Supply chain
Asian Edge: China rising fast after 2000
Colley Hwang, DIGITIMES, Taipei

Prior to 2000, the majority of China's industry was basically manufacturing businesses expanding from the Pearl River Delta to the Yangtze River Delta, and then onto Chengdu and Chongqing. However, with the production ecosystem growing mature, many of the supporting sectors also started to take shape, giving a new outlet for China's industry.

In 2000, SMIC was founded in Shanghai, becoming the pioneer of China's semiconductor manufacturing industry. In 2002, BOE announced its advancement into the LCD panel manufacturing industry. The two firms were the pioneers of China's key components sectors.

The two companies primarily relied on domestic clients initially. With investments from local governments, the two makers were able to quickly expand their production and business model to help local panel and semiconductor industries reach where they are now.

China's handset industry that began to develop rapidly around 2000 was initially a sector that focused mainly on copycat feature phones. After going through waves of elimination and innovation, it was able to establish its own ecosystem and competitiveness, forming the foundation of China's dominance in today's smartphone market.

South Korea fell victim to the rise of China. Its dominance in the steel industry was broken by China in 2003, and its petrochemical industry was also caught up by China's in 2004. In 2009, South Korea's shipbuilding and car industries both lost out to China. South Korea's shipbuilding industry faced huge losses and pressure to lay off workers. With an economy only one eighth of China's, South Korea could barely fight back.

China then surpassed South Korea in the smartphone manufacturing and panel industries. And now South Korea's memory industry - its last lifeline - may also be in danger due to competition from China. In 2018, South Korea's semiconductor exports totaled US$108.9 billion and of Samsung's profit of US$52.7 billion in the year, around US$40 billion was contributed by its semiconductor business.

Amid the US-China trade tensions, China is seeking to expand its memory manufacturing and the move will significantly affect Samsung's profitability, which may be halved to only US$20 billion in 2019, according to forecast from South Korea.

(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

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