Chongqing's industries have now diversified but unlike eastern China, its export sector is small due to its inland location. Instead, factories producing local-oriented consumer goods such as processed food, autos, chemicals, textiles, machinery and electronics are common.
Chongqing is China's third largest centre for motor vehicle production and the largest for motorcycles. In 2007, it had an annual output capacity of 1 million automobiles and 8.6 million motorcycles.
Leading makers of cars and motor bikes includes China's fourth biggest automaker; Changan Automotive Corp and Lifan Hongda Enterprise.
As the leading maker of diesel engines and heavy-duty trucks in China, Weichai Holdings Group Co.
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The PC industry
The PC industry is setting up vast new factories, development and logistics centres in the cities of Chongqing and Chengdu in western China. Hewlett-Packard, Acer and Asustek, the world’s number one, three and six PC brands by shipments, chose Chongqing. Dell and Lenovo, ranking second and fourth, picked Chengdu, the capital of Sichuan province less than 300km away.
That spurred Quanta, HP’s largest manufacturing partner, which also supplies all other leading notebook brands, to set up shop in Chongqing as well. Foxconn, which serves HP, Dell, Apple, Asustek and Sony, set up facilities in both cities while Compal and Wistron, two other large notebook contract manufacturers, are building factories in both places.
Inventec, a smaller manufacturer, is ramping up operations in Chongqing.
In the first five months this year, Chongqing sold 2.43 million laptop computers abroad. The exports were valued at 840 million U.S. dollars, accounting for 20 percent of the city's total export value.
June 22, 2011
Taiwan's Compal Electronics to build production base in Chongqing
Compal Electronics Inc., a major world contract maker of laptops, has signed an agreement to build a production base in southwest Chongqing Municipality, local authorities said Tuesday.
The Taiwan-based company is the last of the world's six largest computer contract manufacturers to have plants in Chongqing as the city strives to become the world's largest OEM (original equipment manufacturer) base for laptops, the city government said in a statement.
Zhang Yongqing, CEO of Compal Electronics, said its Chongqing base would combine research and design and the production and sales of desktops, laptops, TV sets and other digital products, plus spare parts and accessories.
The plant aims to produce 10 million laptops and other consumer electronics annually by 2015, Zhang added.
Chongqing has lured major laptop brands, including HP, Acer and Asus and contract manufacturers like Foxcom, according to Huang Qifan, mayor of Chongqing. Huang noted that the city plans to produce 100 million laptops and 100 million related electronic terminals annually by 2015.
Chongqing's location can help reduce transportation costs for companies and make the city a major inland electronics production base, Huang said. The revenue of the electronic information industry amounted to 136 billion yuan (21 billion U.S. dollars) in 2010, up 46.3 percent year-on-year. The number is expected to hit 200 billion yuan in 2011.
Acer begins Chongqing laptop production 1 June 2011 Acer’s first made-in-Chongqing laptop was produced on 26 May, according to a municipal government website. The world’s second largest PC maker by shipments aims to produce 30-40 per cent of its laptops and notebooks at new facilities in Chongqing by the end of 2011, according to company president Jim Wong.
Taiwan-based Acer said key suppliers have established operations in Chongqing and will begin component shipping by the second half of this year. Acer has followed closely behind HP in establishing a major production facility in the city.
Between 1 January and 28 May 2011, HP exported 2,107,000 computer sets from Chongqing, valued at US$718m. An average air cargo consignment generates more than 30 documents according to the International Air Transport Association (IATA). Reducing the burden of paperwork is the ambition of ‘e-freight,’ an industry-wide project initiated by IATA in 2004 to remove paper from the supply chain. The initiative involves airlines, shippers, freight forwarders, carriers, ground handling agents and customs authorities. The objective is to replace original paper documents with electronic versions. production by 2012.
Supply Chain Asia Knowledge Supply Chain Asia magazine
Here at Supply Chain Asia Knowledge we’ve been digging up the potential of the world’s largest municipality for some time. And latest figures show we were right to highlight Chongqing as a really exciting prospect. In the first quarter, the giant southwest Chinese city’s airport shifted $571m worth of cargo, up a whopping 235.9 percent year-on-year.
Chongqing exported 599,600 laptops in the first quarter. To help products clear faster, the city has opened a green channel for IT products giving a clearance time of no more than ten minutes. And there aren’t any signs of these numbers slowing.
Taiwan’s computer giant Asus has just announced a $150m factory to be established in the city, which briefly served as the Chinese capital during the Second World War. “Now we already have the three of the world’s top computer manufacturers planted in Chongqing: HP, Acer and Asus.
This year Chongqing will produce approximately 30 million laptops and we estimate the laptop production will reach approximately 100 million by 2012, which is almost one third of the world’s laptop production,” an official from the Chongqing Economic and Information Commission told Supply Chain Asia magazine.
Air cargo carriers are excited by the potential of the market. Yangtze River Express launched a new freighter service from Taipei to Chongqing on April 12. The flights will be operated twice a week on Tuesdays and Saturdays using B737F. “The route will greatly strengthen the IT bond between Taipei and Chongqing, the biggest city in southwest China. At the same time, the new route will have linkage effects with Yangtze River Express’ existing Guangzhou-Chongqing and Shanghai- Chongqing-Moscow-Luxembourg routes to build a seamless connection between Taiwan, southwest China and Europe,” said a spokesperson from Yangtze River Express.
TNT Airways and EVA Airways have also launched cargo routes out of Chongqing.“There will be huge needs for air cargo in the IT industry here, now we are in negotiations with China Cargo Airlines, Korean Air, Asiana Airlines, Singapore Airlines, Lufthansa Cargo and AirBridge Cargo. We are trying to open daily freighter services to Europe, America and Southeast Asia by the end of this June to support the industry,” said the official.
A special cargo train service from Chongqing to Xinjiang and onto Germany and Holland also started recently. From Chongqing to Duisburg, the service will take 16 days to cross 11,179 kilometers.
Chongqing is becoming a fixture on the international IT and cargo map.
In 2011, laptop computer vendors encountered two major difficulties. First, Eurozone debt crisis deteriorated, while Europe is one of major laptop computer markets; second, the Thailand flood in October hit the HDD disk industry severely and impacted laptop computer shipment in best-season Q4 since nearly half of the hard disks worldwide were produced there. As a result, the laptop shipment registered 195 million units in 2011, just up 1.6% from 2010.
94% of global laptop computers are assembled by Taiwanese vendors, mostly ODMs instead of OEMs. Majority of vendors just define the product positioning, rather than design. ODMs assume not only design and production but component procurement. So, laptop ODM is not the field for which ordinary EMS manufacturers are competent, and only a few ones can do that.
In 2011, laptops witnessed two biggest changes. Above all, the traditional EMS corporations-- Flextronics quitted the laptop contract manufacture. Flextronics tapped into the field in 2009, but within two years, it only received HP’s orders, and HP’s order price was much lower than that of other vendors. Therefore, most of ODMs are reluctant to deal with HP’s orders. Though Flextronics received orders, it suffered huge losses.
Hon Hai, quite similar to Flextronics, persevered in developing the laptop contract manufacture, but it strictly controlled the contract scale. Many believe Hon Hai will retreat from the laptop contract manufacture sooner or later. The withdrawal of EMS players brought a reprieve to laptop ODMs who competed fiercely for meager profit.
Second, the laptop production transferred to western China. Although all laptop ODMs are from Taiwan, their production bases are located in Mainland China. According to the data of the Ministry of Industry and Information Technology (MIIT), China's laptop output was 244 million in 2011, of which 230 million ones were exported. Herein, laptops cover Tablet PCs and Kindle Fire e-book readers.
In 2010, laptop manufacturers accessed to Chongqing successively. Their production bases put into production in 2011 when 25,478,200 computers were produced in Chongqing (an 11.9-fold rise), including 24,073,900 laptops (up 25.4-fold). However, Chengdu became the iPad production base, with the output of close to 20 million units in 2011.
Traditional laptop production bases are located in Shanghai and Kunshan. In 2011, 89.54 million laptops were produced in Shanghai and 89.07 million ones in Jiangsu Kunshan. The laptop production transferred to western China because of the rising labor costs in the Yangtze River Delta. For production staff and management personnel, the wages rose year by year, which made laptop ODMs with the gross margin of 3-4% be overwhelmed.
In western provinces of China, the labor costs are lower, but the logistics costs are higher. Moreover, the western labor costs are growing rapidly. Therefore, Chongqing is the second base at most; the Yangtze River Delta is still the first base. The future production base of Taiwanese laptop ODMs may be Viet Nam. The laptop supporting industrial chain in the Yangtze River Delta is the most perfect, and the logistics costs are the lowest, so the region will still be the main production base in the upcoming 2-3 years.
In 2011, Tablet PCs made great strides. Apple's iPad shipment reached 47.6 million, a substantial rise of 2.2 times. In fact, the biggest difference between Tablet PC and laptop lies in processors and screens. It is hard to make product differentiation in processors, while it is easier to differentiate screens, especially touch screens.
OGS (One Glass Solution) is most discussed and recognized as the development direction of touch screens. OGS has three kinds. To keep the independent industry chain, touch screen manufacturers integrate upstream tempered glass cover lens to propose TOL (Touch On Lens) solutions. Panel makers prefer in-house touch process, so they propose On-cell solutions and In-cell solutions. Under the guide of Apple, On-Cell and In-Cell solutions have grown mature.
The monopoly of Samsung in AMOLED forces Apple to seek cooperation with the panel makers such as Sharp and TMD, and Apple projects huge capital in R&D of screen and touch technology. It is very possible that Apple will accept On-Cell and In-Cell solutions of panel makers. Most people believe that In-Cell solutions will be adopted. At present, only TPK and Wintek supply touch screens for iPad, neither of which are panel manufacturers; if In-Cell solutions are employed, both of them will lose the business opportunities valued at USD8 billion, but it is out of the question. It is still unknown that whether TOL or In-Cell will win.
iPad 3 will be launched in March 2012. To reduce its over-reliance on Hon Hai, Apple has cooperated with Pegatron and it also considers the cooperation with Quanta Computer that is the largest laptop ODM.
Global Personal Computer And Server Industry
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