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  1. Technology
January 18, 1989


By CBR Staff Writer

After some very embarrassing attempts to master information technology – buildings that purported to be semiconductor manufacturing plants that were cooled by nothing more than fans, and had the windows wide open were reported a few years back there is a growing realisation that the People’s Republic of China could soon have all its newly industrialised neighbours looking nervously over their shoulders in a few years. As an indicator, Hong Kong-based Jasmine Digital Ltd and its US partner Danbus Memory Systems Inc have been putting it about that they believe that China could be the next disk drive capital of the world. Many US disk drive manufacturers have shifted almost all their manufacturing offshore over the past decade, going primarily to Singapore, which has offered cheap labour coupled with high-quality production and parts distribution.

Best bet But according to David Morris, chief executive of both Jasmine Digital and Danbus Memory Systems, the industry has topped out in Singapore and the next move to cut costs will be focussed on the People’s Republic of China – companies are losing their competitiveness in Singapore because they are all relying on the same suppliers. Therefore, in order to remain competitive, drive manufacturers are looking elsewhere to cut costs, Morris told Microbytes Daily. And mainland China looks to be the best bet, according to Morris, who believes that manufacturing in the People’s Republic could mean cost reductions of 15% to 20%, and he reckons that disk drives could be one of China’s largest foreign exchange industries in the next few years. Morris says that the disk drive industry has the strong support of the Chinese government, which sees it as a potential boost to China’s modernisation effort. However, he conceded that middle-level managers in China are scared of Western operations, but argued that this fear is currently being overidden by a national commitment to become a major player in the hard disk industry, as evidenced in the way Chinese magnetics experts are lead-ing research projects related to disk drives. Jasmine Digital plans to begin manufacturing drives in China’s Shenzhen Special Economic Zone in a joint venture with the Chinese. The joint company, Magnum Digital, will make high-capacity drives (170Mb or more) based on technology acquired from Western Digital and Atasi Corp. Magnum Digital is projecting sales of $250m by 1991.

Bandwagon Morris predicts that by 1990, the street price for fast – 25mS or better access time – drives will be about $5 per megabyte, in contrast to current OEM prices of $6 or $7 per megabyte. He also said that drive performance in voice-coil actuated drives is approaching 18mS in the lab, claiming that 15mS access is probably the lower limit of voice-coil technology. Morris expects other manufacturers to jump on the Chinese bandwagon in the near future. Indeed, this particular bandwagon looks set to keep on rolling as Mayor Lu Yucheng of Peking has announced that his municipal government is to construct a high-technology centre which will offer preferential tax treatment to domestic and foreign high-technology companies locating plants there. The site for the centre will cover 40 square miles and will be situated near Peking University where 500 or so science and technology related enterprises have already located their plants. The centre will be used mainly as an export base and both indigenous and foreign high-technology companies can expect a 15% tax reduction, and those exporting more than 40% of their products abroad, a 10% income tax cut. No income tax will be levied on enterprises during the first three years after their establishment. The China Computer Development Corporation, which is a large-scale publicly owned enterprise established in December 1986, already has a number of subsidiaries located in Peking.

Great Wall Foremost among them is the Great Wall Microcomputer Development Co which is keen to raise its profile in foreign markets. The Great Wall series of microcomputers was a product leader in China in 1987 i

n terms of production and output value, sales and exports; and the Computer Development Corp sees the series as the flagship for Chinese technical expertise abroad. The Great Wall range of microcomputers, all of them XT- and AT-alikes, includes the GW-0520DH high-end Chinese English micro with an 8088-1 CPU, 640Kb memory, and 72Kb ROM; the GW-286B with 80286 microprocessor, 1Mb random access memory, and 128Kb read only memory; and the GW-386, which is a 32-bit supermicro based on Intel 80386, featuring a running speed three to four times faster than IBM AT, 2Mb on board memory, and hard disk capacities ranging from 40Mb to 80Mb. The China Computer Development Corp is represented in the West by Hong Kong-based Technology Research Co, and the American Wescom Inc of Sante Fe, California.

Bolt Holes If 1992 looms large in the minds of nervous or ambitious European business people, 1997 and the transfer of sovereignty to Peking looms a whole lot larger in the minds of all the people of Hong Kong, and while a large number are frantically exporting their capital to bolt holes, mainly in North America, others are embracing the opportunities that a liberalised Chinese market and a potentially enormous new market with cautious enthusiasm. Already many exotically-named Hong Kong companies are nothing more than fronts for Peking – frequently jointly owned with Hong Kong investors, so that the first impression that China will be entering the computer market from ground zero is wide of the mark. All the managerial skills, all the manufacturing expertise the Chinese need to give the South Koreans the frights of their lives are already to be found right there in Hong Kong – and the still-regimented Chinese workforce will soon begin to look very attractive indeed to companies from IBM and Motorola down who are far from complaisant about the growing labour unrest in Korea. By the Year 2000, Made in China promises to be the seal of low-cost quality – and the China in question will not be Taiwan.

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