From Chips to Cars

Powell Industries is not alone in its China expansion. Most of the word's largest companies are embarking on facility projects that dwarf anything in the United States. In fact, the rush to build factories in China represents the most fundamental shift in industrial site selection since the Japanese wave of the early 1980s.
        The Royal Dutch/Shell Group and China National Offshore Oil Corp. announced in October that they would proceed with China's largest investment in petrochemical production -- a $4.3 billion joint venture in the southern province of Guangdong. The project is slated to be completed by 2005 and will generate $1.7 billion a year in sales, bolstering an economic juggernaut of a province that exports more than $100 billion in products every year.
        He Jian Technology Co., run by executives from Taiwan, broke ground in early 2002 on a $1 billion semiconductor plant in Suzhou near Shanghai. The project came to fruition after the Taipei government lifted a ban on China investments by Taiwanese semiconductor firms. Altogether, companies based in Taiwan have invested $70 billion in China. In September, exports from Taiwan to China increased by 171 percent from the same month in 2001.
        Taiwan Semiconductor announced in August that it would build a $1-billion chip plant in the Songjiang industrial park near Shanghai. TSMC makes chips for companies such as Philips and Motorola and for fabless companies such as Broadcom and NVIDIA. For fiscal year 2001, China accounted for 7 percent of worldwide semiconductor demand. By 2010, that figure is expected to reach 20 percent.
        German-based technology company Siemens AG announced in April that it would invest $250 million to establish three research and development centers in Beijing, Shanghai and Singapore by 2003. Ernst Behrens, president and CEO of Siemens Ltd. China, said the investment was prompted by China's entry into the WTO. Behrens said the move will increase the competitiveness of the company's 40 joint ventures in China so that Siemens can launch new, high-quality products.
        Coca-Cola Beverages announced that it will spend $150 million over the next two to three years to build six new bottling plants in China. Company president Paul Etchells said the investment would create 100,000 jobs. Since the entry of the Atlanta-based company into China in 1979, the world's largest soft-drink firm has invested $1.1 billion into the country.

This polystyrene plant in Zhangjiagang, a joint venture between Dow Chemical and Asahi Kasei, started production on Nov. 1, 2002.

        SAL Petrochemical Co. Ltd., a joint venture between Dow Chemical and Asahi Kasei of Japan, announced Nov. 1 the official start-up of its polystyrene plant in Zhangjiagang, China. The factory will have an annual production capacity of 120,000 metric tons (132,276 short tons).
        "We have a long history of doing business in China and believe that the addition of this facility will give us the ability to be in much closer contact with the needs of our customers on the ground in the country," said Clay Dunn, business vice president of Dow Polystyrene. "China's accession to the WTO will present many opportunities for our business; and by investing in localization, by integrating into the local economy with an in-market manufacturing base and marketing channel, we believe we will greatly enhance our ability to respond to our existing and prospective customers."
        China is the largest petrochemical product importer in the world and is expected to continue to be a net importer for the next 10 years. Plastics consumption per capita in China now stands at only one-fifth of that in developed nations, according to Dow.
        While semiconductor and petrochemical plants continue to represent the largest foreign capital investments in China, foreign-owned automotive assembly plants are also on the rise. Encouraged by lower import duties and the lifting of restrictions on models sold following China's entry into the WTO, global automakers see a prime opportunity to gain a foothold in a country that represents -- potentially -- the world's largest consumer market for cars, trucks and vans. For manufacturers, China represents something else too: the world's largest labor force, with the lowest labor costs in the industrialized world.
        Hyundai Motor, South Korea's largest automaker, announced Oct. 15 that it would invest $1.1 billion into its first automotive assembly factory in China over the next eight years and reach production of 500,000 vehicles a year by 2010. Hyundai said it would start building Sonata and Elantra sedans at its new plant near Beijing by the end of 2002. The first-year capital investment will total $100 million.
        The other global automakers are following suit. General Motors announced Oct. 23 that it was negotiating with Chinese carmaker Yantai Bodyworks Co. and others to expand GM's presence in one of the world's fastest-growing auto markets. GM had agreed in April to take 42.1 percent of a $597-million venture using Daewoo assets called GM Daewoo Auto and Technology Co.
        Ford Motor Co. announced in June that it will make Fiesta-based cars in China. Ford's new China factory in the western city of Chongqing will start producing 50,000 cars annually in April of this year. "Ford's strategy is simple," said Kenneth Hsu, spokesman for Ford Motor China. "We are here for long-term growth. We are not here for a project to just hit and run for profits. China is one of our few critical markets around the world."
        Nissan Motor Co. announced Sept. 19 that it would invest $1 billion in a new auto venture in China. The deal between Japan's third largest automaker and China's Dongfeng Motor Corp. calls for the venture to produce 550,000 vehicles by 2006. "China is Nissan's new frontier," said Nissan CEO Carlos Ghosn, noting that Nissan's $1.03 billion investment in the 50-50 venture with the Chinese motor company was one of the largest deals Nissan had ever made overseas.
        Tianjin Toyota Motor Co. officially launched production of its VIOS compact sedan Oct. 8 in the city of Tianjin. The $100-million plant employs 850 Chinese workers and will make 30,000 vehicles per year at the 322,917-sq.-ft. (30,000-sq.-m.) plant.
        Isuzu Motors Ltd. of Japan announced Nov. 8 that it had reached an agreement with China's No. 1 automaker, Shanghai Automotive Co. Ltd., to start producing large trucks in China in 2004.