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Dr. K.B. Chan Chairman and Managing Director Surface Mount Technology Ltd. November 21, 2005

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Springboarding Technology for Commercial Success Dr. K.B. Chan Chairman and Managing Director Surface Mount Technology Ltd. November 21, 2005 China’s growth & major economic zones Opportunities - Automotive and electronics Partnership with Hong Kong Summary Content Major Economic Zones

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slide1
Springboarding Technology for Commercial Success

Dr. K.B. Chan

Chairman and Managing Director

Surface Mount Technology Ltd.

November 21, 2005

content
China’s growth & major economic zones

Opportunities - Automotive and electronics

Partnership with Hong Kong

Summary

Content
major economic zones
Major Economic Zones

Growth 2005>9%

05/10 > 7.5%

Bohai Economic Zone

7+2

CHINA

Yangtze River Delta (YRD)

6+1

Pan-Pearl River Delta (PPRD)

9+2

strength of economic zones
Strength of EconomicZones

1

Total 2,054 95% 1,207 93%

1 Includes eastern China, *Includes China, Hong Kong and Macao

Source: China Statistics Bureau, Hong Kong Census & Statistics Dept, Macau Statistics and Census Service

slide5

Bohai Economic Zone – 7+2

  • Diversified economy:
  • Political, culture, R&D center - Beijing
  • Export, manufacturing base - Tianjin
  • Major industries/sectors:
  • Heavy industry, machineries, steel, military
  • Central Government designates as Third Wave
slide6

Yangtze River Delta – 6+2

  • Industry and investment-oriented:
  • Shanghai as the regional leader – banking and finance, industrial manufacturing, tourism
  • becoming more internationalized
  • Major industries:
  • Very diversified
  • Automotive & auto parts, electronics equipment and parts, textile, chemicals,
slide7

Pan-Pearl River Delta – 9+2

  • Export-oriented:
  • external trade of Guangdong accounts for over 30% of China’s total
  • large numbers of foreign-invested manufacturers in Guangdong, with a high concentration of Hong Kong-invested companies> 60,000
  • Major industries/sectors:
  • consumer goods, light Industries, petrochemical,
  • > 40% are electronic related
electronics production in china
China is Factory of the World

Advantage – Low cost & huge domestic market

Electronics market – forecast by 2007

300 Billion US$

20% of world output

Growth rate 12%, double of world’s

Largest market – hand set, DVD, TV,

Top 5 – PC, home appliance,

Electronics Production in China

Source: isuppli, 03/2004

electronics output in major economic zones
Electronic is major industry, highest growthElectronics Output in MajorEconomic Zones

40% of PPRD GDP,Over 80% from Guangdong

Source: China’s Electronic Information Industry Yearbook

slide11

EMS in China to Increase

Source: iSuppli, June 2003

automotive industry in china
2004World Ranking

4th largest producer

3rd largest market

Automotive Industry in China

2003 Sales > 100 Billions US$ ; Vehicle Output (Units)

Started

> 200 thousand

> 3 million

> 5 million

1953

1971

1980

2000

2002

2003

2004

> 100 thousand

> 2 million

> 4 million

Vehicle Sales (Million Units)

2005-2010 CAGR 16%

Source: State Information Center – China Economic Information Network

automotive electronics in china
Automotive Electronics in China

2000 - 2010 CAGR >30%

Source: FOURIN China Auto Weekly

trend in china s automotive components industry
Automotive Output – could exceed 10 M vehicles by 2010

Automotive Components–over 30% growth

Share of automotive electronic components in a car will increase from 10% to 30% by value

Foreign/ JV auto makers to procure local low-cost and high quality parts and components

Domestic brands increase from 25% to over 50%

Trend in China’s Automotive Components Industry
position of hong kong
Major economic engine of the Pan-Pearl River Delta, finance and service center

Over 40% of China’s Foreign Direct Investment - FDI is from Hong Kong

HK companies operate more than 60,000 factories in Southern China - employing > 10 million workers

40% of HK Manufacturing GDP is electronics

Position of Hong Kong

Source: Hong Kong Trade Development Council

advantages of hong kong
Advantages of Hong Kong
  • Cosmopolitan city – large number of foreign company
  • Excellent infra-structure, transportation, telecom
  • Sound legal and tax system, center for arbitration
  • Mature equity market
  • Efficient government with no corruption
  • Easy communication, English, Chinese
  • Risk Management
  • IP Rights protection
  • Currency management - RMB
hk r d technology developments
HK - R&D – Technology Developments
  • Administer under ITC – Innovation & Technology Commission – Funding ~ 4Billion HK$
  • 8 Universities
  • Establish 5 R&D centers from 2006
  • Auto parts, logistics, textile, nano tech, IT & telecom
  • ASTRI – Apply Science and Technology Institute
  • HKScience & Technology Park – IC design, photonics
  • Cyber Port – Digital entertainment
  • HK Productivity Center
slide19

Guangdong/HK Technology Co-operation Funding Scheme

  • Joint funding efforts between the 2 Government to support R&D projects
  • 2004> US$ 40 m in 6 areas
  • RFID , Auto-parts, elctronics & IT, energy tech
  • new materials, precision equipments
  • 2005> US$ 67 m in 6 areas
  • communication, medical & bio tech, new materials
  • green manufacturing, agriculture,
hk companies as partners
HK Companies as Partners
  • Understand both International and Chinese cultures, acting as a bridge
  • Historic link with multinational companies, and foreign countries
  • Substantial business experience in China, know “what not to do”
  • Fast response
  • Strong business integrity
summary
Summary
  • The 3 major economics zones will be China’s economy growth engine > 90%
  • Pan Pearl River Delta – Super Economic Zone
  • Bohai Economic Zone is the Third Wave
  • Electronics and automotive will be the leading industries
  • Partnership with Hong Kong companies for outsourcing or entering the China market
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