and their pulling effects on the development of the mobile phone industry gradually increased (See Table 1).(III)Market structures of products were further adjustedWith increasingly fierce competition in the market, most enterprises actively adopted positive measures and constantlyadjusted marketing strategies, a new round of the pattern changes of Chinese mobile phones market in 2005 emerged.The domestic market shares of foreign-funded enterprises were further improved. With its strong capital andtechnological advantages and with a full grasp of the domestic market situation, foreign brand mobile phones manufacturersaccelerated to launch new products to capture market shares on the one hand, and on the other hand, went all out in productsto cover all high, medium and low-grade products, and enhanced the competitiveness of domestic enterprises in middle andlow grades of products. With the rapid increase in 2005, market share of foreign-funded enterprises reached 59.4 percent, 3.9percentage points higher than that in 2004. Among the total, domestic market share of Nokia reached 25.8 percent, 10.8percentage points higher than that in 2004.In terms of domestic market shares, Motorola reached 8.7 percent, Samsungreached 6.9% and Sony-Ericsson reached 3.3%. The total domestic market shares of the above top four foreign-fundedenterprises reached 44.7%, which was higher than domestic market shares of all Chinese brands.Market shares of domestic brand mobile phones enterprises continued to decline. In 2005, original competitiveadvantage of domestic brand mobile phone disappeared gradually and its growth was weak, which were caused by thefollowing. As the original competitive advantages in channels, prices and familiarity with local market conditions wereincreasingly weakened, the defects in capital, technology and other aspects became main factors of constraining China'sdomestic brand mobile phones enterprises to further develop. The constraining factors were rapid industrial expansion,slower marketing of new mobile phones, many problems in the quality of products, decrease or even losses in enterprises’profits and others. As a result of these above factors, domestic market shares of domestic brand cell phone enterprisescontinued to decline from 44.5 percent at the end of 2004 to 40.6% in 2005. Judged from the top three domestic brandenterprises, the total domestic sales in 2003 accounted for 31.6% of domestic market shares, which were decreased to 22.5percent in 2004 and 17.5 percent in 2005.Production was concentrated further. The scale of Chinese mobile phone industry was further expanded, and productionwas concentrated into superior enterprises. Output of top ten enterprises in 2004 accounted for 72.9% of that of the wholeindustry, and their sales accounted for 72.8% of that of the whole industry. In 2005, production concentration degree wasfurther enhanced. Calculated by year-on-year caliber, the production and sales of top 10 enterprises respectively accountedfor 78.7% and 78.4% that of the whole industry.·178·

Electronics & Information(IV)China-made brand mobile phones have begun to enter the market of mobile customizedphoneGuangdong Mobile Communication Co., Ltd purchased Q515 mobile phones from TCL in 2005, which became one offive customized phones selected firstly into Guangdong Mobile Communication Co., Ltd, meanwhile, another type of TCL,758, has been selected into the customized products portfolio of Guangdong Mobile Communication Co., Ltd. China MobileCommunication Co., Ltd purchased S198, S610, V69 and other types of cell phones from Ningbo Bird Co., Ltd. China-madebrand mobile phones have entered customized portfolio, which broke the monopoly of China Mobile customized models byforeign brand mobile phones and also showed that quality of some China-made mobile phones has been improvedsubstantively and reached quality level of international standards .(V)Fresh mobile phone enterprises allied to share marketIn 2005, four fresh mobile phone enterprises, Skyworth Mobile Communication Co., Ltd, Guohong CommunicationDigital Group Ltd., Dalian Daxian Pantech Communication Co., Ltd and Wanlida Group Co., Ltd. announced that they wouldally in procurement, after-sales service, research and development, production, sales and others to share resources in order toachieve the aim of lowering costs and increasing profits. By the way of alliance, raw materials can be procured fromupstream suppliers together to reduce costs and joint service stations were set up to improve each service spot and reduceafter-sales costs.(VI)Much severer market competitionIn 2005, the competition of domestic mobile phone market was still fierce. On the one hand, costs of raw materials,energy and labor were increased; on the other hand, structural and short-term oversupply of mobile phones led tocontinuously lower prices of the domestic mobile phone market and continuously compressed space of corporate profit;Increasingly widened lower end of market by foreign-invested enterprises further compressed market space of domesticbrand mobile phones so that domestic brand mobile phone manufacturers were difficult to further develop.(VII)Speedily updating of productsAs new mobile communications businesses have been introduced, functions of mobile phones were enhanced andoutside shells of mobile phones were renovated, most of mobile phone manufacturers continuously made out new varieties ofcell phones which adapted market demand. Updating cycles of handsets were further shortened, so the situation of relying onone type of cell phone to overcome difficulties a few years ago would no longer exist.(VIII)Insufficient funds restricted the development of domestic mobile phone enterprisesAs our state strictly controls the scale of bank credit, loans were controlled to grant rigorously and prudently by banks toenterprises, especially to the mobile phone industry. Some enterprises had to withdraw from the mobile phone industrybecause of insufficient funds and problems in capital chains.(IX)China made technological breakthroughs in the area of 3GFollowing the TD-SCDMA network technology standard, Vimicro successfully developed a mobile phone chip, “StarMobile II”, which made a breakthrough in dealing with mobile phone music and flash in the era of 3G. Noah3000 mobilephone chips developed jointly by Southeast University and Dongda Communications Inc. were passed the systematicaltesting including calls and data transmission and the test results showed that all performance indicators of this chip reachedWCDMA international standards. This indicated that China has had all core technologies to develop three standards of theworld's mobile communications.·179·

China Business Guide(X)Channel partners began to be engaged in customized business of mobile phones.As operators entered the terminal sales field in 2004 and made out customization of mobile phones, ZhongyuTelecommunication Co., Ltd, as the largest domestic professional channel partners of mobile phones, launched the targetedcustomization of unique phones after direct supply and buyout business in 2005. Channel partners of mobile phones involvedthe prescription of mobile phone prices, and such changes of production and sales patterns and distribution chains canintegrate brand strengths and price advantages so as to further promote market demand.II. Analysis of the Situation in 2006Customization of mobile phones will create new opportunities and challenges for mobile phone industry. InFebruary, 2005, the Chinese State Development and Reform Commission issued Several Provisions on Approval of MobileTelecommunications System and Terminals Investment Project, which indicated that the licensing and approval system ofmobile phones carried out for a number of years was ended. In one year, 20 mobile phone companies, excluding increasedvarieties of original mobile phone enterprises, were newly approved so that some enterprises with strong economic strengthand R & D capability entered the area of mobile communications, which not only made market competition fiercer but alsoenhanced overall competitiveness of domestic brand mobile phone enterprises.Transition of mobile business from 2 G to 3 G will bring new opportunities to domestic brand cell phoneenterprises. In 2006, China will actively and pragmatically promote the development of the third generation mobilecommunication (3 G). Network building of 3 G will bring mobile communications industry with a few years of high-speeddevelopment, at the same time, new game rules in the era of 3 G will be changed profoundly and industrial chains will bemore complex and diverse. Various groups, including terminal manufacturers, mobile operators, equipment vendors, contentproviders, financial service providers, wireless access operators and others, will be more closely linked. An importantindicator, i.e. the ability to integrate upstream and downstream resources, will be increased to the core competitiveness ofmobile phone manufacturers, and in this aspect domestic brand cell phones will have greater advantages.Innovative sales channels of mobile phones will bring new opportunities and challenges to enterprises. With thecoming era of G 3, sales channels will be changed profoundly. In order to promote new business, China Mobile and ChinaUnicom will strengthen their own strength in the whole industrial chains and enhance links with end-users, and will makemore efforts in the sales field of mobile phones to deal with new operators’ future impact. Along with the release of 3 Glicenses, new mobile operators are facing with pressure to rapidly develop consumers, and will be similar with China Unicomto adopt C net initial strategy that users are developed through preferential methods, such as terminal subsidies, free mobilephones if joining networks and others. Massive procurement and bundled sales of mobile phone operators will be rapidlyevolved into important sales ways.Domestic brand cell phone manufacturers are still facing weak independent innovation capability, imperfect supplychain, deficient development of international market and other issues, and in the export sector, they also facing intellectualproperty litigation by international multinational companies and other uncertain factors. In 2006, Chinese mobile phoneindustry will face the development environment with both opportunities and challenges. On the one hand, economicglobalization trends to develop deeply, global restructuring is accelerated, manufacturing capacities of developed countriesare speedily transferred into developing countries, which help China better participate in international labor division andcooperation. According to estimates of IDC, global mobile phone market in 2006 will grow by 5%, which will furtherpromote the growth of China's exports of mobile phones. On the other hand, China's national economy in 2006 will continueto maintain steady and rapid growth, and a good market demand environment for mobile phone industry will be created byaccelerated process of Chinese urbanization, people's increased income, quicker upgrading of consumption structure so thatdemands for mobile phones in the domestic market will remain strong. Constantly changing of phone functions and designswill speed up the upgrading of mobile phones and promote further growth of the market. At the same time, the application ofnew communications technologies will enrich contents of cell phones and attract more mobile phone users so that there willbe rapid growth in both urban mature market and rural fresh market. In 2006, domestic new mobile users will continue to·180·

Electronics & Informationremain around 48 million users. With increasing varieties, further enhanced functions and declining prices, cell phones willcontinue to improve its update rate which is expected to increase from 30% ~ 40% in 2005 to 40% ~50% in 2006. Therefore,China cell phone industry in 2006 will continue to maintain a rapid, healthy and coordinated development and its output inthe whole year is expected to reach 340 million sets.【Statistics data】Table 1 Production and Export of Mobile Phones from 2000 to 20052000 2001 2002 2003 2004 2005Output 5257 8397 12000 18644 23175 30367Export 2275 3968 6329 9534 14604 22800Ratio (%) 43.3 47.3 52.7 51.1 63 75·181·

China Business GuideChapter VII International Cooperation and Product Import and ExportTradeSection I. Strengthening Overseas Cooperation and Promoting IndustrialDevelopmentI. ReviewIn 2005, focusing on “the tenth five-year-plan” and the development emphasis of the information industry, China’sinformation industry conducted the strategy of “bringing inward” and “going outward” and promoted wide internationalcooperation and communications in the information industry, creating good international and domestic environments for therapid development of China’s information industry.II. Promoting “bringing in”, and deepening the overseas industrial cooperationIn 2005, focusing on such key development fields as integrated circuit, software and etc, China’s information industrydeveloped wide and profound communications and cooperation with large MNCs in investment, R&D, production and so on,and the cooperative level and quality were further improved.(I)Attaching importance to China’s market, and developing cooperation of mutual benefitIn recent years, China’s electronic information industry achieved rapid development and the market scale wasincreasingly enlarged. More importantly, China’s government attached more importance to the development of informationtechnology and information industry, which completely improved China’s investment environment. Therefore, a lot offoreign corporations set foot on China to look for cooperative opportunities, and the overseas cooperation in the electronicinformation industry became very active.As the key fields in the development of the information industry, integrated circuit and software fields attracted wideattention from China’s government, enterprise circle and foreign corporations. In order to enlarge their market in China andconsolidate their leading position in the market, some MNCs strengthened the investment and cooperation in the integratedcircuit field in China. In October 2005, AMD, the 2 nd largest MPU manufacturer in the globe, held a global board meeting inBeijing to study China’s investment environment and development of the information industry and discuss its developmentstrategy and plan, which is the first time for it to convene a global board meeting in other country away from the USA.During the meeting, Hector Ruiz, the board chairman of AMD, put forward the proposal “planting the core in China andwinning the future in joint hands”, and signed an agreement with China’s related department to transfer the core technique ofX86 microprocessor with low power consumption so that they can develop the products suited to China’s market and enlargeand consolidate its position in China’s market by means of the core technique of AMDX86. The board chairman and CEO ofIntel also came to China in succession, added the investment in Chengdu CPU package and testing factory and moved itschannel career department to Shanghai, which is the first time for foreign enterprises to set its global career headquarters inChina.The cooperation in software field has been gradually deepened. In May 2005, China’s Ministry of Information Industrysigned Memorandum of Understanding on the Cooperation in Open Source Software Field between Ministry of InformationIndustry, PRC and Ministry of Economy, Finance and Industry, French Republic with France’s Ministry of Economy, Financeand Industry, which determined the cooperative direction and field in open source software field between China and France.In open source software field, China developed a lot of cooperation with Japan and Korea e.g., OSS Promotion Forum among·182·

Electronics & InformationChina, Japan and Korea, the 2 nd session of Northeast Asia OSS Promotion Forum. In June 2005, the 9 th China InternationalSoftware Expo sponsored by Ministry of Information Industry and the 3 rd Dalian Software Fair sponsored by Ministry ofCommerce were held in Beijing and Dalian respectively. Many software enterprises and users from every corner of the worldattended or visited the two exhibitions, and the exhibitions built a good platform for corporate cooperation. The cooperationamong the software enterprises of China and other countries has been continuously deepened. Microsoft signed agreementswith Langchao Group Ltd., China National Computer Software&Technology Service Corporation (CS&S) to investUS$25.00M and US$20.00M respectively to build associated on-line lab; Gold Abacus achieved US$7.60M of investment ofUnion Fortune Investment Co., Ltd, UK; and CS&S also conducted cooperation on financing with World Bank InternationalFinance Corp.(IFC).In 2003, Philip, Holland held the first global board meeting in China; following that, the company held another boardmeeting focusing on developing China’s business in China. Sumsung, Korea planned to build the 2 nd Sumsung Headquartersin China. Best Buy, US intended to conduct cooperation with China’s information industry to exploit American market bymeans of China’s production advantages.(II)Enlarging the investment on scientific research in China and strengthening technicalcommunication and cooperationAt present, the investment of MNCs on scientific research in China has been gradually enlarged, and the technicalcommunication and cooperation have been strengthened continually. Whiling enlarging the production investment in China,many large companies also expands the input in research and development.Preliminary statistics show that Motorola has accumulatively invested over US$300M in the research and developmentin China; Philip put forward to input 40.00M Euros in its technology park in Shanghai to conduct R&D every year; Microsofthas gradually expanded its research institute and research center in China; while developing its authorized processingbusiness, Cisco invested US$30.00M to build a Shanghai R&D center; Sun made a decision to double the scale of itssoftware center in China in the upcoming two years.In 2005, Ministry of Information Industry- Software & Integrated Circuit Promotion Center (hereafter as CSIP) reachedtwo cooperation with MNCs in the R&D field. In February 2005, Ministry of Information Industry and Freescale jointly builtLinux system laboratory to promote the application and R&D of Linux system in PowerPC. In December 2005, theIntellectual Property Service Laboratory organized by Ministry of Information Industry and Thomson was established, whichis the only laboratory serving the industrial intellectual property in China, and it provides global patent standard andadvanced intellectual property analysis and management tools such as the index Database for scientific papers and etc. Inaddition, the laboratory project jointly built by CSIP, Microsoft and HP is also on-going in accordance with the plan.(III)Guiding foreign enterprises to invest in the Western Region, and uniting foreign fund torevive the Northeast RegionIn 2005, China’s government called on foreign enterprises to participate in China’s Western development and revivingthe old industrial bases such as Northeast and so on. In order to carry out the national development strategy such as Westerndevelopment and reviving the old industrial bases such as Northeast, the Ministry of Information Industry tries to takecooperative ways such as the co-development between the central government and local authorities, foreign enterprises andthe enterprises in the Middle and Western Regions, promotes the overseas cooperation of local information industry andimproves the development level of the information industry in the Middle and Western Regions and the application level ofthe information industry in the old industrial bases. In July 2005, Ministry of Information Industry organized an MNCs visitteam attended by 8 large MNCs leaders including Motorola, Microsoft, Texas Instruments, Philip, Ericoson, Sumsung, LG,and NEC to conduct an on-spot review to the information industry and information development in Inner MongoliaAutonomous Region so as to push the investment and cooperation of the above companies with the Western. In InnerMongolia Autonomous Region, the delegation inspected the traditional large backbone enterprises, economic developmentzones and industrial parks of Huhehaote and Baotou respectively, and held talks and communications with the leaders of the·183·

China Business Guidetwo cities and related departments. This measure enabled the leaders of these enterprises to get to know the informationindustry, information development plan, market development and demand of Inner Mongolia Autonomous Region and thetwo cities. After the activity, some companies conducted follow-up inspections to Inner Mongolia Autonomous Region. Atpresent, Microsoft is negotiating cooperation issues on building a R&D center in Inner Mongolia Autonomous Region withthe local government.Owing to the joint efforts of Ministry of Information Industry and Heilongjiang Provincial Government, Sino-RussianInformation Industrial Park is under construction, which consists of Haerbin Park, Mudanjiang Park and Russia’sSea-Periphery Kray. In May 2005, the 1 st phase of Sino-Russian Information Industrial Park launched. Two industrial parkswith planned area 5 km 2 and 3 km 2 respectively were built in Haerbin and Mudanjiang. At present, the infrastructureconstruction of 1km 2 -“initiating area” has begun and the investment attraction of the park has also on the way. HeilongjiangProvincial Government and Russia’s Sea-Periphery Kray Government are conducting discussions on the issues on buildingSino-Russian Information Industry Park in Russia. The final layout of Sino-Russian Information Industry Park is one parkand three districts, which will drive the investment attraction in the eight cities including Haerbin, Mudanjiang and etc, andpromote the extension and development of the industrial chains such as complete parts, package materials for industrialenterprises and form scale operation. Meanwhile, it will also play a positive role in adjusting the import and export tradingproduct structure between China and Russia, establishing bilateral import and export trade and the mutual promotion andharmonious development of import and export processing industry.III. Implementing “going outward”, and promoting the internationalizationdevelopment of enterprisesFocusing on the foreign and domestic markets and resources, Ministry of Information Industry developed multi-leveland multi-channel overseas cooperation, which enlarged and deepened the communication and cooperation on theinformation industry between China and overseas enterprises, raising China’s position in the world.(IV)The Government promotes enterprises to “go outward”In 2005, Ministry of Information Industry made great efforts to promote enterprises to “go outward” and conductoverseas cooperation. The main measures include:The first one is to promote enterprises to “go outward” via the overseas visits of high-rank officials. In May 2005,Vice-minister Lou Qinjian led a team to visit Greece and Spain. The main goal of the visit is to promote and push theimplementation of “going outward” strategy and help enterprises extend the overseas market. In Greece, the delegationvisited and inspected Greece’s Ministry of Transport and Communications, OTE, a Greek telecom operator andINFO-QUEST, through which, the development and cooperation in the information industry between Greece and China werecommunicated and the delegation also recommended several China’s enterprises such ZTE Corporation, HuaweiTechnologies Co., Ltd. and so on. The delegation also expressed that China’s government would support the two companiesto develop their business in Greece. In Spain, the delegation visited its Ministry of Industry, Travel and Trade, and held talkswith the senior management team of Telefonica, which deepened the understanding and mutual trust between the twocountries. The two parties conducted wide communication and discussion towards the issues including the cooperation incommunications field and joint extension of the communication market in the third country and the like. Telefonica expressedthe hope to strengthen the purchase and R&D cooperation by means of China’s capacity and advantages in communicationequipment manufacturing, software and other electronic information product manufacturing; meanwhile, it also hoped todevelop cooperation with China’s telecom enterprises in China’s telecom market.In July 2005, Minster Wang Xudong paid a visit to Brazil by means of the opportunity to attend the APEC telecomminister meeting held in Peru. He discussed the cooperation in digital TV field with Brazil, and the two parties reachedunanimous opinion and hoped to enhance the cooperation and communication in the field. In September 2005, when MinisterWang Xudong attended the minister meeting of ASEAN and China, Japan and Korea (10+3), held talks with Vietnam’s·184·

Electronics & Informationminister of post and telecom, visited the related companies in the information and communication field and promoted China’srelevant enterprises, which pushed the communication and cooperation of main management departments on information andcommunication and the mutual benefit and cooperation of the information industry and enterprises between the two parties.In December 2005, Vice-minister Lou Qinjian visited Jamaica and Cuba. In Cuba, he held work talks with Cuba’sMinistry of Information and Communication and visited President of GE, General Valdez, and paid a visit to the joint venturebuilt by China PTIC Information Industry Corporation and Cuba’s GE, which pushed substantially the business and projectcooperation of China PTIC Information Industry Corporation, Huawei Technologies Co., Ltd., and ZTE Corporation in Cuba,the partnership of China and Cuba in the information technology field, strengthening the cooperation in the internationalmultilateral fields and the two key cooperative projects i.e., color TV and communications. In Jamaica, he made great effortsto push the wide cooperation in the information and communication field between China and Jamaica, ZTE Corporation’sparticipation in Jamaica’s remote medical program, the network rebuilding programs of Huawei Technologies CO., Ltd. andZTE Corporation with Jamaica.In order to push the enterprises in such fields as telecom operation, equipment manufacturing, design and construction toexploit African market, Vice-minister Jiang Yaoping visited Kenya and Angola. Vice-minister Jiang Yaoping held talks withthe heads of the Ministry of Finance, the main administrations of communication and telecom of the two countries and visitedthe local representative offices of Huawei Technologies Co., Ltd., ZTE Corporation, and Alcatel Shanghai Bell Co., Ltd.,which promoted the cooperation in the information and communication field between China and Kenya and Angola and thebusiness extension and program cooperation of China’s related enterprises.The second one is to “invite inward” and exploit the international market. In 2005, the Ministry of Information Industryinvited the heads of information and communication administrative departments from 25 countries including Algeria, Kenya,Cameroon, Ghana, Guinea, and Peru and so on and the secretary general of Common Market for Eastern and Southern Africa(COMESA) to visit China. The visits not only deepened the full understanding of these countries to China’s rapiddevelopment of economic and information industry since its opening up, the overall power of information industry and thetechnology, production, R&D of the Chinese enterprises, and enhanced their confidence on the cooperation with China’sinformation industry, but also got a profound understanding to the support attitude of China’s government to the overseasbusiness extension of Chinese enterprises. All of these played a positive role in promoting the overseas projects of China’senterprises.The third one is to sign overseas cooperation agreements and ensure enterprises to exploit overseas market. China’sgovernment signed cooperation documents with the government and the information and communication administrations ofother countries, and focused on the fund operation, technical exchange, equipment introduction, staff training, research anddevelopment and operation and management in the information and communication field between the governments,enterprises and scientific research and education departments of the two countries, which laid a foundation for China’senterprises to exploit overseas market. In 2005, the Ministry of Information Industry signed the following cooperationagreements: Memorandum of Cooperation Understanding between Ministry of Information Industry, PRC and Ministry ofPublic Management, Home Affairs, Posts and Telecommunications, Japan, Memorandum of Cooperation Understandingbetween Ministry of Information Industry, PRC and Ministry of Communication and Information Technology, Azerbaijan,2005 Working Plan of Information Industry Working Team, Sino-U.S. Joint Commission on Commerce and Trade,Memorandum of Cooperation Understanding between Ministry of Information Industry, PRC and Ministry of InformationTechnology and Telecom, Pakistan, Memorandum of Understanding on the Cooperation in the Information andCommunication Field between Ministry of Information Industry, PRC and Columbia Republic, Memorandum ofUnderstanding on the Cooperation in Open Source Software Field between Ministry of Information Industry, PRC andMinistry of Economy, Finance and Industry, French Republic, Memorandum of Understanding on the Cooperation inCommunication and Information Technology Field between Ministry of Information Industry, PRC and Ministry ofCommunication and Information, Republic of Uzbekistan, Memorandum of Understanding on the Cooperation inCommunication and Information Technology Field between Ministry of Information Industry, PRC and Ministry ofInformation and Communication, the Republic of Kazakhstan, Memorandum of Understanding on the Development andCooperation in Information and Communication Field between Ministry of Information Industry, PRC and Ministry of·185·

China Business GuideTransport and Communication, Peru, Memorandum of Understanding on the Cooperation in Information andCommunication Field between Ministry of Information Industry, PRC and Ministry of Transport and Post, Telecom, theRepublic of Kazakhstan.(V)the Diversification of enterprises to “going outward”Huawei Technologies Co., Ltd. In 2005, the company fulfilled RMB45.3B of global sales income, up 40%year-on-year, of which, the overseas sales income accounted for 58% of the sales income total (the overseas contract amountwas US$4.8B. At present, the company set up 8 region department and 85 representative offices and technical service centers.Its products have entered over 100 countries and regions including Britain, France, Germany, Spain, US, Japan and so on. Itsproducts and solutions have been applied in over 100 countries and 28 operators ranking in Global Top 50, and it has servedover 1 billion users in the globe. The company has also joined over 70 international organizations for standardization such asITU, 3GPP, IEEE, IETF, ETSI, OMA, TMF, FSAN, DSLF and etc. In 2005, it submitted over 1000 papers. At the end of2005, the company accumulatively applied for over 11,000 patents, ranking the largest one that applies for patents in Chinafor several consecutive years. Of the fundamental patents, the company took 5%, ranking the 5 th in the globe.ZTE Corporation Driven the market, the company developed technical innovation and realized the leap of technologyand market. Having accomplished the “three-step” strategy, i.e., from the domestic market to the market of developingcountries and to the market of developed countries including Europe and America and etc, the company created a series ofinnovation ways including with market as the driving force, the globalized technical resources and regional innovation,advanced R&D mode and so on. The company invests 10% of sales income on R&D per year, and it has set 14 R&D centersin the US, India, Sweden and China. As for the international intellectual property field, the company not only kept dramaticgrowth in the quantity of standard participation and patent application, but also entered the internationally advanced rank inthe quality of standard and patents. At present, the company has joined over 50 international organizations for standardizationincluding ITU, 3GPP, 3GPP2, CDG and etc, and achieved the drafting right and editor seat of the international standard insuch fields as NGN, optical transmission, information security, gateway, 3G terminal and so on.Legend Holdings Ltd. The company came into the world via the acquisition of the global PC business of IBM. InDecember 2004, the two parties signed the agreement and on May 1 st , 2005, the M&A transaction were eventually conducted.After the acquisition, the company has submitted the financial report with profit in international business to the stock marketfor three consecutive quarters. Meanwhile, its business in China also achieved growth, of which, the growth in PC businesswas 33% and the pre-tax profit grew by 45%; the growth in mobile phone business was 110% and the pre-tax profit wasRMB100M. After the acquisition, the company has become a global company.BOE Technology Group, Ltd. The company achieved development via the commercial mode “overseas acquisition,financing abroad, domestic building and driving the complete ones”. Via merging and acquiring the technology of KoreaHyunda (HK) Technology Limited, the company entered TFT industry. After the M&A, the whole production line finishedthe debugging and was put into production in 2005. The building of the 5th-generatio line of TFT-LCD drove other sixcomplete product manufacturers to enter BOE DTP, Beijing Economic Development Zone.Haier Group Corporation With “developing famous brand” as the internationalized strategy mode, the companypromoted the brand development strategy in accord with the requirement of “three-step development” overseas. At present,the company has built R&D centers in over 10 economic zones in the globe, conducted internationalized developmentaccording to the integration of design, manufacturing and creating and achieved stage achievement. As for independentintellectual property, the TV chip it developed has fulfilled 20 million chips of commercialization, and achieved RMB5.5B ofbusiness income on software and system integration. On standardization, it has two products that have met the internationalstandard. The company applied accumulatively 6189 patents, of which, 819 are invention patents, and it is the only one inChina to win G-Mark Award. In 2005, the company realized RMB103.9B of business income, of which, the export value wasUS$2.8B, up 40%.·186·

Electronics & InformationIV. Developing overseas cooperation and communication be means of themultilateral and bilateral cooperative systemThe multilateral and bilateral cooperative system is an important platform for China’s information industry to developoverseas cooperation and communication. At present, the multilateral and bilateral cooperative system in the informationindustry field mainly includes the communication and information technical cooperation commission (under which is an ITwork team) under the premier contact system between China and Russia, ASEAN-China (10+1), ASEAN-China, Japan andKorea (10+3), the minister contact of information and communication among China, Japan and Korea, the informationindustry work team of Joint Commission on Commerce and Trade (JCCT), the mixed cooperation commission of China’sMinistry of Information Industry and France’s Industry Ministry, the information expressway cooperation system of MeigongRiver Subregion and etc. In 2005, the Ministry of Information Industry developed various overseas cooperation andcommunications via the existed cooperation system.The 10+1 cooperation system continued healthy and steady development. In May 2005, China held the firstChina-ASEAN Telecom Week which was proposed by Premier Wen Jiabao. Vice-Premier Huang Ju attended the openingceremony and delivered a key speech, in which, six proposals on the cooperation in the information and communication fieldwere put forward. The response of the participants was very strong. Following the telecom week was the telecom ministers’forum, in which, China-ASEAN Beijing Declaration on Building Partnership in Joint Development of the Information andCommunication Field was unanimously passed, the China-ASEAN information cooperation website was opened, and thespecial report meeting on China-ASEAN diplomatic relations and economic and trade cooperation and the sustainabledevelopment workshop on information and communication were held. The 4 th China-ASEAN information andcommunication workshop was held in Shanghai, whose closing ceremony was held in Shenzhen, and the delegation visitedHuawei Technologies Co., Ltd., and ZTE Corporation. China’s Telecom Week played an active role in consolidating anddeepening the China-ASEAN strategic partnership, promoting the mutual trust and cooperation in the information andcommunication field and enhancing the awareness of China’s enterprises in the ASEAN market.The 10+3 cooperation system will transform gradually from information communication to program cooperation. InSeptember 2005, the 2 nd 10+3 telecom ministers’ meeting was held in Vietnam. The ministers showed their opinions on thedirection, ways and fields of the 10+3 information and communication cooperation in the future. The three proposals of“strengthening negotiation, utilizing the advantages, forming joint forces, supporting the civil and academic circles todevelop multi-level and multi-channel communication and exchange and extending gradually the cooperation field withshrinking the figure gap as the focus and the human resource development as the basis” put forward by Minister WangXudong were welcomed and got warm response from the ASEAN delegates. In the meeting, the ministers from ASEANcountries showed the hope to develop substantial cooperation in some fields via the system. There is a trend for 10+3cooperation to transform to program cooperation.The information expressway building of Meigong River Subregion has pushed. The program is a key one inChina-ASEAN cooperation in the information and communication field. In July 2005, the 2 nd leaders meeting of MeigongRiver Subregion was held in Kunming, in which, the Understanding Memorandum on the Plan and Building of MeigongRiver Subregion Information Expressway was signed. In December 2005, the 1 st meeting of the leader teams of MeigongRiver Subregion information expressway was held in Guangxi Zhuang Autonomous Region, in which, the workingmechanism of the leader teams was determined, and they also exchanged opinions upon the schedule and financing and otherissues about the program. At present, the program has entered implementation stage.The equal talks and friendly negotiation on Sino-America information and communication industry has been graduallypromoted. First, the meetings among the high-rank officials were very frequent. In January and July 2005, Ministry WangXudong met with the minister of American Ministry of Commerce who paid a visit to China, and exchanged opinions uponsuch issues as the government purchase of software, the development of 3G mobile communication, wireless local areanetwork, China’s Telecom Law, telecom market access and etc.·187·

China Business GuideIn February 2005, Vice-minister Jiang Yaoping with his team visited the US and conducted communications on telecomlawmaking and regulation. The foreign affairs department signed a memorandum on the cooperation of setting domain namemirror server in China with Verisign to strengthen the cooperation in the Internet field.From November to December 2005, the vice-chairman of US Chamber of Commerce, the first vice-minister commerceand the vice-minister of commerce in charge of international trade and so on visited the Ministry of Information Industry andexchanged frankly opinions on such issues as the stipulation of communication standard, intellectual property protection,telecom service talks, Telecom Law, 3G mobile communication, Sino-America trade imbalance and the opening of China’stelecom market, the export of American communication equipments to China, China’s investment environment and etc.Second, the information industry work team of Sino-America Joint Commission on Commerce and Trade has developedgradually its work. In March 2005, the two parties signed the 2005 Work Plan of the Information Industry Work Team ofSino-America Joint Commission on Commerce and Trade. Following that, the implementation of the plan is under smoothcourse. For example, the seminar on information and communication technical standard and the conformity evaluationprocedure was held in China; and the Ministry of Information Industry organized teams to attend the training on theintellectual property laws, regulations and cases of information industry and conducted on-spot inspections to the intellectualproperty management of famous enterprises in the US.The Sino-Russian cooperation was developed steadily. China’s Ministry of Information Industry signed the Summary ofthe Chairman Enlarged Meeting of Sino-Russia Communication and Information Technology Commission. At present, thetwo parties have implemented many cooperation programs, for example, China Telecom has finished the large-capacity,high-data-rate international optical fiber cable of Heihe-Bragoveshensk jointly with Trans Tele Com (TCC); China Unicomand TCC have completed the capacity expansion program of international optical fiber cable from Fuyuan to Khabarovsk,and the national Post Office and Russia’s united post enterprise signed the Understanding Memorandum on FurtherStrengthening Sino-Russian Post in September. In August 2005, the IT work team of Sino-Russian Communication andInformation Technology Commission held a meeting in Russia and signed the Meeting Summary. The two parties decided tospeed up the building of information industry parks, improve the complete policies and infrastructure, strengthen thecooperation in e-commerce and IT application fields, and continued promoting the opening of the communication andcooperation website in Sino-Russian IT field as soon as possible.The Sino-French cooperation has achieved many achievements. In October 2005, China’s Ministry of InformationIndustry and France’s Ministry of Economy, Finance and Industry held the 6 th meeting of Sino-French communication and ITmixed commission in Beijing. The two parties conducted exchanges and communication on such issues as the policies andregulations on communication and IT and the industry development, intellectual property protection, the applicationdevelopment of electronic government affairs and e-commerce, open source software cooperation, IPv6, smart card, theworld summit on the information society, and confirmed open source software and the composition and working way of IPv6working team.In November 2005, Vice-Premier Huang Ju along with China’s government delegation attended the Tunis Stage Meetingof World Summit on the Information Society, in which, Tunis Commitment and Tunis Agenda were passed. Vice-PremierHuang Ju delivered a keynote speech in the meeting. During the meeting, Minister Wang Xudong of Information Industrywho paid the visit with the delegation held bilateral talks with the ministers of the information and communicationdepartments from 13 countries, and exchanged opinions on the issues including the cooperation in information andcommunication field and etc.V. ProspectsIn 2005, the information industry took on an overseas cooperation layout with diversification, full rounds and wide field.The government did a great deal in such aspects as creating environment, providing conditions, promoting programs and soon. The enterprises achieved improvement with different degrees on such aspects as technical level, product R&D, overseastrade and overall integrated power and so on. The overseas cooperation of the information industry played an important part·188·

Electronics & Informationin promoting the further opening up of China’s economy, the healthy and steady development of China’s information industryand so on.It is estimated that China’s information industry will continue implementing the strategy of “bringing inward” and“going outward” and strengthening the overseas cooperation and promoting the industry development in the eleventh“five-year-plan”.【Statistics data】Table 1 the Export of Electronic Information Products of the Sino-Foreign Joint Ventures, Enterprises withSino-Foreign Cooperation, and Wholly Foreign-Owned Enterprises in 2005Unit: US$10,000Category of productsForeign-funded Sino-foreign Sino-foreignenterprises joint ventures cooperative enterprisesTotalCommunication equipments 2217536 1565468 35506 3818510Radio TV equipments 709106 110115 15599 834820Computers 9826643 1463920 211782 11512345Household electronic appliances 2091560 1102137 68946 3262643Electronic components 1045109 385053 68276 1498437Electronic apparatuses 1429108 436462 28254 1893824Electronic materials 30163 18034 35 48232Electronic instruments and equipments 432123 75754 32632 540509Notes: The data come from Ministry of Information Industry.Table 2 the Import of Electronic Information Products of the Sino-Foreign Joint Ventures, Enterprises withSino-Foreign Cooperation, and Wholly Foreign-Owned Enterprises in 2005Unit: US$10,000Category of productsForeign-funded Sino-foreign joint Sino-foreignenterprises ventures cooperative enterprisesTotalCommunication equipments 671572 655440 5697 1332708Radio TV equipments 189193 72194 7959 269346Computers 4510627 702210 46680 5259517Household electronic appliances 468325 207272 11846 687444Electronic components 1328464 399582 33202 1761248Electronic apparatuses 6746788 1435683 134885 8317356Electronic materials 123719 46708 1400 171827Electronic instruments and equipments 588854 171265 18211 778331Notes: The data come from Ministry of Information Industry.Section II Review of the Import and Export of Electronic Information Products in2005I.ReviewIn 2005, the export of China’s electronic information products kept the trend of high-speed growth, driving the dramaticgrowth of the foreign trade import and export across the country. The import and export total of the whole year wasUS$488.73B, up 25.8% year-on-year, which was 4.48 times of that in the year 2000, and accounted for 34.4% of the nationalforeign trade total, 2.6% higher than the growth speed of the national import and export trade.In 2005, the accumulated export value of electronic information products was US$268.17B, up 29.2% year-on-year,0.8% higher than the growth speed of the national foreign trade export, which accounted for 35.2% of the national foreigntrade export value, and its contribution rate to the growth of national foreign trade export amounted to 36%, and took 10.2%among the 28.4% of national foreign trade export growth. In December 2005, the export value of electronic informationproducts was US$29.27B, and the export growth speed in the current month was higher than the growth speed of the nationalforeign trade export in the same month.·189·

China Business GuideIn 2005, the accumulated import value of electronic information products was US$220.56B, up 21.9%, which was 4.3%higher than the growth speed of the national foreign trade import. The electronic information products realizedaccumulatively US$47.61B of trade surplus. The export value of electronic information products from January to December,2005, was listed in Figure 1.Figure 1 the export value of electronic information products from January to December, 2005Unit: US$100M285 292.7300253 262.6215.3 206191 215.6 230.6250214.6200 159.7 156.2150100500Jan. March May July Sept. Nov.II. Characteristics of the export(I)The export growth speed of communication equipments, computer products and radio TVequipments and products is lower than the average growth speedFrom January to December 2005, the communication equipments and products were exported accumulativelyUS$43.36B, up 45.9% year-on-year, and the growth speed reduced by 25.2% compared with that in the same period of theprevious year. Of it, the export value of December was US$5.46B, increased a bit than the export of November. The exportvalue of radio TV equipments was US$9.22B, up US$11.28B. The export value of computer products was US$124.7B, up27.5%, and the growth speed dropped by 20.1% year-on-year, which was 1.7% lower than the average export growth speed.Of it, the export value of December was US$13.0B, increased a bit than that in November. The export value of householdelectronic appliances was US$41.63B, up 23.4%, and the growth speed dropped by 1.5% year-on-year; the export value ofDecember was US$4.56B, dropped slightly than that in November. The export of electronic apparatuses and equipments tookon negative growth, and the export value was US$7.26B, dropped by 6.7% year-on-year.Among the main export products of communication equipments, the export value of mobile phones was US$20.66B, up45.9%; the export value of optical fiber communication equipments was US$410M, up 112.7%; and the export value of IPtelephone converters was US$336.4B, up 306.1%. The growth speed of these products was higher than the overall level.Among the computer products, the export value of microcomputers was US$3.71B, the export value of notebookcomputers US$29.9B, the HDD export value US$4.11B, the modem export value US$1.61B, the router export valueUS$880M, the AMT export value US$160M. The export growth speed of these products was all higher than the averagegrowth speed. The export value of digital cameras was US$5.54B, up 14% year-on-year, and the growth speed dropped by50.3%, which is very obvious. In addition, the export value of CRT displays was only US$1.59B, which took on dramaticnegative growth, and dropped by 41.4%.Among the household electronic appliance product, the export value of color TV sets was US$5.05B, up 57.6%, ofwhich, the export value of liquid crystal color TV sets was US$2.1B, up 238%; the export value of plasma color TV sets wasUS$290M, up 91.8%; and the export value of kinescope color TV sets was US$2.23B, down 1.6% year-on-year.The export value of liquid crystal displays was US$10.85, up 69.5%; the export growth speed of such main products asprinted circuit, smart cards, optical fiber cable and so on was all higher than the average growth speed and the export value ofcolor kinescope, color data/graphic display tubes had dramatic negative growth.·190·

Electronics & Information(II)Processing trade is still the main trading pattern of the electronic information productexportFrom January to December 2005, the export value of processing with imported materials was US$197.18B, up 28.1%year-on-year, which accounted for 73.5% of the export total, and the growth speed dropped by 17% year-on-year; the exportvalue of processing with given materials was US$42.13B, up 37.8%, which accounted for 15.7% of the export total; theexport value of entrepot trade in tax-protected zone was US$6.71B, up 10.8%; the export value of general trade wasUS$20.99B, up 30.9% and the growth speed dropped by 18.9%, and the drop growth was very obvious. In theabove-mentioned trade patterns, only the growth speed of processing with given materials and general trade was higher thanthe average growth speed, and the growth speed of the other trade patterns was all lower than the average growth speed. Theshare of the electronic information product in the export trade in accordance with various trading patterns in 2005 was listedin Figure 2.Figure 2 the Share of the Electronic Information Product in the Export Trade in Accordance with Various TradingGenral trade7.80%Patterns in 2005Other trades0.50%Entrepot trade inTax-protectionzones 2.50%Trade of processingwith givenmaterials5.70%Trade of processingwith importedmaterials73.50%(III)The proportion taken by foreign-funded enterprises was increasedIn 2005, the export value of electronic information products of foreign-funded enterprises reached US$177.81B, up35.8% year-on-year, which accounted for 66.3% of the export total of the industrial electronic information products, up 3.1%year-on-year; the export value of Sino-foreign joint ventures was US$51.57B, up 20.1%; the export value of private-ownedenterprises was US$9.21B, up 42.9%; and the export value of state-owned enterprises was US$19.95B, up 2.6%. The exportof electronic information products of enterprises with various types in 2005 was listed in Figure 3. And the export growth ofelectronic information products of enterprises with various types in 2005 was listed in Figure 4.Figure 3 the Export of Electronic Information Products of Enterprises with Various Types in 20053000250020001500100050002585.4Accounting1778.1ForeignfundedenterprisesUnit: US$100M515.7Sino-foreignjointventures199.5 92.1state-ownedprivate-ownedenterprises enterprises·191·

China Business GuideFigure 4 the Export Growth of Electronic Information Products of Enterprises with Various Types in 2005Unit:%5042.91454035.7535 29.24302520.12015102.5950Accounting Foreign-funded Sino-foreignJoint Ventures(IV)The export market is still rather concentratedOf the export market of China’s electronic information products in 2005, the Hong Kong Special Administrative Regionranked the first one, to which, the export value was US$69.46B, up 37.5%, taking 25.9% of the export total; the second one isthe USA, to which, the export value was US$61.12B, up 28.1%, taking 22.8% of the export total; the third one is Japan, towhich, the export value was US$22.2, up 10.0%, taking 8.3%.State-ownedenterprisesprivate-ownedenterprisesThe export total of the top 10 countries and regions was US$219.04B, taking 81.7% of the export value of electronicinformation products. The export of the countries and regions ranking the top 7 export value in 2005 was given in Figure 5,and the export growth of the countries and regions ranking the top 7 export value in 2005 was given in Figure 6.Figure 5 the Export of the Countries and Regions Ranking the Top 7 Export Value in 2005454035302520151050Unit:%37.5128.1310.0739.3814.5720.06Figure 6 the Export Growth of the Countries and Regions Ranking the Top 7 Export Value in 200533.5Hong Kong USA Japan Holland Germany Korea Singapore7006005004003002001000695Unit: US$100M611222152 15196 84Hong Kong USA Japan Holland Germany Korea Singapore(V)The export provinces and cities still concentrate on the eastern coastal regionsIn 2005, the export of electronic information products in Guangdong Province ranked the first, and the export value wasUS$114.45B, up 24.9% year-on-year, taking 42.7% of the export total of industrial electronic information products, and theproportion dropped by 1.5% year-on-year; the second one is Jiangsu Province, whose export value was US$63.88B, up45.2%, taking 23.8% of the export total of industrial electronic information products, and the proportion rose by 2.6%year-on-year; the third one is Shanghai, whose export value was US$39.08B, up 24.3%, taking 14.6%; the fourth one is·192·

Electronics & InformationTianjin, whose export value was US$8.93B, up 11.6%; the sixth one is Beijing, whose export value was US$8.36B, up 48.2%.The export values of Guizhou Province, Tibet Autonomous Regions and Sichuan Province and so forth took on dramaticallynegative growth. The provinces and regions in the middle and western regions such as Shanxi Province, Inner MongoliaAutonomous Region, Qinghai Province and etc, whose export base was rather low, achieved dramatic growth. The exportvalue growth of electronic information products of Shanxi Province was 718.6%, and the export value growth of electronicinformation products of Inner Mongolia Autonomous Region was 1768.7%, and Qinghai Province grew by 276%. The exportof the top 6 provinces and cities on export value in 2005 was given in Figure 7, and the export growth of the top 6 provincesand cities on export value in 2005 was given in Figure 8.Figure 7 the Export of the Top 6 Provinces and Cities on Export Value in 20051144.5120010008006004002000GuangdongProvince638.8JiangsuProvince390.8139.1 89.3 83.6Shanghai Tianjin FujianProvinceUnit: US$100MBeijingFigure 8 the Export Growth of the Top 6 Provinces and Cities on Export Value in 20056050403020100Unit:%24.9GuangdongProvince45.2JiangsuProvince48.224.3 22.711.6Shanghai Tianjin Fujian BeijingIII. Characteristics of importIn 2005, the main characteristics of electronic information products were the strong demand of electronic componentproducts and the slow import growth of consumer finished products. The import of electronic components grew by 18%, andthe import of electronic apparatus products grew by 28.5%. Of it, the import of integrated circuit and micro-electroniccomponents grew by 34.9%, higher than the average growth speed, and the import value of integrated circuit andmicro-electronic components was US$810.24B, becoming the largest import product. The import of household electronicappliances grew by 5%, dropped by 13.2% year-on-year.IV. Problems existedIn 2005, the export of electronic information products still faced a series of new problems and deep conflicts, whichneeded to be solved.In recent years, the international trade conflicts aiming at China has been deepened. First, the anti-dumping investigationaiming at China has been increased gradually. Since 1995, China has become a country with most antidumping investigations·193·

China Business Guidein the globe. Second, MNCs collected the high patent tax to China’s electronic information products. Following DVDs, manyelectronic information products such as mobile phones, color TV sets, computers, MP3, digital cameras and etc faced theintellectual property issue. Third, the technical barrier was increased, e.g., the modification of technical regulations, increaseof standard, addition of environmental protection requirements and etc. Waste Electrical and Electronic Equipment (WEEE)and the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (ROHS) issued by theEU will come into force on August 13,2005 and July 1 st , 2006, respectively. WEEE and ROHS regulate the equipmentscannot contain such substances as aluminum, hydrargyrum, cadmium, hexavalent chromium, PBDE or PBB, which will bringpressure to the export of China’s electronic information products. Fourth, the trend of adopting “safeguard measures” andother trade protection measures to restrict China’s products is becoming more and more obvious. It is worth noticing thatbased on the restriction of product export, the foreign countries adopt various suppressing forms to China’s enterprises andthe suppressing level is gradually deepened, and they restrict the development of China’s industry and the growth of productexport by means of suppressing the domestic industrial policies and standard stipulations and so on.The deep-level issues in the export structure of China’s electronic information products still exist, mainly includingmore “OEMs”, less independent brands; more processing trade, less general trade; more foreign-funded enterprises, less localones; more export of complete products, less core components, most of which depend on import; more products withimported technology, less products with independent intellectual property and etc. All of these issues reflect thenon-equilibrium of China’s electronic product trade structure.V. ProspectsIt is estimated that the export value of China’s electronic information products will reach US$280.0B in 2006. Theexport of electronic information products in 2006 will focus on the following:The first one is to continue promoting the export coordination. The Ministry of Information Industry will coordinateand settle the problems in the industry development and product export and help enterprises resolve the difficulties they meetby means of the joint working system on trade prosperity via technology and the joint meeting system of the nationaltechnical trade measure departments. It will also conduct study and analysis on the domestic and overseas policy adjustmentwhich will affect the product export and industry development and put forward solutions in time to provide references to thedecision-making departments.The second one is to extend the range of full drawback in the electronic information product export. Relateddepartments should study and implement the proposed 56 products proposal scheme. In 2006, according to the demand ofindustry development and the change of industry structure, the proposal of extending the range of full export drawbackproducts will be put forward properly so that better policies for product export can be created.The third one is to enhance independent innovation and optimize the product structure. We will support thedevelopment of software, integrated circuit, key component and new material as well as manufacturing equipment, promotethe technical innovation capacity of export enterprises and enhance the optimization and upgrading of industry and tradestructure via electronic development fund, integrated circuit research development special fund and so on. We will focus onthe implementation of the key projects and technical standard including new-generation mobile communication, digital TV,next-generation network, new display component, integrated circuit and software and etc, and speed up the development ofinformation terminal products with large quantity and wide range as well as high technology to foster new export growthareas. In order to support software outsourcing, we will release policies and measures to encourage software outsourcing withrelated departments and improve the international market channel so as to promote the joint export of service and products.We will strengthen the application of IT in the social economic fields, accelerate the development of application electronicproducts such as automobile electronics, machine tool electronics, and medical electronics and so on and promote thetechnical content and added value of the exported products.The fourth one is to enhance the international cooperation and guide the information industry to “go outward”.We will Guide enterprises to increase the added value of export products and optimize the structure of export products;complete the "going out" policy and service system and create favorable conditions for enterprises to exploit the international·194·

Electronics & Informationmarket; promote communication Operators and electronic manufacturers to take a variety of forms and extend theinternational market in joint hands; fight for the foreign aid funds and support overseas communications projects; guideenterprises to participate in overseas operations and international competition through credit support, the governmentalcooperation projects and etc, and promote the export of communication products; promote various bilateral and multilateralcooperation in the industry, and enhance inter-regional free trade; organize purposefully enterprises to investigate andparticipate in some newly rising markets in Eastern Europe, Latin America, Africa, ASEAN and so on, and invite foreignelectronic information enterprises as well as the relevant governmental departments visit China, reaching cooperationprograms while expanding the international promotion; successfully hold the large exhibitions such as China BeijingInternational High-Tech Expo in Beijing, china International New High-tech Achievements Fair in Shenzhen and ChinaInternational Consumer Electronics Show in Qingdao and so on, play the bridge and platform role in promoting internationalcooperation and the trade development of the electronic information industryThe fifth one is to enhance the industrial early warning. Industry early warning is not only to strengthen themonitoring and analysis to product imports, industrial development and competitiveness of domestic industries, but also toconduct effective monitoring and analysis to exports of products; thus, it can judge in advance the possibilities ofanti-dumping and other trade protection measures and come up with countermeasures and measures to reduce the recurrenceof similar incidents.The sixth one is to raise the level of introducing foreign investment and guide the healthy concentration ofindustry. China's information industry should seize the opportunity of the current international industrial transfer andstructural adjustment, and focus on the effective use of foreign investment, increasing the utilization quality of foreign capital,the introduction of advanced technology, management experience and high-quality personnel, encouraging MNCs to set upR&D centers in China and promoting the optimization and upgrading of domestic industry, and enhancing the healthyindustry concentration to raise its status and level in the global industry division. The Ministry of Information Industry jointlywith relevant departments will take measures on such issues as anti-piracy, protection of intellectual property and etc to createthe investment environment for foreign businesses; guide the orderly capital introduction conducted by local governments,form a layout with harmonious development of industry, and support several industrial concentration areas to complete itsindustry supporting service system so as to undertake the transfer of overseas industry and promote MNCs’ transfer andtaking roots in China; perfect the building of national electronic information industry bases and industrial parks, and releasethe corresponding supportive policies; and strengthen inspection and guidance to promote the implementation of thesupporting measures for industrial bases.The seventh one is to enhance the internationalized operations of large enterprises and foster local multinationalcorporations. It is necessary to strengthen the guidance and training to Top 100 electronic information enterprises, learn fromforeign successful experience, and guide and encourage enterprises to focus on R&D capacity, multinational operations andcapital operation, and give special support to large enterprises from such aspects as government procurement, key projects,e-development funds, external cooperation projects, and personnel training and so on, and encourage them to speed up theirinternational operations and participate in the international standard setting and the international technical alliances; conductmultinational operation pilots and give most enterprises special policy support on such aspects as finance, taxation,commerce and human resources, and share the exploration cost of multinational operations, and provide conveniences fromcustoms clearance, quality inspection, foreign exchange and personnel entry and exit and foster local MNCs with importantinfluence in the globe.·195·

China Business Guide【Statistics data】Table 1 the Import of Communication Equipments and Products in 2005Product Name Unit Import amount Import value (US$10,000) Growth rate(%)Telephone total 10,000 166.60 5753.08 26.15Of it, cordless phones 10,000 125.17 3401.46 79.12Of it: video phones 10,000 2.28 387.35 -48.22Fax 10,000 158.38 15345.24 -14.71Various program-controlled switches 10,000 1.57 7750.26 157.85Of it: digital program-controlled telephoneswitches10,000 0.01 6161.98 468.54Of it: analogue mobile communication switches 10,000 47.79 19.44Ethernet Switches 10,000 66.64 44725.74 -1.31IP telephone signal conversion equipments 10,000 6.53 992.58 96.01Handheld (car) mobile phones 10,000 1275.16 119779.50 -18.74Interphones 10,000 25.25 4097.23 155.30Mobile communication base station 10,000 0.23 3208.26 -66.40Wireless pagers 10,000 0.68 -36.44Optical communication equipments 10,000 14.20 4833.79 -45.25Of it: optical transceiver and Pulse codemodulation equipment10,000 13.12 2510.06 -5.09Of it: WDM optical transmission equipment 10,000 1.08 2323.73 -62.42Table 2 the Export of Communication Equipments and Products in 2005Product NameUnitExport Export value Growthamount (US$10,000) rate(%)Telephone total 10,000 19845.13 212496.24 7.49Of it, cordless phones 10,000 9622.37 160.253.52 8.88Of it: video phones 10,000 2.83 157.67 -96.60Fax 10,000 548.60 46479.06 -17.01Various program-controlled switches 10,000 16.92 132642.67 24.85Of it: digital program-controlled telephone switches 10,000 0.15 92997.29 31.49Of it: analogue mobile communication switches 10,000 23.37 -75.80Ethernet Switches 10,000 757.49 52396.54 58.63IP telephone signal conversion equipments 10,000 123.09 3363.89 306.10Handheld (car) mobile phones 10,000 22830.08 2066233.43 45.86Interphones 10,000 2376.79 28627.30 -10.11Mobile communication base station 10,000 5.85 131733.40 14.57Wireless pagers 10,000 66.28 1139.69 103.49Optical communication equipments 10,000 13.24 40979.47 112.67Of it: optical transceiver and Pulse code modulation equipment 10,000 4.66 1932.82 -28.96Of it: WDM optical transmission equipment 10,000 8.58 39046.65 135.95Table 3 the Import of Radio TV Equipments and Products in 2005Name of productUnitImport Import valueamount (US$10,000)Growth rate (%)Radio and TV transmitting equipments for radio TV 10,000 0.01 4026.99 319.25TV satellite ground station equipments 10,000 69.46 -61.26TV cameras 10,000 0.20 375.14 5.08Broadcast TV camera 10,000 0.05 913.28 -11.52Table 4 the Export of Radio TV Equipments and Products in 2005Name of productUnitExport Export valueamount (US$10,000)Growth rate (%)Radio and TV transmitting equipments for radio TV 10,000 20.14 710.21 -15.94TV satellite ground station equipments 10,000 1.14 48.54 -5.41TV cameras 10,000 2.01 676.05 7.00Broadcast TV camera 10,000 3.69 -82.69·196·

Electronics & InformationTable 5 the Import of Computer Products in 2005Name of product Unit Import amount Import value (US$10,000) Growth rate (%)Microcomputers 10,000 2.39 6324.46 -1.05Notebook computers 10,000 72.99 65411.40 -11.16Calculators 10,000 1239.01 3946.97 14.18Printers 10,000 690.87 76621.46 -11.75Of it: stylus printers 10,000 59.75 9988.98 -25.73Of it: laser printers 10,000 207.32 36461.20 0.15Of it: inkjet printers 10,000 396.17 21090.49 -28.55Scanners 10,000 44.05 6593.84 0.19Digitizers 10,000 0.18 262.42 26.59HDDs 10,000 10651.07 722605.30 56.74Floppy drives 10,000 1127.88 8037.76 -42.83CD-ROM drives 10,000 7615.21 323607.41 19.13displays 10,000 583.99 97514.81 9.80Of it: LCDs 10,000 451.51 86625.93 13.14Of it: CRT displays 10,000 131.18 10224.03 3.51ATMs 10,000 0.57 8226.60 -18.77UPS 10,000 14.95 9269.41 6.82Hubs 10,000 7.30 506.85 -66.54Routers 10,000 85.94 36115.56 22.89Modems 10,000 1751.49 17543.41 -8.68Other digital cameras 10,000 661.69 100444.70 13.90Table 6 the Export of Computer Products in 2005Name of product Unit Export amount Export value (US$10,000) Growth rate (%)Microcomputers 10,000 623.25 370648.18 34.95Notebook computers 10,000 4135.25 2990203.40 43.94Calculators 10,000 47500.31 81640.64 1.40Printers 10,000 6921.93 688673.64 12.07Of it: stylus printers 10,000 98.56 12622.19 20.90Of it: laser printers 10,000 2354.62 418614.99 5.90Of it: inkjet printers 10,000 3634.00 227269.83 20.69Scanners 10,000 728.25 30256.62 -17.18Digitizers 10,000 0.75 75.71 297.99HDDs 10,000 9990.15 411076.90 51.67Floppy drives 10,000 5101.73 19144.49 -37.05CD-ROM drives 10,000 16458.28 380710.51 3.01displays 10,000 9560.41 1614798.24 9.63Of it: LCDs 10,000 7458.86 1453864.84 22.59Of it: CRT displays 10,000 2096.25 159046.28 -41.44ATMs 10,000 1.69 16299.01 43.15UPS 10,000 1259.07 42867.94 28.13Hubs 10,000 1758.71 19502.38 -12.50Routers 10,000 3467.76 88031.33 56.13Modems 10,000 10419.24 160948.38 45.33Other digital cameras 10,000 7603.03 553529.97 13.99Computer software 10,000 118.25 65733.57 90.50Table 7 the Import of Household Electronic Appliances and Products in 2005Name of product Unit Import amount Import value (US$10,000) Growth (%)Color TV sets 10,000 38.51 4394.03 -31.49Of it: kinescope color TV sets 10,000 18.46 513.18 31.71Of it: liquid crystal color TV sets 10,000 6.28 1061.62 -66.85Of it: plasma color TV sets 10,000 0.79 830.58 -59.96Monochrome TV sets 10,000 12.46 227.71 704.09Home video camcorders 10,000 47.71 16980.89 222.70·197·

China Business GuidePocket cassettes tuners 10,000 1.31 -91.36Pocket cassettes players 10,000 2.09 -80.03Laser disc players 10,000 111.74 5624.07 1.74Of it: VCD players 10,000 4.14 206.42 -24.97Laser phonographs 10,000 21.75 2255.55 -24.72Combined radio/sound recorder-players 10,000 273.57 13081.21 402.33Car radio recorder players 10,000 40.04 2513.95 -52.01Color video projectors 10,000 4.22 4426.34 20.37Orthophoto projectors 10,000 0.01 102.90 -33.25Radios 10,000 22.82 494.13 36.69Micro-wave ovens 10,000 1.35 190.19 -7.91Table 8 the Export of Household Electronic Appliances and Products in 2005Name of product Unit Export amount Export value (US$10,000) Growth (%)Color TV sets 10,000 3974.65 505084.52 57.55Of it: kinescope color TV sets 10,000 2564.29 223016.20 -1.62Of it: liquid crystal color TV sets 10,000 729.08 210279.25 237.97Of it: plasma color TV sets 10,000 24.30 28703.95 91.84Monochrome TV sets 10,000 1151.69 11682.85 -22.78Home video camcorders 10,000 252.21 26417.69 37.67Pocket cassettes tuners 10,000 410.79 791.26 -42.73Pocket cassettes players 10,000 744.22 1247.08 6.62Laser disc players 10,000 17316.83 733483.31 4.78Of it: VCD players 10,000 2211.83 35814.04 -29.74Laser phonographs 10,000 5773.13 67062.29 -34.86Combined radio/sound recorder-players 10,000 22869.78 256336.30 24.48Car radio recorder players 10,000 2927.16 107488.55 32.20Color video projectors 10,000 207.00 133598.05 42.78Orthophoto projectors 10,000 18.51 1355.02 -24.29Radios 10,000 3734.72 13648.98 18.27Micro-wave ovens 10,000 4224.07 176426.75 31.46Table 9 the Import of Electronic Components and Products in 2005Name of product Unit Import amountImport value Growth rate(US$10,000) (%)Capacitors 10,000kg/1000 5624.25 379277.98 19.97Resistors 10,000kg/1000 1643.57 110477.45 8.71Printed circuits 10,000kg/1000 1765549.73 656868.18 29.26Smart cards 10,000 19255.64 17063.83 -20.87Integrated circuits 10,000 7537029.17 8102435.69 34.87Of it: integrated circuits original filmswithout cutting processing10,000 560366.12 759260.74 92.04Color kinescopes 10,000 1837.75 64732.86 -33.18black and white kinescopes 10,000 264.40 1079.42 -57.96Color data graphic display tubes 10,000 1529.75 60823.33 -44.30Transistors 10,000 16090007.08 532720.82 13.51Color TV sets parts 10,000kg 1431.00 33539.56 -17.44Monochrome TV set parts 10,000kg 72.51 1534.16 -18.02Optical fiber cable 10,000kg 231.31 3626.38 -9.52electro acoustic components 10,000 211448.96 140498.10 36.24Liquid crystal display boards 10,000 150790.56 2749259.71 30.86Table 10 the Export of Electronic Components and Products in 2005Name of product Unit Export amount Export value (US$10,000) Growth rate (%)Capacitors 10,000kg/1000 5017.36 134630.09 18.28Resistors 10,000kg/1000 2176.49 50679.32 17.91Printed circuits 10,000kg/1000 1221152.33 534230.41 39.62Smart cards 10,000 52388.87 27111.18 49.23·198·

Electronics & InformationIntegrated circuits 10,000 2160939.41 1375402.18 30.71Of it: integrated circuits originalfilms without cutting processing10,000 77968.69 171008.69 11.79Color kinescopes 10,000 1952.25 79664.75 -7.62black and white kinescopes 10,000 404.99 2515.65 51.36Color data graphic display tubes 10,000 598.46 24573.89 -25.40Transistors 10,000 13790496.42 160668.79 20.80Color TV sets parts 10,000kg 13833.30 117954.12 47.82Monochrome TV set parts 10,000kg 2135.69 9914.77 24.26Optical fiber cable 10,000kg 1485.97 13137.33 83.43electro acoustic components 10,000 465696.44 378849.75 26.64Liquid crystal display boards 10,000 161098.19 1085136.27 69.48Table 11 the Import of Electronic Special Equipments and Products in 2005Name of product Unit Import amount Import value (US$10,000) Growth rate (%)Automatic plug-in machines 10,000 0.09 6340.71 0.76Automatic coreslice adhering machines 10,000 0.90 147730.29 6.48Table 12 the Export of Electronic Special Equipments and Products in 2005Name of product Unit Export amount Export value (US$10,000) Growth rate (%)Automatic plug-in machines 10,000 34.47 1488.13Automatic coreslice adhering machines 10,000 0.03 2975.71 -24.83Table 13 the Import of Electronic Information Products Divided According to Trade Patterns in 2005(1)Unit: US$10,000Trade patternImport totalGrowth Communication Radio TVrate (%) equipments equipmentsTrade of processing with imported materials 11751079.84 23.50 814096.29 201008.90Trade of processing with given materials and assembly 3414537.69 43.59 63104.09 23330.50General trade 3302179.35 -2.75 488593.32 53213.28Entrepot trade in tax-protected zone 2474338.50 21.52 177592.42 36442.34Exit and entry of goods in the warehouses of tax-protectedzone599150.43 162.76 49769.92 4919.27The imported equipments and articles as investment offoreign-funded enterprises378236.35 -13.62 5306.71 379.12Imported equipments in processing trade 67900.08 8.94 57.38 17.50Imported equipments in the export processing zone 55200.67 67.05 909.77 71.88Others 11537.40 -7.23 3048.00 210.67Goods aided and presented by other countries andinternational organizations870.35 -64.63 171.65 16.05Small-amount border trade 452.64 24.69Leasing trade 392.26 -1.49 33.68Trade of outward processing 311.09 133.66 180.35Goods donated by overseas Chinese, fellowmen of HongKong, Macao and Taiwan, and Chinese with foreign 241.58 219.61 0.04nationalityTax-free foreign exchange commodities 11.90 -65.67 0.01 2.39Barter trade 0.63 41.71 0.63Total 22056440.76 21.85 1602864.26 319611.90·199·

China Business GuideTable 13 the Import of Electronic Information Products Divided According to Trade Patterns in 2005(2)Unit: US$10,000ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments2956867.42 458348.30 1308547.81 5739404.25 101111.24 171695.631120485.37 90593.43 303665.78 1753733.21 28454.99 31170.32836271.48 212185.15 236971.39 1077567.83 51696.86 345680.041233455.36 88151.38 191150.59 672138.07 9967.16 65441.19156297.25 18229.04 62218.82 284074.26 732.12 22909.7523276.88 10668.11 1057.64 1995.66 118.94 335433.311211.67 140.55 13.30 47.63 0.01 66412.034207.54 951.08 225.41 402.01 11.96 48421.031878.90 1186.24 806.52 1907.01 218.70 2281.35208.09 20.03 47.56 266.15 140.823.04 449.608.45 0.96 349.17107.48 23.254.79 8.75 0.02 0.78 227.203.56 5.936334176.76 880488.96 2104707.88 9531644.34 192784.83 1090161.84Table 14 the Export of Electronic Information Products Divided According to Trade Patterns in 2005(1)Unit: US$10,000Trade patternExport totalGrowth Communication Radio TVrate (%) equipments equipmentsTrade of processing with imported materials 19718136.21 28.07 3465876.58 722766.05Trade of processing with given materials and assembly 4213122.22 37.39 241795.77 130438.14General trade 2099216.51 30.94 584980.92 48704.6Entrepot trade in tax-protected zone 671412.07 10.83 30615.83 15777.15Exit and entry of goods in the warehouses oftax-protected zone80661.36 45.07 11794.52 3346.25Small-amount border trade 22898.97 67.57 351.27 337.18Others 5363.95 134.85 73.31 6.43Import goods in overseas contracting projects 4418.17 20.68 618.19 216.28Goods aided and presented by other countries andinternational organizations1422.72 -45.55 235.26 115.47Trade of outward processing 139.21 88.31 26.99Barter trade 0.04 -97.59Total 26816791.40 29.24 4336368.62 921707.55Table 14 the Export of Electronic Information Products Divided According to Trade Patterns in 2005(2)Unit: US$10,000ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments9774324.70 3105270.94 1270374.69 909891.51 26903.84 442727.892152916.38 579484.31 274139.34 712113.61 13244.00 108990.68193071.75 359165.54 359509.68 387295.82 28093.98 138394.23327177.89 81559.17 70043.98 118675.63 4312.84 23249.5919562.40 22946.06 8893.46 5272.53 49.80 8796.365657.47 12477.11 1433.92 386.31 37.20 2218.523144.72 2039.02 11.15 19.86 69.461763.32 210.16 592.80 50.39 103.96 863.06487.66 197.70 38.94 131.62 216.0873.91 38.300.0412478106.28 4163350.00 1985037.95 2133911.20 72783.92 725525.91·200·

Electronics & InformationTable 15 the Import of Electronic Information Products Divided according to Various EconomicTypes of Enterprises in 2005 (1)Unit: US$10,000Economic type of enterprises Import total Growth rate (%)Communication Radio TVequipments equipmentsForeign-funded enterprises 14627540.91 30.42 671571.91 189193.16Sino-foreign joint ventures 3690354.87 10.68 655439.64 72194.38State-owned enterprises 2304368.24 -2.36 205174.28 30165.50Private-owned enterprises 878531.25 27.34 54379.07 4469.65Collective enterprises 284698.78 41.93 10559.89 15624.72Sino-foreign cooperative enterprises 259879.90 -10.69 5696.57 7958.82Other enterprises 11061.85 9.90 41.38 5.65Individual businesses 4.96 1.52Total 22056440.76 21.85 1602864.26 319611.90Table 15 the Import of Electronic Information Products Divided according to Various Economicof Enterprises in 2005 (2)Unit: US$10,000ComputersHouseholdelectronic appliancesElectroniccomponentsElectronicapparatusesElectronicmaterialsElectronic instrumentsand equipments4510626.87 468324.96 1328463.55 6746787.91 123718.57 588853.98702210.01 207272.24 399582.29 1435683.20 46708.04 171265.06777907.30 135292.87 204132.66 722192.57 14131.07 215371.99253639.17 45730.98 96246.06 340346.67 5630.70 78088.9540466.72 10476.06 40907.89 147887.70 849.41 17926.3846680.06 11846.35 33201.86 134884.71 1400.04 18211.482646.23 1542.59 2173.53 3861.48 346.99 443.990.41 2.90 0.03 0.106334176.76 880488.96 2104707.88 9531644.34 192784.83 1090161.84Table 16 the Export of Electronic Information Products Divided according to Various EconomicTypes of Enterprises in 2005 (1)Unit: US$10,000Economic type of enterprises Export total Growth rate (%)CommunicationequipmentsRadio TVequipmentsForeign-funded enterprises 17781348.83 35.75 2217536.15 709106.36Sino-foreign joint ventures 5156942.98 20.10 1565467.99 110115.15State-owned enterprises 1995120.16 2.59 239766.61 44151.59Private-owned enterprises 921137.92 42.91 74960.57 38520.45Collective enterprises 489290.11 36.31 203027.83 3790.22Sino-foreign cooperative enterprises 471029.23 15.19 35505.86 15598.79Individual businesses 1428.02 28.34 418.23Other enterprises 494.18 120.86 75.26 6.77Total 26816791.43 29.24 4336368.62 921707.55Table 16 the Export of Electronic Information Products Divided according to Various EconomicTypes of Enterprises in 2005 (2)Unit: US$10,000ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments9826642.86 2091560.22 1045108.72 1429107.98 30163.49 432132.061463920.49 1102136.71 385052.62 436462.32 18033.62 75754.09708016.92 475852.78 271782.86 157619.22 13912.22 84017.96165901.85 332066.44 146036.86 71182.80 10056.84 82412.1091580.26 92198.28 68576.28 11066.03 572.25 18478.96221782.09 68945.69 68275.94 28254.00 34.63 32632.24179.80 487.51 156.51 75.43 9.56 72.6482.01 102.37 48.17 143.42 1.32 34.8812478106.28 4163350.00 1985037.95 2133911.20 72783.92 725525.91·201·Types

China Business GuideTable 17 the Import of Electronic Information Products of each Province, City, and Autonomous Region in 2005 (1)Unit: US$10,000Name of Provinces, Cities, andCommunication Radio TVImport total Growth rate (%)Autonomous Regionsequipments equipmentsGuangdong Province 8624268.88 20.76 465217.92 139924.65Jiangsu Province 5313705.39 34.64 156984.68 38682.17Shanghai 3806550.73 16.39 116723.10 60550.43Tianjin 1189229.02 32.63 428177.72 44978.97Beijing 1057280.41 21.29 238570.91 19141.48Fujian Province 664790.42 5.59 28918.30 2002.45Zhejiang Province 431489.59 3.36 67505.11 6074.20Shandong Province 416000.93 30.58 58677.66 4472.31Liaoning Province 251581.78 -18.35 18502.54 1090.63Sichuan Province 53004.81 -27.29 1575.74 105.85Hubei Province 45694.44 27.26 10200.53 300.70Inner Mongolia Autonomous Region 26704.57 67.71 20.92Shaanxi Province 25451.73 18.30 1843.14 161.87Jilin Province 18954.86 -43.06 161.53 201.40Hebei Province 16589.02 41.61 271.64 101.58Hunan Province 16106.83 -5.07 300.67 122.38Chongqing 12777.38 -19.18 905.29 3.35Anhui Province 12642.64 1.09 478.42 10.11Heilongjiang Province 10358.27 -22.93 300.26 6.19Jiangxi Province 10158.75 14.49 182.92 56.35Gansu Province 9809.99 205.08 702.61 0.88Guangxi ZhuangAutonomous Region9001.93 13.38 2787.57 1157.32Guizhou Province 8645.74 -50.09 1465.64 274.95Yunnan Province 6721.26 -11.55 647.40 45.92Henan Province 6343.89 -14.96 104.70 97.65Xinjiang UygurAutonomous Region4932.01 9.27 728.07 7.54Shanxi Province 3957.53 61.89 413.18 0.55Hainan Province 2687.16 -39.20 205.76 3.70Ningxia Hui Autonomous Region 351.56 -18.79 4.90Tibet Autonomous Region 342.45 531.03 156.01Qinghai Province 306.77 1.79 82.63 15.41Total 22056440.76 21.85 1602864.26 319611.90Table 17 the Import of Electronic Information Products of each Province, City, and Autonomous Region in 2005 (2)Unit: US$10,000ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments2326117.79 349820.17 968307.94 4029379.00 28241.69 317259.731771789.08 154070.43 400914.14 2498476.77 66728.42 226059.701261905.83 183859.88 282098.55 1646179.23 54475.40 200758.3375257.89 31859.10 136657.95 410288.11 10355.40 51653.89251590.96 69810.39 59995.37 282712.15 13240.46 122218.71356452.74 18556.77 49787.26 190076.06 1682.67 17314.17112936.22 9842.77 48552.71 152078.78 2796.06 31703.7462683.78 19154.71 85090.48 158024.09 1228.98 26668.9251828.33 25946.67 47438.25 80487.82 4372.70 21914.8410296.58 1746.93 2902.31 24057.62 2296.40 10023.3912902.04 2814.17 1395.24 8642.28 2186.17 7253.32961.81 115.04 10375.65 12632.88 491.20 2039.362625.71 1944.66 694.04 7843.47 1057.22 9281.612516.81 4227.83 3212.30 2752.61 650.71 5231.676367.19 431.72 1794.16 2733.23 435.77 4453.73·202·

Electronics & Information2661.67 383.25 942.59 8391.70 357.62 2946.951828.47 2324.90 1273.85 1171.29 66.53 5203.702501.91 537.84 752.84 3794.07 193.86 4373.592574.19 624.31 755.18 2620.81 67.59 3409.75542.41 609.32 95.69 3149.97 591.47 4930.646300.22 17.75 7.85 1308.19 2.82 1469.671368.45 423.28 132.84 646.38 599.18 1886.921887.15 83.21 809.15 2808.57 10.73 1306.342418.14 112.90 85.85 580.03 66.53 2764.491810.88 384.09 357.93 166.28 70.70 3351.671216.28 470.87 28.81 287.13 101.43 2091.871921.94 133.04 34.16 232.73 11.84 1210.09768.86 177.82 168.68 27.66 405.17 929.518.06 2.93 4.38 7.64 0.10 323.54124.00 3.61 58.8411.38 2.23 41.75 84.19 69.186334176.76 880488.96 2104707.88 9531644.34 192784.83 1090161.84Table 18 the Export of Electronic Information Products of each Province, City, and Autonomous Region in 2005 (1)Unit: US$10,000Name of Provinces, Cities, andCommunication Radio TVExport total Growth rate (%)Autonomous Regionsequipments equipmentsGuangdong Province 11445147.96 24.87 1640361.37 410886.79Jiangsu Province 6387573.49 45.22 538601.23 145637.16Shanghai 3908199.45 24.27 314341.09 293172.22Tianjin 1391224.77 22.66 835652.28 16974.92Fujian Province 893.486.93 11.58 27297.79 3715.66Beijing 836196.56 48.15 534257.08 7531.72Zhejiang Province 760873.56 37.68 227779.52 14095.32Shandong Province 510865.01 48.77 162336.18 22652.16Liaoning Province 367893.52 -7.37 33743.12 3458.63Sichuan Province 54789.03 -19.76 1594.16 126.97Hubei Province 41302.64 30.35 8820.63 266.09Hebei Province 31838.61 51.09 995.83 66.14Shaanxi Province 26681.58 19.45 770.61 23.55Anhui Province 23147.74 30.19 349.43 586.66Inner Mongolia Autonomous Region 23104.01 23.59 22.14Heilongjiang Province 22503.96 82.27 301.40 46.75Hunan Province 17146.87 40.00 371.15 236.84Shanxi Province 11147.70 718.57 2737.73 0.48Jilin Province 9737.58 24.84 297.30 45.01Guizhou Province 8929.29 -41.63 3988.26 19.49Jiangxi Province 8499.25 79.53 35.76 55.34Xinjiang Uygur Autonomous Region 8173.89 20.36 74.69 202.98Henan Province 6330.79 35.14 137.73 7.71Guangxi Zhuang Autonomous Region 6120.05 -7.92 227.06 1602.75Chongqing 5993.44 5.67 792.29 15.11Hainan Province 3776.04 81.11 123.52 169.39Ningxia Hui Autonomous Region 2061.40 -7.61 4.98 1.63Yunnan Province 1805.67 33.64 75.61 1.99Gansu Province 1230.69 19.67 4.12 0.09Tibet Autonomous Region 744.54 -23.58 84.57 81.70Qinghai Province 265.42 276.06 188.55 4.16Total 26816791.43 29.24 4336368.62 921707.55·203·

China Business GuideTable 18 the Export of Electronic Information Products of each Province, City, and Autonomous Region in 2005 (2)Unit: US$10,000ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments5076368.54 2504428.00 1005127.68 400753.59 6954.21 400267.784081936.93 617677.78 343059.62 536235.94 14194.85 110229.992036580.17 277046.56 135902.90 754564.36 16101.91 80490.25116397.87 201977.01 65039.46 141566.14 1341.22 12275.87583446.64 172005.46 64221.85 24849.82 2282.49 15667.22122682.76 25367.61 27518.16 104478.06 4624.74 9736.42171133.48 108025.91 136742.35 58376.22 2927.28 41793.49124473.70 56806.76 102506.50 25896.41 996.05 15197.26101599.23 126113.21 52219.05 23572.73 1695.72 25491.823302.99 25424.89 3812.03 18391.61 1332.96 803.4316820.30 1707.13 9646.42 2799.85 102.15 1140.083909.87 3810.89 3882.55 5613.90 10078.16 3481.281935.28 1644.94 1466.10 15326.54 2627.35 2887.22361.4 12934.46 3249.28 4298.27 51.21 1317.038736.22 5598.29 8623.19 22.66 0.04 77.8713332.37 5398.00 600.05 1154.23 104.20 1566.97362.14 2093.80 5795.72 7255.48 863.76 167.986686.47 46.41 857.98 700.72 33.24 84.691079.97 1974.09 2362.87 3094.44 558.41 325.492713.93 1239.98 546.51 171.59 0.09 249.45397.23 1330.66 1525.10 1956.78 3078.75 119.641053.78 6249.52 191.20 240.00 48.58 113.1438.79 1330.84 3002.73 589.06 988.62 235.321874.45 302.04 1934.11 58.05 7.01 114.58252.33 2252.33 943.16 314.04 7.54 1416.6325.45 106.78 3056.77 112.14 182.000.44 265.47 22.68 1764.94 1.25525.74 29.42 842.52 287.80 42.590.44 0.37 1.70 1205.53 18.4577.83 355.52 94.00 2.58 48.3370.93 0.92 0.8612478106.28 4163350.00 1985037.95 2133911.20 72783.92 725525.91Table 19 the Import of Electronic Information Products according to Country or Region in 2005 (1)Unit: US$10,000Name of country or region Import total Growth rate (%) Communication equipments Radio TV equipmentsTaiwan Province, China 3976416.33 20.80 86366.39 31577.09China 3937847.12 46.04 518204.01 97464.70Korea 3592755.16 31.00 367796.56 21240.39Japan 3225078.83 1.18 143093.64 123314.56Malaysia 1393094.35 20.27 52747.80 3676.99Philippines 1176168.40 43.84 21625.62 1303.61USA 1066465.93 8.25 68763.06 6942.80Singapore 849932.36 29.85 44419.51 4426.40Thailand 698679.35 32.52 28781.91 6578.05Hong Kong SAR, China 479567.79 1.66 58597.03 13396.67Germany 367170.40 2.71 30203.25 1266.27Indonesia 147226.64 15.36 1014.74 367.04France 136081.94 15.66 17034.15 660.56Mexico 107127.88 12.24 6503.79 32.48Ireland 100625.35 18.80 1310.33 19.08Finland 92118.05 -8.84 68880.73 12.12Costarica 89385.64 41.83 13.50·204·

Electronics & InformationU.K. 83647.80 7.23 8272.26 464.87Canada 72148.40 24.58 10231.91 486.06Sweden 62810.69 -29.37 37406.28 124.36Italy 57114.93 6.98 8127.32 1062.63Holland 44182.10 -29.96 1084.30 536.90Israel 43604.80 -10.36 4589.00 77.28Switzerland 32567.19 25.05 1073.74 3683.24Malta 23391.06 -6.34 21.30Austria 22239.29 -1.76 261.48 46.67Morocco 21902.74 38.84 2.59Portugal 19485.09 39.31 1.35 65.15Belgium 18839.98 9.47 1056.78 45.51Hungary 15919.78 -10.18 5694.82 46.93Table 19 the Import of Electronic Information Products according to Country or Region in 2005 (2)Unit: US$10,000ComputersHousehold Electronic Electronic Electronic Electronic instrumentselectronic appliances components apparatuses materials and equipments1193296.64 93633.19 368162.13 2095587.53 38921.57 68871.801643548.68 215149.66 595711.46 744217.68 3161.42 120389.501231979.45 64514.62 213053.95 1612338.45 18934.47 62897.27632284.07 159797.63 480167.19 1277719.28 88674.20 320028.26149295.07 29888.21 53864.77 1080994.59 1490.22 21136.70270305.80 16258.13 22239.01 835230.13 377.35 8828.75213452.78 66117.34 55848.81 456818.75 16532.45 181989.94240548.93 75010.32 40217.70 421486.44 1132.16 22690.90354975.61 16401.99 63528.00 217673.15 44.26 10696.383435.81 34185.95 79080.62 190966.50 3012.30 16892.9145833.63 31244.98 22613.90 121480.44 7872.58 106655.3691730.85 12917.63 17575.87 21142.65 346.84 2131.025571.65 8460.05 6359.89 79141.42 2909.48 15944.7439961.52 1687.46 15159.77 41601.34 19.08 2162.4547666.49 3439.35 456.36 46476.81 0.04 1256.902479.12 9570.55 3070.18 3287.18 72.67 4745.5147.78 1281.23 1326.01 86570.80 146.3315295.84 5646.89 6660.06 24694.40 828.25 21785.2213673.93 2296.60 2561.48 35682.88 300.44 6915.112966.42 9122.46 3435.04 2812.41 104.91 6838.8011079.44 3896.69 5702.88 16688.09 1556.47 9001.401899.80 2396.17 1423.95 12408.42 84.70 24347.862718.03 2286.88 3281.40 13339.58 714.83 16597.801871.40 1053.75 7926.80 6999.00 1430.79 8528.483.20 22.99 8.89 23326.31 8.362632.24 655.58 5744.00 6574.93 312.20 6012.209.36 13.19 88.87 21784.58 4.1415989.41 334.14 1611.02 1446.23 37.801125.06 2612.08 1207.33 10637.84 121.84 2033.543180.99 1740.75 1368.96 2607.97 3.56 1275.79Table 19-1 (continued)Name of country or region Import total Growth rate (%) Communication equipments Radio TV equipmentsVietnam 12419.08 66.00 102.91 297.02India 10231.77 39.28 38.77 0.19Czech Republic 9895.23 17.26 58.70 8.62Australia 9837.41 -27.47 952.91 33.24Denmark 9343.02 -0.92 1925.90 47.30Norway 7427.33 -4.23 2534.14 79.31Spain 7004.86 -9.95 554.33 9.49·205·

China Business GuideRussia 6997.47 20.95 348.39 3.01Porto rico 6982.98 25.50 19.56 68.54Brazil 4513.50 -4.58 830.35Poland 4108.55 17.47 268.19 0.03Estonia 2966.89 557.01 1075.74New Zealand 1551.06 -31.00 201.47Slovakia 1189.09 47.88 7.12 0.02Slovenia 1122.41 52.04 0.18Romania 1111.52 -47.72 488.69Bulgaria 656.50 50.61 0.04United Arab Emirates 540.27 321.17 0.67 0.02Ukraine 488.94 -8.99 1.32Dominica 443.60 107.39Macao SAR, China 432.24 181.04 6.10Greece 367.78 -17.67 7.60Belarus 366.25 -0.19Sri Lanka 356.89 83.89 145.87South Africa 278.79 -47.36 70.38 0.32Iceland 267.70 620.46Luxemburg 220.33 -5.83 0.24DPRK 183.04 -23.52Latvia 150.74 -72.70 148.34Tunis 147.90 42.03Table 19-2 (continued)ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments3470.81 227.50 6223.86 880.07 0.03 1216.87546.22 146.53 1445.16 4323.52 11.31 3720.08360.81 449.64 7280.51 1227.92 129.95 379.07807.07 1017.79 1683.41 2902.05 30.65 2410.29903.67 1494.29 1531.33 787.42 190.95 2462.14302.10 497.24 207.08 124.99 858.23 2824.251369.31 729.72 1131.37 1408.18 281.09 1521.374.31 887.85 123.47 3239.39 1218.66 1172.406578.26 34.42 4.43 149.57 128.21184.27 410.84 1285.27 1143.72 568.61 90.44133.88 1178.21 1671.39 521.00 15.37 320.475.37 534.75 78.41 57.87 0.18 1214.57215.98 131.80 587.97 344.81 0.83 68.2185.62 578.91 86.19 266.12 165.094.42 149.77 862.41 38.32 1.43 65.880.98 80.17 186.42 7.52 3.44 344.3040.14 14.04 587.25 15.031.16 2.03 0.17 523.79 11.90 0.530.10 0.68 34.50 9.97 398.19 44.1992.53 20.51 51.98 33.51 245.0739.29 49.77 7.85 311.93 17.304.55 21.58 12.53 11.76 0.04 309.730.26 0.04 353.57 0.30 12.100.28 6.58 164.18 5.33 34.6445.79 19.59 3.71 63.56 2.09 73.3438.11 22.48 109.48 97.930.83 6.16 18.91 77.65 116.552.11 0.36 41.98 91.92 46.670.03 0.36 0.94 1.081.19 9.50 87.27 0.31 49.63·206·

Electronics & InformationTable 19-1-1 (continued)Name of country or region Import total Growth rate (%) Communication equipments Radio TV equipmentsCroatia 139.55 -1.11 0.21Salvador 123.88 19.74Kirghizstan 106.61Turkey 85.88 -12.99 2.63 0.02Iran 67.52 60.02 0.04Argentina 63.89 -92.37 0.68 0.12Monaco 63.17 -45.75Liechtenstein 53.13 146.09Chile 43.39 79.10 4.14Vanuatu 32.73Chad 30.55 30.55Honduras 23.53 228.79Dominica 22.97 106.55Mauritius 21.64Kuweit 20.21Madagasikara 16.30Saudi Arabia 15.35 618.24 0.03Lithuania 13.13 -25.58 0.01Burma 11.64 1004.55 0.17Lebanon 11.53 9066.77Cambodia 11.44 2.00Others in Asia 10.50Pakistan 10.10 -63.02 0.53Cyprus 9.61Oman 6.52 270.31Georgia 5.82Namibia 5.49 52.67Iraq 5.42 48.79Venezuela 5.32 0.01Table 19-2-2 (continued)ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments5.11 0.31 133.34 0.58123.69 0.16 0.030.02 101.43 5.157.09 21.82 38.87 3.09 12.373.12 3.74 6.09 52.76 1.7714.87 35.31 0.54 3.27 9.090.10 7.82 34.42 20.841.07 3.83 0.03 0.14 48.0613.57 0.02 0.57 24.71 0.3832.730.02 4.18 16.09 3.236.67 5.94 3.87 0.05 6.4421.64 0.013.68 16.5316.304.46 0.76 0.32 9.59 0.190.78 0.37 0.73 5.35 5.890.13 11.340.03 9.88 1.628.54 0.9010.50·207·

China Business Guide0.01 0.01 7.72 0.63 1.204.07 4.30 0.73 0.510.32 0.04 6.151.87 3.950.70 4.66 0.130.84 3.29 1.290.01 0.03 5.26Table 19-1-1-1 (continued)Name of country or region Import total Growth rate (%) Communication equipments Radio TV equipmentsWallis and Futuna 5.29Ecuador 5.07 26.75Azerbaijan 4.89Tajikistan 4.62 64.95Albania 4.40 114.57Egypt 3.67 -81.83 0.01Uzbekistan 3.13 0.27Kazakhstan 3.11Kenya 2.77Bengal 2.24 421.72Notes: The data come from China’s customs.Table 19-2-2-2 (continued)ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments5.291.90 0.29 0.17 2.724.05 0.841.53 3.084.400.65 0.01 2.11 0.02 0.860.05 2.820.07 3.040.30 0.16 0.05 2.250.01 2.23Table 20 the Export of Electronic Information Products according to Countries or Regions in 2005 (1)Unit: US$10,000Name of country or region Export total Growth rate (%) Communication equipments Radio TV equipmentsHong Kong SAR, China 6945519.94 37.51 968619.76 256614.27USA 6112168.03 28.13 1015973.51 305788.11Japan 2219666.90 10.07 150401.14 100038.80Holland 1522816.61 39.38 78457.77 71766.35Germany 1512467.05 33.50 408686.99 9146.35Korea 957563.03 14.57 173604.53 13869.87Singapore 837794.43 20.06 226319.81 39592.94Taiwan Province, China 670933.31 25.62 49008.89 8533.74U.K. 594139.39 25.00 89363.45 14537.93Malaysia 530558.43 33.90 48066.24 13834.91France 410167.68 -6.30 99794.07 6052.53Australia 269535.61 21.21 32947.03 11491.40Canada 256252.96 57.59 16108.69 18444.47Thailand 254014.34 37.53 50202.55 2100.60Ireland 244438.53 49.07 2668.03 14223.48India 218036.81 40.52 87231.38 861.66·208·

Electronics & InformationTable 20 the Export of Electronic Information Products according to Countries or Regions in 2005 (2) Unit: US$10,000ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments3170720.26 755348.24 857376.41 753929.49 12471.55 170439.953033483.68 1190654.65 189531.23 208312.48 5911.71 162512.661147656.47 345364.41 185527.00 174141.69 24384.86 92152.521106757.63 172093.98 25796.50 44979.45 926.96 22037.97736753.68 192821.61 49712.14 81459.82 3409.44 30477.02280628.99 175691.24 131749.78 149308.30 3449.38 29260.94239155.06 41193.37 73758.05 202584.64 1415.93 13774.63267715.27 37706.82 75685.65 187568.53 12384.57 32329.85288542.73 148146.37 24412.43 13343.64 1691.70 14101.14306326.54 24382.50 54623.16 73610.47 315.15 9399.45204443.66 70830.82 13582.94 5392.41 367.96 9703.29143549.89 67911.52 7278.10 2572.20 1.15 3784.31109576.75 87988.82 8245.40 7723.01 150.30 8015.52110435.63 31242.95 25144.14 30066.51 288.81 4533.15214826.90 6238.13 2053.32 864.85 1.11 3562.7163797.75 26217.49 18673.62 11926.04 1061.43 8267.44Table 20 the Export of Electronic Information Products according to Countries or Regions in 2005 (1-1)Unit: US$10,000Name of country or region Export total Growth rate (%) Communication equipments Radio TV equipmentsFinland 212795.54 42.27 69339.69 820.50Mexico 201511.18 23.19 38772.02 1911.87Luxemburg 199451.91 123.70 12454.50 837.51Hungary 191175.55 1.52 89722.71 2893.42Brazil 165163.90 64.07 63447.76 1033.79Philippines 158605.04 2.07 21545.38 1035.28Belgium 157752.86 18.74 28526.56 2400.81Italy 150286.22 14.91 31407.60 2660.15United Arab Emirates 147488.70 32.46 21999.62 1605.61Russia 142055.23 58.94 40085.42 645.00Spain 136021.71 59.57 27601.20 1605.23Indonesia 112271.77 22.49 23956.12 2371.36Czech 100407.32 36.10 17077.24 224.42Turkey 84119.17 35.36 11265.00 983.21Sweden 66861.23 40.22 24583.25 3149.78South Africa 57077.21 30.63 4166.11 1425.69Poland 54707.68 107.35 7981.06 414.39Pakistan 45848.71 67.48 29199.48 221.05Nigeria 34906.71 67.02 20449.14 196.37Ukraine 34598.30 57.23 5120.37 164.33Saudi Arabia 33005.55 23.75 8014.00 163.18Austria 32260.81 -18.66 6080.63 228.89Vietnam 32255.28 64.79 10174.93 399.35Switzerland 31052.55 61.03 7669.61 150.75Chile 29610.99 37.89 1872.38 316.19New Zealand 28177.97 38.99 5475.40 244.21Israel 28169.07 22.78 3999.54 417.23Iran 27960.54 12.65 9980.45 198.94Argentina 26943.15 66.44 3742.52 343.76Denmark 26702.57 31.91 4877.71 606.27·209·

China Business GuideTable 20 the Export of Electronic Information Products according to Countries or Regions in 2005 (2-2)Unit: US$10,000ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments77469.93 49794.44 7628.01 4127.18 158.78 3457.0078382.91 49609.98 12921.30 10323.10 107.49 9482.51184392.92 1628.75 32.56 82.38 23.2947185.64 22139.97 20910.99 5676.90 46.77 2599.1534622.67 37366.24 15131.62 9357.29 131.75 4072.7832990.23 7280.69 28665.74 62647.36 1008.82 3431.5380747.44 30480.93 8320.99 3800.91 410.56 3064.6743281.94 45413.58 14034.79 5296.29 418.36 7773.5247124.36 60344.94 8031.95 3386.50 11.00 4984.7219166.26 56423.15 7323.09 9950.99 331.55 8129.7849294.39 38719.39 8187.78 6587.86 173.32 3852.5434567.58 20760.16 17950.38 8972.65 65.59 3627.9271439.41 6722.45 3476.72 427.07 51.40 988.6131078.50 18046.19 9945.15 6326.57 9.43 6465.138505.91 24459.96 2415.88 1024.89 1.49 2720.0818944.37 23516.39 3970.79 3340.04 4.19 1709.6221801.13 13306.24 4081.91 3589.18 32.69 3501.082133.98 8227.99 3149.66 1396.09 26.40 1494.071544.20 5695.21 2648.22 948.67 3424.912550.74 21046.48 2672.33 1506.38 141.62 1396.058989.15 11663.23 1214.37 1347.82 0.84 1612.9715592.08 4332.59 4286.82 1070.24 1.48 668.074952.91 7965.38 4485.92 1402.30 32.00 2842.4911139.56 4763.14 5669.80 431.82 28.44 1199.438356.35 16005.21 1658.29 436.81 0.65 965.1111177.15 9517.52 746.73 426.46 590.528748.02 9561.41 2605.25 863.23 28.63 1945.763532.33 6639.24 2530.40 2510.60 14.71 2553.866611.82 10244.52 1941.69 2986.62 3.41 1068.797385.76 9892.77 2100.39 353.91 0.33 1485.43Table 20-1-1-1 (continued)Name of country or region Export total Growth rate (%) Communication equipments Radio TV equipmentsBangladesh 23476.83 77.56 14517.40 413.26Greece 22332.87 49.83 10243.44 321.04Panama 21558.61 22.13 529.35 403.39Egypt 21093.12 59.74 3656.23 416.18Portugal 20046.74 90.63 4943.88 63.97Columbia 18926.47 103.27 8366.30 200.74Slovakia 17634.48 176.56 1387.66 152.59Algeria 17595.92 18.21 9246.42 77.81Kazakstan 16413.9 21.12 2586.89 30.66Iraq 16257.67 121.07 14815.14 27.55Macao SAR, China 15202.21 0.47 3160.00 46.79Morocco 14644.66 47.82 4028.53 46.53Venezuela 14245.31 202.85 5765.13 155.63Norway 14153.97 224.84 6100.13 123.44Sudan 13019.62 424.38 10566.46 29.85Esthonia 12968.25 35.23 6627.59 75.21Rumania 12735.50 69.97 2979.66 117.15Peru 10803.67 23.65 2016.00 110.51Lithuania 10491.93 20.72 545.68 36.67Jordan 8641.45 52.77 2108.36 4.85·210·

Electronics & InformationUzbekistan 8091.81 78.35 4975.64 8.04Sri Lanka 7827.26 101.55 4032.99 28.52Benin 7339.99 -3.81 5599.87 35.80Libya 7306.31 88.44 5878.27 7.75Bulgaria 7305.68 14.62 1856.43 69.77Croatia 6740.85 110.10 1901.46 67.76Paraguay 6653.14 -12.09 115.81 334.18Tunis 6344.60 165.07 3253.08 21.05Uruguay 6258.60 58.86 392.17 35.90Syria 5266.91 -18.48 1130.33 29.05Table 20-2-2-2 (continued)ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments2971.61 2680.64 1176.83 995.44 2.45 719.213744.96 5416.42 1113.77 484.80 0.26 1008.183701.28 15249.12 1105.21 278.40 291.864001.57 6876.98 2456.96 2106.53 11.26 1567.414103.92 5582.59 1818.47 3183.56 10.15 340.192299.64 5225.89 1409.81 659.43 4.27 760.3911065.26 2551.61 522.59 310.55 6.00 1638.231183.05 5579.09 304.57 803.80 401.183290.92 8649.40 410.35 896.72 548.97175.13 934.32 54.86 46.41 204.281016.40 2082.53 5804.79 2125.07 19.10 947.532856.91 6170.02 675.24 481.35 1.53 384.561436.35 4653.03 593.08 707.94 934.154832.49 2231.05 315.95 268.14 16.70 266.081065.88 516.41 260.67 160.78 103.96 315.601172.43 1088.41 2431.89 964.26 447.03 161.423610.93 4237.69 968.94 383.61 28.31 409.222229.93 5105.16 751.23 212.59 378.241432.26 6859.14 457.68 837.97 322.52375.57 5467.47 178.50 270.46 236.241250.31 1470.26 92.92 147.99 0.98 145.67685.06 1873.96 332.13 604.36 0.22 270.0182.32 782.18 615.91 136.90 87.01250.38 667.00 267.76 144.03 91.121168.01 3018.04 709.07 232.53 0.71 251.12973.86 3308.20 226.56 117.58 1.12 144.303479.08 1931.84 514.19 121.13 156.92761.51 1513.45 220.02 440.39 135.111820.34 3586.38 224.68 120.23 78.90442.18 1865.76 701.16 384.60 5.86 707.98Table 20-1-1-1-1 (continued)Name of country or region Export total Growth rate (%) Communication equipments Radio TV equipmentsEcuador 5012.21 -13.78 533.80 98.71Kuweit 4502.19 5.59 696.36 17.61Lebanon 4490.01 -4.40 157.41 58.89Cuba 4230.43 -39.71 861.20 182.82Costarica 4143.52 96.35 235.19 8.00Slovenia 4002.69 43.62 795.63 61.17Kirghizia 3990.72 38.01 511.14 172.16DPRK 3868.94 12.98 132.84 12.65Burma 3625.24 -72.15 208.82 13.90Ghana 3509.40 -42.47 1914.87 59.27Kenya 3394.66 -17.77 1979.98 6.69·211·

China Business GuideTajikistan 3259.72 172.38 2829.11 0.18Nepal 3113.69 -16.49 1660.45 120.13Latvia 2879.17 32.98 661.61 12.04Yemen 2627.96 -59.23 1160.76 2.48Mongolia 2529.81 173.07 1716.50 28.33Belarus 2295.40 -29.90 670.04 5.72Guatemala 2208.54 45.90 465.81 64.17Mauritius 2177.95 73.01 1289.19 15.46Ethiopia 1991.86 -33.09 1061.98Laos 1929.93 -26.38 1491.09 5.29Yugoslavia 1929.51 -13.24 629.55 7.46Turkmenistan 1877.11 21.33 863.90Lesotho 1814.14 39.35Notes: The data come from China’s customs. Of it, the data statistics include 220 countries and regions, and Table20 only reflects the top 100.Table 20-2-2-2-2 (continued)ComputersHousehold electronic Electronic Electronic Electronic Electronic instrumentsappliances components apparatuses materials and equipments838.18 2578.82 450.00 163.00 24.13 325.58565.91 2737.14 153.54 144.29 0.20 187.15681.54 2441.46 327.26 322.84 0.02 500.58240.89 2292.55 56.65 40.38 555.93249.23 1331.49 121.89 2049.57 0.22 147.93872.15 1908.12 217.56 75.62 0.60 71.86251.58 2732.58 47.83 14.83 187.17 73.42555.25 2585.51 255.09 65.12 42.00 220.48593.74 1387.22 730.48 127.75 287.14 276.20144.85 408.85 409.36 372.06 200.14238.86 714.22 233.11 101.85 0.01 119.9436.53 354.30 8.89 2.74 27.97217.34 783.99 141.80 64.84 125.14737.01 940.12 240.71 68.02 26.12 193.53149.25 746.04 275.09 126.58 167.77359.77 233.36 135.79 3.76 52.29211.47 380.89 176.79 617.21 70.06 163.22341.13 953.51 194.67 60.47 128.78122.95 577.42 60.25 39.28 1.49 71.92133.17 465.72 222.29 27.60 81.109.61 240.59 97.34 41.62 44.38355.92 743.61 60.14 67.11 65.7318.33 946.71 40.75 7.419.66 1803.26 1.09 0.13Notes: The data come from China’s customs. Of it, the data statistics include 220 countries and regions, and Table20 only reflects the top 100.·212·

Electronics & InformationChapter VIII Overall Data StatisticsI. Main data statistics of China’s economic development (1998-2006, focusing onthe electronic information industry)Unit:100M yuan20000018000016000014000012000010000080000600004000020000079553 82054 89404 109655 120333 1358231598781823211998 1999 2000 2001 2002 2003 2004 2005Figure 1 China's GDP in the Period from 1998 to 2005151050Unit:%7.89.1 10.0 10.17.1 8.0 8.39.91998 1999 2000 2001 2002 2003 2004 2005Figure 2 China's GDP Growth in the Period from 1998 to 2005Unit: 100M yuan761908000065210700006000047431 5494643581500003957033541 353574000030000200001000001998 1999 2000 2001 2002 2003 2004 2005Figure 3 China's Overall Industrial Growth in the Period from 1998 to 2005·213·

China Business Guide1510Unit:%8.9 8.59.98.710.012.811.5 11.4501998 1999 2000 2001 2002 2003 2004 2005Figure 4 China's Overall Industrial Growth in the Period from 1998 to 2005Unit: US$100M76208000700060005000400030002000100002661 3256 593324921837 194943821998 1999 2000 2001 2002 2003 2004 2005Figure 5 China's Export Trade in the Period from 1998 to 2005Unit:US$100M70005614660160005000412840003000200014021657225124362952100001998 1999 2000 2001 2002 2003 2004 2005Figure 6 China's Import and Export Trade in the Period from 1998 to 2005·214·

Electronics & InformationUnit: 10,000 perseons124810 125909 126583 127627 128453 129227 129988 13075615000112000190001600013000111998 1999 2000 2001 2002 2003 2004 2005Figure 7 China's Population in the Period from 1998 to 2005Unit:100M yuan100000704778000055567435006000024941 28406 29855 3291837214400002000001997 1998 1999 2000 20001 2002 2003 2004 2005Figure 8 The Fixed Asset Investment of the Whole Society in the Period from 1998 to 200588604Unit:%3027.7 26.6 25.72010013.95.110.313.016.91998 1999 2000 2001 2002 2003 2004 2005Figure 9 The Fixed Asset Investment Growth of the Whole Society in the Period from1998 to 2005120001000080006000400020000Unit: 100M yuan2247 3113 4494 3953 5052 67399225 115751998 1999 2000 2001 2002 2003 2004 2005Figure 10 China's Telecom Business Total in the Period from 1998 to 20054.74.2Unit: 100M 53.542.831.6 1.8 2.02 1.3101998 1999 2000 2001 2002 2003 2004 2005Figure 11 The Total Capacity of China's Local Exchange in the Period from 1998 to 2005·215·

China Business Guide3504340000 Unit: 100M households3124435000263313000021442250001803720000144831087215000 874210000500001998 1999 2000 2001 2002 2003 2004 2005Figure 12 The Development of China's Fixed Telephone Users in the Period from 1998 to 20052500020000150001000050000Unit: 10,000 households171292108511228 135959297625774631998 1999 2000 2001 2002 2003 2004 2005239774000035000300002500020000150001000050000Figure 13 The Development of City Fixed Telephone Users in the Period from 1998 to 2005120001000080006000400020000Unit: 10,000 households2386Unit: 10,000 households2478433034185183845368111452278472060192012699510159 110661998 1999 2000 2001 2002 2003 2004 2005Figure 14 The Development of China's Rural Fixed Telephone Users in the Period from1998 to 200533482 393431998 1999 2000 2001 2002 2003 2004 2005Figure 15 The Development of China's Mobile Phone Users in the Period from 1998 to2005·216·

Electronics & Information70006000500040003000200010000Unit: 100M yuan807106214222605 2815354551931998 1999 2000 2001 2002 2003 2004 20056701Figure 16 The Industrial Growth Accomplishment of the Electronic InformationProduct Manufacturing Industry in the Period from 1998 to 20053841140000 Unit: 100M yuan350003000025000200002412611885 13423 175791500010000 3362 4302 6041500001998 1999 2000 2001 2002 2003 2004 2005Figure 17 the Sales Income Accomplishment of the Electronic InformationProduct Manufacturing Industry in the Period from 1998 to 200512001000800600400200163Unit: 100M yuan200396563 5766961004 107401998 1999 2000 2001 2002 2003 2004 2005Figure 18 The Profit Total Accomplishment of the Electronic Information ProductManufacturing Industry in the Period from 1998 to 200540003500300025002000150010005000Unit: 100M yuan325 421560751·217·1100163324051998 1999 2000 2001 2002 2003 2004 20053900Figure 19 The Sales Income Accomplishment of the Software Industry in thePeriod from 1998 to 2005

China Business Guide2500Unit: US$100M18092206200015001000500225384539 591851132201998 1999 2000 2001 2002 2003 2004 2005Figure 20 The Import of Electronic Information Products in the Period from 1998to 200530002500200015001000500Unit: US$100M25839055165035.940 Unit: US$100M28.0353020.02515.0207.515 4.710502000 2001 2002 2003 2004 2005Figure 22 The Export of China's Software Products in the Period from 2000 to 200592014212075268201998 1999 2000 2001 2002 2003 2004 2005Figure 21 The Export of Electronic Information Products in the Period from 1998 to 200525000200001500010000Unit: 100M yuan5801715090681281718465 24021500002000 2001 2002 2003 2004 2005Figure 23 the Sales Income Accomplishment of China's Three Kinds of Foreign-InvestedEnterprises or Ventures in the Period from 2000 to 2005·218·

Electronics & Information2500200015001000500Unit: US$100M401 48773511901780234102000 2001 2002 2003 2004 2005Figure 24 The Prodcut Export of China's Three Kinds of Foreign-Invested Enterprises orVentures in the Period from 2000 to 200512001082 1039Unit: 100M yuan10008005485224704256004002000LegendHoldingsHaierGroupBOE TCL Group Huawei MideaGroupFigure 25 The Business Income of the Top 6 in Top 100 Electronic Information Enterprises in 2006160152140Unit: 100M yuan1207664100604680426040200Huawei Haier Group ZTE Utstarcom DigitalChinaInsigmaFigure 26 The Software Income of the Top 6 in Top 100 China's Software Income Scale Enterprises in 2006·219·

China Business GuideUnit:%Notes: The full names are Legend Holdings Ltd., Haier Group, BOE Technology Group Co., Ltd., TCL Group CompanyLimited, Huawei Technologies Co., Ltd., Midea Group Co., Ltd., UT ZTE Corporation, UTStarcom Telecom Co., Ltd.,Digital China (China) Ltd., Zhejiang University Innovation Technology Co., Ltd., Motorola (China) Electronics Ltd.,Shandong Samsung Telecommunications Co. (SST for short), Tech-Com (Shanghai) Computer Co., Ltd., FreescaleSemiconductor (China) Limited, HP Technology (Shanghai) Co., Ltd., Nokia Shouxin Communication Co., Ltd. (NCT forshort).60005000400030002000100005174.1 4532.42385.6Motolora SST Tech-comComputer1592.2 1523.1 1508.1Freescale HP NCTFigure 27 The Composite Index of the Top 6 in the Top 100 Three Kinds of Foreign-Invested Enterprises or Ventures on Composite Benefit Index in 2005II. List of Top 100 Electronics Information Enterprises 2006 (the 20th)SerialBusiness income Profit total Export valueName of the enterpriseNo.(10,000 yuan) (10,000 yuan) (10,000 yuan)1 Legend Holdings Ltd. 10818936 205167 11519592 Haier Group 10393583 131950 10738753 BOE Technology Group Co., Ltd. 5481378 -6706 8326374 TCL Group Company Limited 5214954 -118090 9584675 Huawei Technologies Co., Ltd. 4696689 514966 17334306 Midea Group Co., Ltd. 4249790 77600 14556827 Hisense Group Co., Ltd. 3337730 62065 3701628 Shanghai General Electronics (Group) Co., Ltd. 2930206 -46674 15563179 Panda Electronics Group Co., Ltd. 2812324 62535 147449810 Peking University Founder Group Co., Ltd. 2588093 85024 8692811 ZTE Corporation 2157592 160581 92644312 Sichuan Changhong Electronic Group Co., Ltd. 1811903 26267 29541613 Shenzhen Huaqiang Holdings Limited 1565625 48989 109905514 Great Wall Technology Co., Ltd. 1509102 62186 123740315 Guangdong Glanz Group 1352682 46253 45667416 Shenzhen Skyworth RGB Electronic Co., Ltd. 1306057 15208 15835117 Langchao Group Ltd. 1258725 24698 7284718 Alcatel Shanghai Bell Co., Ltd. 1201069 54645 46502619 Huizhou Desay Holding Co.,Ltd. 1172899 48901 75387020 Konka Group Co., Ltd. 1161277 6000 15643321 Guangzhou Wanbao Group Co., Ltd. 1073799 57438 30968722 Huizhou Foryou Group Co., Ltd. 1035712 48640 66283823 Tsinghua Tongfang Co., Ltd. 982708 22691 11226224 Ningbo Bird Co., Ltd. 907536 -43041 35073325 Dalian Daxian Co., Ltd. 903355 -25786 50609126 Shenzhen Seg Group Co., Ltd. 887221 4048 53638527 Xiamen Huaqiao Electronic Enterprise Co., Ltd. 880457 4333 38976128 Shanghai Feilo Co., Ltd. 721421 85188 29677829 Shenzhen Sed Electronics Corporation 697080 11806 27047330 Qingdao Aucma Group Co. 673650 -369 32155·220·

Electronics & Information31 Byd Auto Co., Ltd. 660349 70052 46333332 Huizhou Qiaoxing Group Co., Ltd. 571198 14986 2685533 Hengtong Group Co., Ltd. 536394 13200 900034 Wanlida Group Co., Ltd. 533685 21747 34298135 Fujian Electronics Information (Group) Co., Ltd. 512965 13909 9323236 XJ Group Corporation 512925 38334 610437 Huadong Electronics Group Company 511890 12975 15196838 Shanghai Hongsheng Technology Co., Ltd. 510369 9085 49875539 Yongding Group Company Limited 510287 30564 825040 Irico Group Corp. 510126 -87000 18568541 Henan Xinfei Electrical Appliance Co., Ltd. 446749 12513 3758842 Gree Electric Appliances (Chongqing) Co., Ltd. 435383 11266 043 Zhejiang University Innovation Technology Co., Ltd. 433561 11468 961244 Shanghai Huahong (Group) Co., Ltd. 426172 19007 19669045 Changbai Computer Group Co. 420853 3583 24488646 Henan Anyang CPT Glass Bulb Group Co., Ltd. 411131 -22535 9799847 China Hualu Group Co., Ltd. 376516 -640 25870948 Daheng New Epoch Technology Inc. 363853 7842 1082249 Jiangsu Zhongtian Optical Cable Group 356100 40532 240050 Jiangsu Hongtu High-tech Co., Ltd. 350947 4210 4183051 Zhejiang Fuchunjiang Communication Group Co., Ltd. 350913 9715 052 Tongguang Group Co., Ltd. 350080 20916 500053 Tsinghua Unisplendour Co. Ltd. 341144 3753 80454 Futong Group Co., Ltd. 323267 12213 727955 Zhenxiong Copper Group Co., Ltd. 315945 8700 628056 Guangdong Donlim Kitchen Group Co., Ltd. 312315 10525 30187557 Huiyuan Group Co., Ltd 280055 13421 058 Neusoft Group Ltd. 280000 20000 5100059 Hengdian Group Dmegc Magnetics Co., Ltd. 274897 28685 12376760Wuhan Research Institute of Posts andTelecommunications267040 2711 3200561 Hedy Holding Co., Ltd. 264750 12038 1411562 Sichuan Jiuzhou Electric Group Co., Ltd. 256393 24358 6561863 China Silian Instrument Group Co., Ltd. 256014 14441 2125964 China Zhenhua Electronics Group Company, Ltd. 253086 10139 6992765 Aerospace Information Co., Ltd. 252526 37424 066 Yangtze Optical Fibre and Cable Company Ltd. 251393 5689 1979967 Shanghai Jinling Co., Ltd. 250804 24995 8820268 Shanghai Feilo Acoustics Co., Ltd. 246544 17040 8292969 Ningbo Yunsheng Co., Ltd. 228167 9922 19024270 China Luck Film Group Co., Ltd. 222365 4591 4173571 Xianyang Pianzhuan Group Corp. 221175 -8862 8457772 Ningbo Xinye Group Corp 220889 6040 2010773 China Resources Microelectronics (Holdings) Limited 220208 11926 5439574 Jiangsu Shuangdeng Group 213279 23603 547875 Hualun Group 209265 8869 076 Tongling Jingda Copper Material Group Co., Ltd. 206041 8513 500077 Guangzhou Radio Group Co., Ltd. 204168 50503 1928478 CISDI Engineering Co., Ltd. 200725 13448 079 Tianjin Communication & Broadcasting Group Co., Ltd. 197668 3148 69880 Westlake Electronics Group Co., Ltd. 194541 5841 7137381 Jiangyin Xinchao Technology Group Co., Ltd. 194489 13688 7108682 Shenzhen Hasee Group Co., Ltd. 192425 11847 107383 Guangzhou Jinpeng Group Co., Ltd. 189057 992 2212084 Beijing Huaqi Information Digital Technology Co., Ltd.) 184600 1796 615085 Jiangxi Province Electronics Group Corp. 183890 9379 4285586 Nantong Fujitsu Microelectronics Co., Ltd. 177407 5786 152701·221·

China Business Guide87 Harbin Guangyu Power Supply Group Company Ltd. 175804 16768 2038488 Liaoning No. 2 Radio Factory (Group) 168500 8951 9021289 Guangdong Shengyi Sci-Tech Co., Ltd. 165960 22592 11795490 Yunnan Nantian Electronics Information Co., Ltd. 164912 2186 267091 Zhenghai Group Co., Ltd. 164831 8960 306692 Tellhow Sci-Tech Co., Ltd. 163493 8634 397693 Yantai Shougang Dongxing (Group) Corporation 158532 6316 218294 Shanghai Automation Instrumentation Co., Ltd. 155260 5979 557195 Weihai Beiyang Electric Group Co., Ltd. 154660 7495 8654996 Chongqing Newtanshanelectric Wire And Cable Co., Ltd. 152365 3707 593197 Shenzhen Hangsheng Electronics Co., Ltd. 150000 7243 550298 Hong An Group Co., Ltd. 148006 16187 099 Hebei Jinglong Industry & Commerce Group Co., Ltd. 147309 31142 72030100 Shandong CVIC Software Engineering Co., Ltd. 146550 2765 3078III. List of Top 100 Electronics Information Enterprises 2007 (the 21st)SerialBusiness income Profit total Export valueName of the enterpriseNo.(10,000 yuan) (10,000 yuan) (10,000 yuan)1 Legend Holdings Ltd. 13,894,689 40,560 291,8322 Haier Group 10,801,576 150,275 1,461,3723 Huawei Technologies Co., Ltd. 6,588,016 413,617 3,466,0144 BOE Technology Group Co., Ltd. 6,312,120 -158,482 842,2815 Midea Group Co., Ltd. 5,182,281 137,037 1,780,6306 TCL Group Company Limited 4,685,523 -356,887 1,353,5397 Hisense Group Co., Ltd. 4,353,344 73,389 630,8328 Peking University Founder Group Co., Ltd. 3,088,350 118,743 80,9449 Panda Electronics Group Co., Ltd. 2,774,131 68,598 1,571,58110 Shanghai General Electronics (Group) Co., Ltd. 2,670,016 -204,717 1,436,90611 ZTE Corporation 2,303,168 106,962 1,021,15512 Sichuan Changhong Electronic Group Co., Ltd. 2,151,163 -63,309 340,90513 Great Wall Technology Co., Ltd. 2,002,021 54,120 1,744,89414 Langchao Group Ltd. 1,520,376 28,965 114,75815 Alcatel Shanghai Bell Co., Ltd. 1,501,828 81,682 699,87016 Shenzhen Skyworth RGB Electronic Co., Ltd. 1,478,978 22,043 176,90817 Guangdong Glanz Group 1,466,280 63,879 538,81418 Shenzhen Huaqiang Holdings Limited 1,396,547 63,833 799,00819 Huizhou Desay Holding Co., Ltd. 1,353,551 38,857 785,65920 Byd Auto Co., Ltd. 1,331,689 138,844 680,42721 Konka Group Co., Ltd. 1,265,615 11,609 386,83822 Tsinghua Tongfang Co., Ltd. 1,222,074 37,636 151,88023 Xiamen Huaqiao Electronic Enterprise Co., Ltd. 1,176,432 5,469 413,82324 Guangzhou Wanbao Group Co., Ltd. 1,149,106 38,103 329,82525 Golden Dragon Precise Copper Tube Group Inc. 1,033,945 18,609 288,92526 Huizhou Foryou Group Co., Ltd. 967,170 56,936 614,58827 Dalian Daxian Group Co., Ltd. 953,182 7,581 581,75928 Shanghai Feilo Co., Ltd. 876,840 110,822 350,40629 Shenzhen Electronics Group Co., Ltd. 829,787 22,118 621,96230 Ningbo Bird Co., Ltd。 673,956 2,829 272,84231 Shanghai Hongsheng Technology Co., Ltd. 604,223 13,614 590,44732 Hengtong Group Co., Ltd. 597,347 21,334 12,03633 Shenzhen Sed Electronics Corporation 582,484 16,312 237,25034 Huizhou Qiaoxing Group Co., Ltd. 565,794 19,327 33,86735 Yongding Group Company Limited 565,269 16,895 8,32236 XJ Group Corporation 564,915 46,043 3,89137 Wanlida Group Co., Ltd. 563,849 21,621 379,639·222·

Electronics & Information38 Gree Electric Appliances (Chongqing) Co., Ltd. 563,804 13,788 039 Amoi Electronics Co. Ltd. 554,646 5,599 109,66440 Fujian Electronics Information (Group) Co., Ltd. 529,589 6,377 110,27941 Baosheng Group Co., Ltd. 523,313 18,889 8,55442 Huadong Electronics Group Company 516,877 6,725 159,26443 China Hualu Group Co., Ltd. 514,440 15,920 445,68644 Irico Group Corp. 508,495 9.968 155,06245 Henan Xinfei Electrical Appliance Co., Ltd. 500,912 22,200 37,56546 Zhejiang University Innovation Technology Co., Ltd. 483,764 15,185 14,00047 Jiangsu Zhongtian Technologies Co., Ltd. 481,316 53,568 10,94848 Shanghai Huahong (Group) Co., Ltd. 478,713 76,504 198,28249 Zhejiang Fuchunjiang Communication Group Co., Ltd. 458,466 13,085 7,78550 Guangdong Chigo Air-Conditioning Co., Ltd. 452,348 12,927 156,24951 Jiangsu Hongtu High-tech Co., Ltd. 439,582 4,294 33,73852 Ningbo Yunsheng Co., Ltd. 437,791 14,180 268,85453 Tongling Jingda Copper Materials Group Co. Ltd. 435,531 11,127 1,05054 Changbai Computer Group Co. 430,293 4,091 357,68655 Guangdong Donlim Kitchen Group Co., Ltd. 398,770 18,225 305,22356 Futong Group Co., Ltd. 383,671 13,771 10,60857 Jinglong Industry and Commerce Group Co., Ltd. 381,444 122,498 67,74958 Wuhan Research Institute of Posts and Telecommunications 372,937 3,600 54,26559 Zhenxiong Copper Group Co., Ltd. 372,397 11,595 72,79760 Aerospace Information Co., Ltd. 367,715 51,914 061 Daheng New Epoch Technology, Inc. 365,597 9,224 14,35662 Tongguang Group Co., Ltd. 358,102 29,736 38,62563 Tsinghua Unisplendour Co., Ltd. 351,202 2,810 65564 Sichuan Jiuzhou Electric Group Co., Ltd. 351,103 27,262 122,85965 Huiyuan Group Co., Ltd. 350,358 14,065 066 Guangdong Shengyi Sci-Tech Co., Ltd. 339,861 48,485 238,26967 Henan Anyang Cpt Glass Bulb Group Co., Ltd. 339,596 -61,079 59,70368 Hedy Holding Co., Ltd. 336,737 7,168 40,30069 CISDI Engineering Co., Ltd. 329,945 36,829 070 Yangtze Optical Fibre and Cable Co., Ltd. 324,108 15,367 17,05671 Neusoft Group Ltd. 315,026 31,687 88,89472 Shanghai Jinling Co., Ltd. 312,868 18,700 90,60473 Zhejiang Wanma Group Co., Ltd. 305,973 18,609 30,14174 China Silian Instrument Group Co., Ltd. 297,034 17,857 24,50775 China Zhenhua Electronics Group Company, Ltd. 289,659 13,005 65,25576 China Resources Microelectronics (Holdings) Limited 288,080 32,493 59,55277 Hengdian Group Dmegc Magnetics Co., Ltd. 285,429 26,716 153,05278 Hualun Group 283,185 8,479 079 Qingdao Aucma Group Co. 280,420 -85,219 21,21680 Xianyang Pianzhuan Group Corp. 277,026 3,251 101,42081 Shanghai Feilo Acoustics Co., Ltd. 265,903 15,391 111,26282 Jiangsu Xinchao Technology Group Co., Ltd. 264,033 21,058 102,99083 China Luck Film Group Co., Ltd. 261,841 4,662 55,04784 Guangzhou Radio Group Co., Ltd. 230,983 65,686 26,01985 Dalian Levear Electric Co., Ltd. 230,660 9,590 147,39886 Harbin Guangyu Power Supply Group Company Ltd. 226,384 20,349 23,79187 Jiangxi Province Electronics Group Corp. 225,831 14,696 50,59888 Jiangsu Shuangdeng Group 225,348 24,788 5,63489 Nantong Fujitsu Microelectronics Co., Ltd. 219,061 10,185 187,76990Zhejiang Great Wall Electronic Science & Technology Group Co.,Ltd.218,871 5,642 3,40291 Datang Telecom Technology Co., Ltd. 213,322 -66,301 4,13492 Chongqing Yuneng Taishan Electric Wire & Cable Co.,Ltd. 212,876 3,574 7,96393 Beijing Huaqi Information Digital Technology Co.,Ltd.) 203,600 1,487 7,620·223·

China Business Guide94 Tellhow Sci-Tech Co., Ltd. 200,976 12,152 8,36995 Jiangsu Linyang Electronics Co., Ltd. 200,256 25,318 1,48696 Shenzhen Hasee Group Co., Ltd. 191,206 4,896 14,85597 Yunnan Nantian Electronics Information Co., Ltd. 190,492 3,245 2,77698 Guangdong Goworld Co., Ltd. 188,469 11,551 78,75699 Shanghai Automation Instrumentation Co., Ltd. 187,544 6,935 6,689100 Fengfan Co., Ltd. 186,731 7,690 2,296The end·224·