Asia Magazine #4

asia bulletin no.4 2004年11月

Photo by Per Sandstrom

Contents Letter from the Editor

November 2004

2

ASIA BULLETIN

3

Centered on Chalmers: 4 Fall Semester at the Asia Office Sweden: Start-up Of NCTU Europe

6

Taiwan: Southeast Asia News

7

Do It Yourself: Rice Noodles

8

Do It Yourself: Integrated Circuits

8

Hsinchu: From Rice Noodles to Silicon Wafers

9

Nice Outfit Most Important: Impossible to Sell Ugly Stuff in Japan

11

South Korea: Wireless Communication

12

China: Business and Investment

14

Asia Bulletin no. 4 November 2004 editors Cecilia Fu Oskar Hagberg writers Hugo Christiansson Cecilia Fu Oskar Hagberg Anders Frick Pei-Chin Liu Marcus Olsson Andreas Sigurdsson

Chalmers Asia National Chiao Tung University

What is Chalmers Asia ?

Chalmers Asia (formerly CITO) opened in March 2003 and is the result of a bilateral exchange agreement between National Chiao Tung University (NCTU) and Chalmers University of Technology.

The Chalmers Asia office is strategically located at NCTU, near Hsinchu ScienceBased Industrial Park and ITRI, Taiwan’s most important industry cluster.

1001 Ta-Hsueh Rd., Hsinchu Taiwan, 300 Republic of China

web phone fax

www.asia.chalmers.se +886 (0)3 573 73 69 +886 (0)3 573 74 69

The purpose of Chalmers Asia • Increase awareness at Chalmers about the development in East Asia, with focus on China and particularly Taiwan • Support mobility of students and staff between NCTU and Chalmers •

Enhance Chalmers’ visibility in

Taiwan and the neighboring region Language lesson

亞洲 年 月

(yazhou) Asia

台灣 中文 瑞典

(taiwan) Taiwan

(nian) Year (yue) Month

(zhongwen) Chinese

Academic exchange Currently, nine Chalmers students are at NCTU, while ten students from NCTU are studying at Chalmers. The opening of an NCTU office at Chalmers this year has strengthened the bilateral exchange.

Read more on page 6.

(ruidian) Sweden

Did you know that Taiwan... ...has approx. 23 million inhabitants. ...has approx. 15 million scooters. ...has most mobile phone subscriptions per inhabitant in the world, on the average 113 subscriptions per 100 inhabitants. ...has one of the highest population densities in the world, 625 inhabitants/km2. (Sweden has 22 and India 328).

November 2004

3

ASIA BULLETIN

Cecilia Fu, editor cecilia.fu@asia.chalmers.se

Letter from the Editor

Photo by Cecilia Fu

When I look through the window at the Chalmers Asia office, I see green lawns with purple flowers, bamboo trees swinging in the breeze, and trimmed hedges standing proudly beside the pounds. This beautiful picture belongs to the National Chiao Tung University in Hsinchu, Taiwan, where the Chalmers Asia head office is situated.

National Chiao Tung University was founded in the suburbs of Shanghai in 1896, at the suggestion from the Minister of Foreign Affairs of the Ching Dynasty. The University was first named Nanyang College. It was established to meet the urgent need to introduce western civilization into China. The college initially focused only on politics, law and translations of western books.

Later, by including new vocational programs, such as business, electrical engineering, shipping management, and railway management, the college played a major role in science and engineering education in modern China.

After the founding of the Republic of China in 1912, the collage expanded to three campuses: Shanghai Industrial College, the Tang-Shan Industrial College, and the College of Management in Railway, Post and Telecommunications. In 1921, the Ministry of Transportation united these three campuses under a single name: Chiao Tung University. In 1957, according to the recommendation from the Ministries of Education, Communications, Economic

Photo by Cecilia Fu

Lake with trees inside NCTU

Main entrance at National Chiao Tung University, NCTU

Affairs, and National Defence, NCTU was re-established at its present location in Hsinchu, Taiwan. After almost fifty years, NCTU is now famous national wide, with a balance between humanistic concern and technological advancement.

It is in this historical school, I proudly present this fourth bulletin from Chalmers Asia. Here you will find interesting articles about business and marketing in Japan and China, about one of the oldest Science Parks in Taiwan, about technical development in Asia, about events at Chalmers Asia during the fall semester and more.

The purpose of this publication is to gather information on the development in East Asia and share it with people connected to Chalmers, in order to increase the awareness of this region.

If you are interested in learning more about the opportunities the Chalmers-NCTU collaboration offer, you are welcome to contact our office. Taiwan might seem far from Sweden, but the distance is shrinking as we are increasing our knowledge about each other.

November 2004

4

ASIA BULLETIN

Centered on Chalmers:

Fall Semester at the Asia Office The number of students working at the Chalmers Asia office at NCTU in Taiwan is increasing and this semester we are nine, six newcomers and three experienced representatives from last spring semester. Some of us newcomers arrived two months before school start to attend a language and cultural course that made the big change of moving to Taiwan much smoother.

But still, there are a lot of new situations a summer course can’t prepare you for. Baked under the sun, dazed by earthquakes and almost swept away by typhoons, we have made it to the Taiwanese late autumn with a more familiar climate to us Swedes.

With dryer air and lower temperatures, allowing you to put on a jacket at nights, it almost feels like a Swedish summer.

Oskar Hagberg, editor oskar.hagberg@asia.chalmers.se

Photo by Jon Davidsson

her work with the exchange of students and PhD’s between Chalmers and NCTU. Oskar Hagberg, representative, is a student in Electrical Engineering. Oskar is responsible for the technical and economical survey, i.e. to make sure that this publication – the Chalmers Asia Bulletin – is produced.

Per Sandström, representative, is a student in Electrical Engineering. Per is part of the group responsible for the exchange of students and PhD’s between Chalmers and NCTU. Cecilia Fu, representative, is a student in Computer & Science Engineering. Together with Oskar she is responsible for the production of the Chalmers Asia Bulletin.

Charlotte Andreasson, representative, is a student in Electrical Engineering. Charlotte is part of the group responsible for the exchange of students and PhD’s between Chalmers and NCTU. Hugo Christiansson, representative, is a student in Electrical Engineering. Hugo will continue his work with corporate relations together with Anders Frick.

Anders Frick, representative, already has a Master of Science from University of Linköping but will take a second one at NCTU in Taiwan. Anders will work together with Hugo with corporate relations.

The assignment for the period September 2004 – January 2005 From the furthermost right and clockwise: Charlotte Andreasson, Cecilia Fu, Oskar Hagberg, Pontus All, Anders Frick, Per Sandstrom, Hugo Christiansson, Yan Tai So, Yan Po So.

Representatives this Semester Pontus All, Head of Office, is a student in Computer Science & Engineering. As Head of Office it lies within his responsibilities to represent Chalmers in contacts with NCTU, to be the main contact to the President’s Office at Chalmers and to allocate work among the Chalmers Asia representatives. Furthermore he has the over-all responsibility for the economy of the office.

Yan Tai So, Deputy Head of Office, is a student in Computer Science & Engineering. As Deputy Head of Office he assists Pontus in his work as well as sharing his experiences from the spring semester 2004 at the office.

Yan Po So, representative, is a student in Computer Science & Engineering. Po will, together with Per and Charlotte, continue

• Chalmers Asia needs to maintain focus on promotion of exchanges, including work with the double PhD-program.

• Chalmers Asia shall assist Chalmers’ and NCTU’s efforts to increase the cooperation in research, particularly by facilitating exchange of information about research initiatives and the mobility of PhD students.

• Chalmers Asia is expected to further develop cooperation with companies in a few selected areas.

• As a part of Chalmers international exchanges, Chalmers Asia shall establish itself as a hub at NCTU for Chalmers students in Eastern Asia (particularly Hong Kong, Tokyo, Singapore and Shanghai).

• The students are expected to make reports on developments in Taiwan and Eastern Asia.

ASIA BULLETIN

5

November 2004

Major events during the fall Photo by Anders Frick

• The office opened after the summer vacation and in order to make the new group of representatives come together, a kick off was held. In addition NCTU organized tours around the school, the Science Park and downtown Hsinchu with the purpose of familiarizing us with NCTU and its surroundings.

• In the beginning of October Chalmers Asia met the vice president of Chalmers, Johan Carlsten and discussed several topics concerning the student exchange.

• On November 5th, the University of Chalmers’ 175-year anniversary was celebrated at the Chalmers Asia office. Around one hundred students and specially invited guests participated in the festivities. Many guests took the opportunity to ask some questions about the student exchange between Taiwan and Sweden.

Head of Office, Pontus All welcoming the guests to the 175-year anniversary Photo by Anders Frick

• Chalmers Asia Corporate Relations has decided to help the Gothenburg based company Unihoc to introduce the sport Unihoc (also called floor ball or innebandy) in Taiwan. Unihoc has provided all the equipment needed to arrange games and we hope the Taiwanese students will welcome the sport.

• Between the 12th and the 17th of November, Chalmers Asia had the honor to receive visits from Eva Walder-Brundin, the head of the Asia and Pacific Department at the Ministry for Foreign Affairs in Sweden; Agne Hansson and Holger Gustafsson, members of the Swedish Parliament and Angelica Mårtensson, Manager of International Exchange, International Student Services at the University of Chalmers.

Many NCTU students dropped by the office during the 175-year celebrations.

Photo by Hugo Christiansson

• A social event was arranged at the 25th of November for the Chalmers Asia members and the Taiwanese students who have studied at Chalmers in order to strengthen the relationship. We all had a pleasent evening together with Go-Cart and dinner.

Coming Events • In December the NCTU students going abroad the following year are invited to an information meeting where they will get a presentation on Sweden and studying at the international programs at Chalmers. The goal is to make Chalmers be a high priority choice when the students chose schools in the beginning of 2005.

Unihoc is demonstraded on a makeshift arena in the conference room.

ASIA BULLETIN

6

November 2004

Sweden:

Start-up of NCTU Europe

Pei-Chin Liu, Head of Office cokanctu@hotmail.com

On September 3rd 2004 NCTU Europe, an overseas office of NCTU, was inaugurated by NCTU’s principal Chung at Chalmers University of Technology. After three weeks’ preparation, assembling furniture bought in IKEA, communicating with different authorities concerned; we had an almost perfect inauguration.

Roughly three months have passed since we arrived at Chalmers.

Our office is gradually coming in order. Close connections with faculties and students in Chalmers give us the help we need managing the office properly. We presently offer potential exchange students at Chalmers useful information and connect industry and academic sectors between Taiwan and Sweden.

For example, we have contacted some world-famous companies from Taiwan, such as Acer and Evergreen, who are willing to give presentations of their companies at Chalmers University of Technology. Having activities like this is the best way to make our technical performances known to Chalmers.

On November 11th, Chalmers’ education fair was carried out at the Student Union. Along with education organizations of different countries, we used this opportunity to provide useful information to potential Swedish students who are interested in going to Taiwan. Keeping contact with those interested students and providing them with the latest news from NCTU is our most important job. We try our best to make Nation Chiao Tung University a popular choice.

All of us came through a period of adaptation and gradually fell in love with this city – friendly, cute, clean, charming but sometimes frozen. New interesting things cross our path every day. Although we have to handle heavy schoolwork and affairs at NCTU Europe at the same time, we know it is a rare opportunity to gain experiences. As pioneers to establish the first overseas office of National Chiao Tung University, we never forget our mission and deeply believe that our office will progress step by step. We hope any students who have interests to study in Sweden grasp this chance tightly; this really is a wonderful place and an experience we would never forget in our whole lifes.

Further reading and contact information: http://www.europe.nctu.edu.tw/

Principal Chung and the NCTU Europe staff outside the new office.

NCTU’s principal Chung and Chalmers’ principal Sundgren shaking hands

November 2004

7

ASIA BULLETIN

Taiwan:

Southeast Asia News

Anders Frick anders.frick@asia.chalmers.se

Taipei 101 Is Aiming For the Skies

Smart government strategy that make people pay taxes

Soon the highest building in the world will be inaugurated

If you take a close look at Chinese history, you will see that luck and to be fortunate plays a big role. With this in mind and with an expectation of making more stores to pay taxes, the Taiwanese government has created a lottery, where every receipt contains a unique lottery number.

Every store in Taiwan has become a lottery ticket distributor, though the lottery tickets are given for free when you shop, since the lottery number is stamped on the receipt. In this way the government motivates the consumer to ask for the receipt, which should increase the tax revenue.

The first price every other month, when the winning numbers is announced, is two million NT-dollars, which corresponds to around 450 000 SEK. The most common winnings are 200, or possibly 1000 dollars, and the chance to win is about 1/250.

According to sources the system works surprisingly well.

At the end of this year the highest building in the world will be inaugurated, Taipei 101. It is a gigantic construction never seen before – even the elevators break the world record with a maximum speed over 60 km per hour. Equipped with two-storey double-decker elevators, a stabilisation system weighing 800 tons and enormous quantities of stores and offices spaces, Taipei 101 will become the first building in the world higher than half a kilometre. Admittedly the CN Tower in Toronto and some other buildings of TV tower type will still be higher. As a building however, Taipei 101 is highest, 56 metres higher than the current highest building, the twin towers Petronas Tower 1 and 2 in Malaysia.

The design and the specifications of the tower are based on the figure 8, the figure which is the traditional fortunate number in the Chinese culture.

Photo by Anders Frick

The Receipt Gives a Chance to Win

Photo by Anders Frick

More about Taipei 101: http://www.tfc101.com.tw/english/ http://www.taipei101mall.com.tw/

Facts about Taipei 101 Height: 508m No. of storeys: 101(!)

Parking spaces: 1 800 Workplaces: >10 000

Karaoke – Everybody’s Favourite What does a Taiwanese do on his/her spare time? The answer is easy. Three of the most common activities are: working, sleeping and singing karaoke.

There are karaoke machines everywhere – on town, at people’s home, on buses, at workplaces and at schools.

Photo by Anders Frick

But, wait a minute. The question was about spare time, how could “working” belong to this category? Well, the thing is that you don’t want to be less hard-working than your colleagues. It is important to arrive early and leave late from your work – the bosses appreciate it. If you are for example doctoral student, it is expected to show up at your lab one day also during the weekend. The other day of the weekend is then spent sleeping, in order to have enough energy to manage the rest of the week.

The last of the three most common spare time activities is of a more pleasant character – especially if you like listening to your friends singing loudly and off tone.

It is the “everybody can sing”-theme and since the karaoke machines automatically add echoes to your voice, it sometimes sounds really nice when people sing...

ASIA BULLETIN

November 2004

8

Do It Yourself:

Rice Noodles

Hugo Christiansson hugo.christiansson@asia.chalmers.se

Rice noodles are popular food in many countries in south eastern Asia. They are often thin and almost transparent.

In order to make your own rice noodles, you will need rice, water and patience. First you should wash the rice, and then grind it to rice flour. Make dough of rice flour and water, and try to work in as much rice flour as possible. Finally the dough should be stretched out to something looking like noodles, which is done of consecutive stretching and folding of the dough. The more times you stretch and fold, the thinner the noodles will get.

To make your own rice noodles, you do not need any expensive tools, but it requires patience. It is much easier buying the noodles in a supermarket.

Rice noodles

Do It Yourself:

Integrated Circuits Since the transistor was invented in 1948, the development of semiconductors and integrated circuits has been extremely fast. The transistor, once of the size of centimetre, is nowadays reduced to 80 nm (less than one thousand of a human hair).

In order to manufacture an integrated circuit, you will need a semiconductor material, a material where the conductivity could be changed with doping and electric field. Normally monocrystal silicon is used, and by using two dimensional methods the circuit is built up layer by layer to give the right properties. Important methods are deposition, photolithography and etching. First deposition is used to add some material to the IC, and then it will be removed on all places where it is unwanted. This is done with a photo resist, a material that hardens if it is exposed. On the non-exposed surfaces it could easily be etched away.

The process with deposition and etching could be repeated 20 times before the IC has got the right properties.

A fab for producing integrated circuits cost about 1 000 000 000 USD. It is much easier and cheaper to buy the circuits in the stores than to make them yourself.

Hugo Christiansson hugo.christiansson@asia.chalmers.se

Integrated circuit

ASIA BULLETIN

November 2004

9

Hsinchu:

From Rice Noodles to Silicon Wafers

Hugo Christiansson hugo.christiansson@asia.chalmers.se Photo by Hugo Christiansson

Once upon a time on a small south sea island, in a small city, they were known of producing the very best rice noodles.

It could be the history of Hsinchu, a town in Taiwan with a population of 500 000 . For generations, it has been famous for producing the best rice noodles, but since the opening of the Hsinchu Science Park in 1980 the business of silicon wafers has become a much more important business for the city.

25 years ago, most of it was bamboo forests, but nowadays more than 100 000 people are working in the science park. In the former rice noodle town, almost 70 percent of the world silicon foundry capacity can be found and other branches as computer peripherals and flat screens are expanding business areas. 90 percent of all wireless network equipment is nowadays “Made in Taiwan�, as well as 80 percent of all mainboards.

The largest company in the Science Park is TSMC, Taiwan Semiconductor Manufacturing Company. It was founded to produce silicon chips to a much lower price than what was possible in US or Europe. The companies establishing in the science park were also attracted with special tax rebates and duty-free import and export.

Nowadays there are almost 400 companies established in the 600 acres science park, and most of them are true Taiwanese companies that have been growing up beside the international giants. Many of the company names are not at all known in Europe, but the products from Hsinchu are likely to be in your home PC.

Outside the science park, the streets are narrower and not that well planned, but in the streets in Taiwan you can find cheap and delicious food.

Photo by Anders Frick

The largest company in Hsinchu Science Park is TSMC, and is a foundry specialized in producing processor chips. In the science park everything seems to be well planned and clean, which is not always the case for downtown Hsinchu.

The rapid development of the Hsinchu Science Park was not taken for granted in the beginning of the 80’s. It is easy to see this, if you leave the well planned and clean science park and head downtown. The city has simply not kept up with the fast growth, so the small streets leading from the city centre to the science park are clogged every day. In the morning, scooters and cars are heading for the science park and in the evening and late night they are going in the opposite direction.

In Taiwan, the working days are long, and there is often no such thing as compensation for overworking. The science park in Hsinchu is surely no exception, and many people work more than 12 hours per day.

- In Taiwan it is important to do a good impression at work, and it means among other things that you do not leave your office before the boss, says PeiYi Cheng, an engineer at TSMC. Never leaving office before your boss is an unwritten rule that is used in many companies in Taiwan. If your boss does not have a life beside work, you will not get it either...

Even if the working days are long, the salaries are not high compared to US or Europe. A salary for an engineer is about 1000 USD, but the expenses for living are much lower in Taiwan than in Europe. The taxes are very low, which gives Taiwanese citizens a number 16 on the world ranking of purchase power.

Many of the companies in the science park have stock shares for their employees, so that all employees get a share of the revenue if the company is profitable. In Europe it is very uncommon with bonuses except among the top management, and it is normally just a matter of some few per cent of your yearly

10

ASIA BULLETIN

November 2004

Photo from www.gio.gov.tw

salary. The system in Taiwan was born when the science park was newly opened and needed experts. Many of the experts were found among Taiwanese engineers working in Silicon Valley in California. In order to attract the skilled engineers, they could not offer very high salaries, but they could promise bigger part of the revenue. During a “good” year it could give the employees just as much in bonus as in ordinary salary and in exceptional years even more.

Photo from www.gio.gov.tw

Comprehensive technological plans and high-caliber manpower resources have transformed Taiwan into one of the world’s largest producers and exporters of IT products.

The Hsinchu Science-based Industrial Park is home to over 300 high-tech companies engaged in telecommunications, optoelectronics, biotechnology, and other IT products. (Courtesy of the Synchrotron Radiation Research Center)

Since the 1980’s, the number of companies in Hsinchu Science Park has been increasing every year, but the question is how far it could continue. During the recession in IT-industry in 2000 the pressure was decreased, but there are still companies waiting to establish in this and other science parks in Taiwan. The big threat to towards the science park comes from China, where the labour is much cheaper. Many companies choose to invest in one of the 70 science parks built up in China, to benefit of even cheaper labour. What once was the reason of establishing in Taiwan – low cost for labour – is nowadays a reason for moving away. The Taiwanese companies are approaching this topic in different ways. Evidently they must provide better quality than their Chinese competitors, but other trends are to build up own brands and try new hot markets, as flat panel display technology.

Taiwanese brands are not famous in Europe, but companies like BenQ, Acer and D-Link are trying to change the way we see Taiwanese brands. It may be enough to keep the science parks in Taiwan busy for a long time.

The Chinese name of Hsinchu. Good to remember if you want to get off the right exit on the highway. Although, nowadays, most traffic signs in Taiwan also has the English name written.

Mifen means rice noodles and the rice noodles from Hsinchu is famous all over Taiwan.

ASIA BULLETIN

November 2004

11

Nice Outfit Most Important

Impossible to Sell Ugly Stuff in Japan

meters. One of the engines for promoting RFID products is the US chain Wall-Mart, which has been using January 1, 2005 as a deadline for their key suppliers to adopt this new technology.

Still the chips are a bit to expensive to be used on all products, but with a larger market it may change soon.

How do you sell a new cellular phone in Japan? By pointing out all technological details? Or maybe by showing statistics over robustness and reliability? No. The answer is: By using light dressed showgirls, to show the products at electronic fairs.

Photo by Anders Frick

It is impossible to sell a new cell phone without a showgirl or two, or four.

Chalmers Asia Bulletin went to the Japanese electronic fair Ceatec in Tokyo to take a look at the hottest trends among the electronics exhibitors. Computers, PDA’s and cell phones seems to merge into small colorful devices, and the way of presenting new broadband routers, GPS devices or video cameras was an interesting cultural phenomena which gave insight into the Japanese way of thinking.

Even the smart cards becomes wireless, using the RFID (Radio Frequency Identification) technology. Instead of contacts or magnetic stripes on the card, information is transmitted using microwaves or induction - sometimes at a distance of several

– Imagine that you don’t have to stand in line to pay at the supermarket. Instead you could just walk through a reader with your trolley and then pay, says Kazuoki Moriwaki at Lintec Corporation Japan.

Japan has been a true pioneer in many areas, such as mobile Internet. The standard of i-Mode was the world first working mobile internet service and is also one of few to be profitable for the provider NTT DoCoMo. Earlier Japanese companies showed little respect to international standards, such as having no GSM coverage even in the biggest cities. However, the time is slowly changing even Japanese companies, and many of the products shown on the market could be operated booth in Japan and abroad. The 3G phones from NTT is just one of many examples where the Japanese companies start to follow international standards.

With more than 700 exhibitors and with 200 000 visitors, Ceatec 2004 is one of the biggest electronic fairs in Asia. Some year ago the fair did concentrate on electronic production equipment, but nowadays its focus has shifted into consumer electronics. It has also turned the focus away from hard-core technology into areas such as design and outfit. With short skirts, plastic-bra and specially designed company necklaces it seems to be possible to sell almost any cell phone – at least in Japan.

Photo by Anders Frick

The general trend among all exhibitors is wireless ness. Or rather ubiquitous ness, because only being wireless isn’t enough. The hard spelled term comes from the Latin word ubiquitous and has the meaning of “existing everywhere and every time”. Except from existing standards as WLAN, the electronics giants also showed prototypes for Ultra Wideband (UWB) and Wireless USB. These technologies are very interesting but the prototypes indicate there will take some time before we can cut all the cables that surround our computers and home entertainment equipment today.

Anders Frick anders.frick@asia.chalmers.se

As can be seen, the interest for new electronic products in Japan is very big...

November 2004

12

ASIA BULLETIN

South Korea:

Wireless Communication EXPO COMM WIRELESS took place in Seoul in May 2004 and it is one of the biggest conferences in Asia concerning wireless technology. One of its main focuses was “Portable internet services and business”. Invited experts from all over the world held seminars on recent trends of telecommunication and wireless industries. Much attention was given to WiBro, short for Wireless Broadband. This concept, developed in South Korea, is believed to bridge current cellular 3G system to the future’s 4G.

• • • • •

Photo by Marcus Olsson

Many Koreans showed interest to the Expo Comm Wireless in Seoul, May 2004

South Korea is of special interest when looking at introductions of new communication technologies. They have the world biggest penetration of fixed broadband, 3G mobile phone and WLAN users. They have not only a high percentage of users; they have also been much involved in the development of these technologies. The first commercially available third generation mobile phone system in the world was launched in South Korea

by SK Telecom in October 2000, being the first country in the world to adopt the new generation. Compared to 2G/2.5G, 3G technology offers bandwidth demanding applications such as full motion video, video conferencing and internet access. The number of 3G subscribers (based on handsets) in South Korea are today around 22.4 millions and occupies 67.6 % of the whole subscriber market of mobile telecom (2003.8). One of the explanations to the success of the 3G system in South Korea is due to their innovative terminal providers: LG, Samsung and to some smaller degree Pantech. The development they have contributed to have been an important factor for the stimulation of the market. Successive innovations include:

Marcus Olsson marcus.olsson@asia.chalmers.se Quality of color screens CMOS censors exceeding 1M pixel The launch of mini hard disks Payment functions The availability to combine cellular/Wi-Fi interfaces

The migration from 2G/2.5G subscribers to 3G has been dramatic in South Korea. While transfer to 3G has been relative smooth in Japan and South Korea, it is just about to establish in the European market which have suffered from huge delays.

There has also been some skepticism over the economic viability of the 3G technology. Several operators introducing 3G have ended up in huge depts. Furthermore there are some drawbacks using 3G as limit of service coverage, short battery life span and the high cost of services. These problems and the demand for higher data rates have created some new innovative ideas for wireless communication.

Recent trends of wireless communication include the use of Wi-Fi which is WLAN technology based on the set of standards known as IEEE 802.11. It uses frequencies in the 2.4 GHz range and its data rate could be as high as 54 Mbps. These are not so controlled by governmental regulations and licenses to use these frequencies are usually not required in most locations. Wi-Fi enables wireless compatible computers or PDA’s to connect to internet when in reach of an access point, also called hotspot.

This technology has been very successful in the wireless internet area but has yet to see a success in the cellular market. Some of the biggest obstacles for Wi-Fi consumer technologies to cut market shears from cellular telephone networks are lack of roaming and authentication features, the limited access range and narrowness of available spectrum. Rather than being competing technologies they are also seen as a complement to each other, taking advantage of the benefits of both systems. Some operators offer mobile internet products that are compatible with both radio systems. But there are some serious disadvantages as well, such as the 100 mW regulated limit on the transmitter which limits the coverage area and interference from other devices such as Bluetooth and video sender devices. These interferences could cause degradation in performance. Just as in the case of 3G, the power consumption is a problem which causes the battery life time to be short as well as it cause heat problems for the device. What might be the most obvious disadvantage of the system compared to 3G is the limited range. It is usually around 50 meters indoors and 100 meters outdoors. Despite their

ASIA BULLETIN

far less range compared to 3G transmitters, they have the big advantage that advanced antennas could be deployed for $ US 1500 while a 3G base station costs from a minimum $ US 1 mill.

The installation of base stations is also far more complicated and needs a license while the Wi-Fi antenna could be installed by anyone. Today, Wi-Fi is seen as a good complement rather than a rival to the 3G system. Due to these various problems a similar technology, WiBro, which have some of the advantages of both Wi-Fi and 3G is on its way to be established in South Korea.

November 2004

13

a standard which it can export around the world. KTF, South Korea’s second largest mobile phone operator, has already tested a high-speed portable Internet service using WiBro technology.

They demonstrated real-time wireless web streaming and internet browsing services. The major motivation for introducing WiBro is that the wired/wireless telephone and broadband internet markets are reaching a saturation point; portable internet service is emerging as a next generation growth engine in the telecommunications market. Several market analyses have been done on the potential market.

WiBro is believed to play an important role in bridging third and fourth generation mobile systems. This standard uses the 2.3 GHz band. WiBro technology offers portable internet service which will give internet connection anytime anywhere even when the user is on the move. The new portable Internet technology WiBro offers is attractive due to its wider network coverage and mobility. The WiBro system can be combined with the existing mobile phone network. The user data rate is higher than 1Mbps and the service charge is low compared to 3G. It will have urban coverage compared to the cellular nation-wide coverage that has much lower data rate.

Market analysts point out three important application areas where WiBro technology will offer improved, or new, services compared to current mobile phone technologies.

• Entertainment: real time streaming broadcasting and 3d Network game.

• Finance and commerce: video conferencing, interactive advertisement, mobile banking and trading.

• Information: web browsing, file downloading, interactive networking.

Compared to WiBro, Wi-Fi offers higher data rates; however, it has limited coverage area and low mobility. One of the invited speakers at the conference, Professor Hong from Seo-Kang University gave an example of one of the big disadvantage of the current Wi-Fi system, “If costumers want to use WLANs, they need to seek and move to one of the many access points offering WLAN service. This shows the low coverage status of this system. This constitutes to about 28 million terminals, or 30 percent.”

Despite of this fact Taipei has recently decided to build a WiFi-network that will reach almost 90 percent of the capital’s population of 3 million. Taiwan’s Q-Ware, which won Taipei’s tender to build the network, plans to spend $70 million on infrastructure, setting up 15,000 to 20,000 access points around the city. New York, San Francisco, Amsterdam and Jerusalem are among cities offering or planning city-wide networks.

The South Korean government hopes that WiBro will be successive not only in the domestic market; they want to create

The wired/wireless telephone and broadband internet markets are reaching a saturation point.

Source KISDI (Korea Information Strategy development Institute, 2002.12)

In line with this, The Ministry of Information and Communication have decided it will pick three portable Internet operators in February next year. The commercial service will begin in 2006. Major companies such as SK Telecom, KT and Hanaro Telecom are among the competing companies for the three licenses that will be issued by MIC (Ministry of Information & Communication).

The government supports this introduction of WiBro in order to try to inspire new growth by pushing for a new communication service. The introduction of WiBro has also had negative effects.

Criticism from market analyst expert claim that this push strategy, where the suppliers hope to create a demand, could be an economic disaster for companies involved in introducing this technology to market. Furthermore, the project has created trade problems with US that have criticized the South Korean government because of their decision to block foreign companies to enter the WiBro project. This could have some serious drawbacks on the governments plan to export the technology.

Further reading: www.wi-fi.org www.kisdi.re.kr www.mic.go.kr www.apiicc.org

ASIA BULLETIN

November 2004

14

China:

Business and Investment China’s market continues to grow in importance. Recently its car industry passed France to become the third largest in the world. The telecom market is the largest with more than 320 million subscribers. The question is not anymore if a foreign multinational firm should establish itself in China, the question is if it can afford not to do it?

The vast lands of China offers a huge domestic market for both local and international companies and the competition is tough.

Short economic history China is a fascinating country. It has a long history, a rich culture, and what now draws most attentions, an economic growth that has placed the nation as one of the most important economies in the world. Countless are the foreign companies who have considered to join the wave and establish a presence in China.

During the 1980s and 1990s foreign companies swarmed into China with the dream of finding a domestic market of 1.3 billion consumers. A dream that never became fulfilled together with strict regulations, to mention some difficulties, made it tough and high losses were common. Many withdrew from the market while other switched strategy to instead use low-wage workers to produce products for markets elsewhere, and areas such as Guangzhou, Shanghai and Beijing became big manufacturing centres. Still this is a common way to do business in China, but the market has transformed and with a middle class of around 250 million people foreign companies can now point to a serviceable “middle class” of tens of millions of people. The telecom market has grown to the world largest with more than 320 million subscribers in October this year, and the car industry has passed France to become the third largest in the world.

China’s influence on the world economy continues to grow.

Andreas Sigurdsson andreas.sigurdsson@asia.chalmers.se

A mapping of today’s China China’s market is growing rapidly, but it is has done that earlier in history as well. The question is what is different for companies wishing to enter China this time? An answer to this is the paradigm shift now taking place in the way foreign companies are approaching China, this because the country in itself has changed.

China has come to look more and more like a real market with all the associated challenges and opportunities that this involves.

People are getting richer which brings a larger domestic market.

The number of local companies has grown rapidly and there is now fierce competition between foreign and local companies in several sectors. The local competitors have emerged quickly and often fight dirty. They emphasis investment and market share rather than productivity and profit, and use below-cost pricing to achieve their aims and take market share from established foreign companies. Since China is becoming to look more like a normal market there are also more strategic options for firms wishing to compete. Sophisticated brand-building and marketing strategies can be used, and improved infrastructure makes it possible for foreign firms to move production to cheaper inland areas of China and start to follow the cost structure of their local counterparts. Lately, a local market developed for mergers and acquisitions (M&A) has immerged, allowing large foreign firms to buy up local competitors.

Options of entrance The business climate in China has experienced major changes but it is still challenging. Several options exist for companies wishing to enter China and they all include obstacles of different nature such as regulations, lack of skilled personnel and intellectual property theft. Regulations remain but are now being relaxed in more and more sectors after China’s WTO entrance.

Setting up a business in China usually involves high start-up costs. Well paid expatriate staff often lives in expensive hotels and training a local work-force can be tough. A long-term perspective becomes necessary when it’s first after a couple of years, when the staff is trained and the number of expatriates reduced to a minimum, a profit might be made. Many companies see manufacturing in China as a relentless battle with costs and daily fights concerning everything from maintaining consistent supplies to fending off new competitors. Despite this, operational issues are not the all-consuming problems they once were. So making business in China is getting better but it is still not easy.

ASIA BULLETIN

15

November 2004

Following options offer a way to establish a presence in China:

and establish a presence than would be building a new network.

• Representative Office; the traditional first step to enter China, and still a very popular, is through a representative office. This is typically used by smaller companies to establish a presence in the market. It is technically not an investment vehicle and it works like a branch office without the possibility to sign contracts or take payment, but it is usually the quickest and least expensive way to establish a presence in China. Through a representative office the company will be enable to learn about the market through market research, build reputation and brand awareness, and to establish important and necessary relationships with actual or potential customers and possible partners for a future investment.

In order to meet investor’s demands and commitments to WTO new options for foreign investors have appeared.

• Wholly Foreign-Owned Enterprise; the most common way to enter China, and the dominant form of foreign invested enterprises, is the wholly foreign-owned enterprise (WFOE). A WFOE is a larger investment that offers simplicity and control, and therefore also includes a greater financial risk compared to a joint venture (JV), but the risk of leaking intellectual property is reduced. It is possible in most sectors to establish a WFOE, but one of the exceptions is the car industry where a 50% joint venture is required. Other regulated sectors are energy, defence, media and banking.

• Joint Venture; the earlier dominance of JVs was primarily due to the fact that WFOEs were not allowed in many sectors of the Chinese economy. In the 1990s JVs accounted for 75 percent of all foreign investment. These arrangements allowed foreign multi-national companies (MNCs) to access China’s market but it often denied foreign companies management control over their domestic investments. Being the only way to enter a sector before has led to many companies buying out their partners as it becomes legal. JV’s is no longer a necessity to enter China but it is still attractive due to its unique commercial advantages. Forming a JV with a Chinese partner often enables a foreign investor to tap valuable resources and mitigate risk to exposure. JV partners can help lower start-up costs and brings local knowledge to the partnership. Many has, when it became legal, bought their partners but others have continued successful relationships and expanded their businesses together with their JV partners even though the law does not require them to do so anymore. Risks do exist, especially when it comes to intellectual property. During the 1990s many companies experienced troubles with partners leaving the cooperation and stealing intellectual property to later start manufacturing the same product at their own company. JV is still the only way to enter certain sectors. For foreign investors interested in selling to the Chinese domestic market JVs still represents an attractive option since distribution related services remain regulated. This will be open for WFOEs in the end of 2004 but establishing a JV with a Chinese partner gives access to existing channels and may offer a quicker, more economical way to learn about the market

• Holding Company; one of these new options is the holding company that offers advantages for foreign investors looking to coordinate and consolidate functions across multiple business units in China. Business functions such as procurement, importation, sales and marketing can all be integrated to achieve economies of scale. The holding company structure is at present only open to a limited number of major foreign investors. The minimum capital requirement of $30 million together with the requirement of at least 10 foreign invested enterprises in the country effectively shuts the door for most companies, but the number of holding companies is increasing as more and more investors meet the requirements.

• Research Centres; another option that has increased in popularity is foreign-invested research and development centres.

In February 2003 China had more than 120 centres. These centres have grown in importance for many companies and has now transformed from black holes in the balance sheet to valuegenerating operations. Most of these centres focus on product development for the domestic or regional markets, but basic research appears to be on the rise and several companies has been able to manage large cost saving by conducting research in China.

Shanghai, a growing city in a country with one of the most important economies in the world.

ASIA BULLETIN

How to succeed?

Hong Kong based HSBC points out four keys to success in China.

The first key is local knowledge about the market. This can be achieved by for example a representative office that gather knowledge through activities such as market research, or a jointventure with a local company who brings the local knowledge.

The second key is to be realistic. This means realise that a WTO membership doesn’t change everything immediately. It is also important to realise that there are major concerns in the banking sector and for China this is considered to be the heart of their economic problems and a long-term challenge for the nation.

The third key is being prepared, both in a short-term perspective as well as a long-term. Things happen quickly so a company needs to be prepared to move and react quickly. The last key is patience, to use a long-term strategy to meet short-term goals as well as a long-term focus with a short-term agenda. A long-term attitude is necessary because income flow will not come early.

The Swedish Trade Council is an organisation that offers different solutions for companies wishing to enter China or other markets.

Their offer with the lowest risk is the Swedish Trade Council’s Business Support Office. Everything from staff to office is arranged by the Swedish Trade Council for a monthly fee. This is an option suitable for small and medium sized companies as a first step into the Chinese market.

Doing business in China involves many challenges. Apart from facing the legal and bank system, bureaucracy and regulations, a company has to face a different culture and Guanxi; a kind of sophisticated networking where personal relations are necessary for business. Contacts are important in Guanxi and trust is created by personal contacts which sometimes can make it difficult or impossible to do business without knowing or having a relation to the right person. This is a way of doing business many foreigners are unfamiliar with and never really understands.

Guanxi is a very important element in doing business in China. It means relations and refers to complicated personal networks. Good Guanxi gives a major advantage when trying to establish a company in China.

November 2004

16

China is an existing and challenging market. It’s growing fast and is becoming increasingly important. Local companies have emerged and are starting to be successful both within and outside China. Restrictions and regulations remain but the risks and problems shouldn’t be over-played. Patience, understanding and a well-planned strategy offer a good opportunity for a successful business in China.

References: • China Business and Investment Roundtable, The Economist ,Tokyo, June 24 2004 • Finance and Economics: Investing in China, The Economist, 2004 • Doing Business in China, The Economist, 2004 • Investing in China is about to get easier, but not less risky, Wall Street Journal, 2004 • Doing Business in and within China, William Atkinson, Risk Management Magazine, 2004 • Strategies for investing in China, The China Business Review, R. Mark Mechem, 2004 • A Whole new world, Wall Street Journal, Neil King Jr, 2004 • Multinational Companies in China, The Economist Intelligence Unit, 2004 • A billion three, not for me; The Economist, 2004 • Interview, Axel Nordegren, The Swedish Trade Council, Shanghai

Zhong Guo literarily means middle country and it is the short for “Peoples Republic of China”.