- The Washington Times - Friday, February 20, 2004

SHANGHAI — Look around your house. If you spot anything electronic, chances are at least part of it came from Shanghai. Increasingly, the nuts and bolts of the wired world — computer chips, printed circuit boards, liquid crystal display panels — are being made in this city of 20 million once best known for its textiles, handbags and Forever Bicycles.

Aided by a foreign investment rush that is bringing many top world manufacturers, including Intel Corp., NEC Corp. and Motorola Inc., Shanghai is trading its low-tech past for a high-tech future.

“China is becoming the factory to the world. Everyone is expanding,” said Jimson Lee, general manager of American Tec Co., which provides equipment for making printed circuit boards used in cell phones and hand-held computers.

There is a chain reaction of sorts. As big electronics manufacturers arrive, their high-tech suppliers follow. And many of the factories use advanced machinery supplied only by other foreign manufacturers, encouraging them to set up shop in Shanghai as well.

So as Europe’s top circuit board maker, Austria Technology & Systems AG, or AT&S;, came to supply Siemens AG and other manufacturers, companies like Hong Kong’s American Tec and Japan’s Omron Corp. came to sell instruments and equipment for their assembly lines.

Major universities also are coming. Tsinghua, Peking and Fudan universities have established a microelectronics research center in the city’s Zhangjiang High-Tech Zone — the Chinese equivalent of a Massachusetts Institute of Technology, Harvard and Stanford alliance.

Exports by foreign-funded manufacturers hit $25.1 billion in the first 10 months of 2003, up 61 percent over a year earlier. The biggest exporter, Taiwan-backed laptop maker Tech Front (Shanghai) Computer, reported exports of $4.1 billion, a sixfold increase.

The high-tech boom is aided in part by Shanghai’s port facilities and its proximity to other large Chinese cities and to Japan, South Korea and Taiwan.

Those factors encouraged Shanghai’s first industrial boom in the late 19th century, when cotton mills and chemical factories sprung up along the banks of Suzhou Creek. Even after the 1949 communist revolution, the city remained China’s biggest commercial and manufacturing center.

But Shanghai has lagged the southern province of Guangdong, which prospered as Hong Kong industrialists moved north to take advantage of lower labor and land costs.

Shanghai, meanwhile, laid off hundreds of thousands of workers as thousands of crumbling state-run factories closed down — the unprofitable legacy of decades of central planning.

Though Guangdong still accounts for a larger share of China’s exports, manufacturing there is mainly low-tech assembly work, employing relatively unskilled laborers from rural provinces.

Unable to compete on costs, Shanghai’s leaders set their sights on high-tech.

Many companies have come — though not into the city itself, where huge state-run factories stand idle along Suzhou Creek, but to old suburban vegetable patches that have risen into landscaped industrial zones.

In a spacious factory in Shanghai’s Xinzhuang Industry Park, Rainbow Yuan explains in fluent English the art of turning copper sheets into circuit boards for cell phones, digital cameras and electronic instruments in cars, medical equipment and airplanes.

“Too much human labor, and you get too many defects from too much handling,” the twentysomething product engineer said, pointing to a woman in white gloves examining circuit boards.

Miss Yuan, one of 750 employees at a year-old factory built by AT&S;, is the kind of college-educated worker that foreign manufacturers court. Employment in the high-tech sector can mean at minimum a doubling or tripling of salary.

Shanghai’s huge pool of industrial labor and its numerous colleges and technical institutes have helped lure manufacturers that otherwise might have set up factories in cheaper provincial cities.

Tax breaks, low-cost land and help from eager local officials in ironing out bureaucratic snags were other welcome incentives, said Patrick Ma, chairman of AT&S; China.

But the ultimate draw has been the demand from electronics manufacturers like Nokia, Siemens and Motorola and big automakers like Volkswagen AG and General Motors Corp., both of which have big operations here.

They are the ones making the things that end up in houses, and they’re the ones who are keeping the Shanghai tech boom moving.

“To be competitive,” AT&S; Chairman Willi Dorflinger said, “we have to be in China.”

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