Although often labeled as Asia' s second most developed economy, China passed Japan' s gross domestic product (GDP) output in the mid-1990s. A significant portion of that success comes from leveraging the world' s largest labor base. For example, Taiwan has outsourced some 90% of labor-intensive optical-component manufacture to China, turning instead to produce optical subsystems and systems.
China' s emerging strength is one of the brightest stars in the dim sky of the global optical communications market. Although demand for optical fiber dried up in 2000 in the rest of the world, analysts predict that China' s demand for optical fiber will reach 16 million kilometers by 2005, up from 6.6 million in 1999, a growth rate of more than 140% and a compound annual growth rate (CAGR) of 15% per year.
As for Taiwan, referred to as one of the Asian tiger economies, it has led the way toward financial achievement in the optical communications sector. Taiwan' s share of the global optical communications market will grow from three-quarters of one percent in 1999 to more than 3% by 2003, representing a CAGR of greater than 14%. The percentage would likely have been higher except for worldwide shortages of connectors, ferrules, and other passive components essential for Taiwan' s area of manufacturing expertise. Although optical communications is behind Taiwan' s largest technological exports—mainly optical-storage drives and flat-panel displays—fiberoptic communications is expected to be the fastest growing segment of the Taiwan photonics industry by 2003, at greater than 24% annually.
While Taiwan pursues more-complex photonic components and equipment for export, China' s deployment of dense wavelength-division multiplexing (DWDM) and synchronous digital hierarchy (SDH) systems has sparked strong internal demand. China' s DWDM market is expected to reach $1.5 billion in 2005, up from approximately $185 million in 2000, while SDH demand will grow at an annual rate of 40% and skyrocket to over $3.7 billion by 2005, up from $700 million in 2000. This demand, combined with China' s GDP growth at around 7.5%, guarantees that China is not only an emerging hotbed of productivity, but one of the world' s largest, most robust markets for optical communications equipment.
Growth with National Support
Greater China' s emergence onto the global optical telecommunications scene goes beyond consumption and production. Through national development policies, both the Dragon and the Tiger hope to expand on recent trends of increased R&D spending and the attraction of top global companies and engineers.
In the 1980s, Chinese officials determined that optical communications should be a significant part of the country' s future prosperity. Leveraging an extensive system of universities and research institutes, China has developed eight optoelectronics industry parks, in Beijing, Changchuan, Chongqing, Guangdong Province, Shanghai, Wuhan, Xi' an, and Zhejiang Province. China has also begun work on a pair of "Optical Valleys," similar in concept to California' s Silicon Valley.
The city of Changchuan, in northeast Jilin Province, is building an Optical Valley that initially includes two industrial parks designed to attract optoelectronics manufacturers. The Chinese Academy of Sciences and Changchuan Optoelectronics Technology Industry Park have joined forces to launch Changchuan-China Optical Valley, with an initial investment of approximately $3 billion. The Optical Valley project is expected to make the optoelectronics industry Changchuan' s second largest after automotive, with annual sales projected to reach $9.6 billion.
A second, and the largest, Optical Valley project is being developed in Wuhan, capital of China' s central province of Hubei. Building on the region' s rich R&D heritage, the project serves as an incubator for medium and large optoelectronics enterprises, with annual sales projected to reach $12 billion annually.
Taiwan has developed similar sources of engineering expertise, most notably through organizations such as Taipei' s Industrial Technology Research Institute (ITRI) and the Photonics Industry & Technology Development Association (PIDA).
A Place in the World
China' s recent acceptance into the World Trade Organization confirms the country' s new place among the world' s technological powers. New laws that open the door to the gradual foreign ownership of up to 50% of major Chinese manufacturers and telecommunications service providers is helping the Chinese economy garner a lion' s share of the world' s foreign direct investment (FDI) at a time when investment reserves are low and competition for those reserves is at its highest point in a decade. An estimated $50 billion a year of foreign investment is currently flowing in to China.
While China continues to attract foreign capital to modernize its manufacturing base, it also continues to leverage the world' s largest labor market to capture an ever-increasing segment of the world' s contract manufacturing market and increase per capita household income. Guided by the Ministry of Information Industry, China is using a growing national income base to ensure domestic investment in R&D, thereby closing a technological gap that was once measured in decades.
By the end of the last decade, China was already showing the largest percentage growth in scientific publications among the world' s developed nations. China' s pursuit of R&D in conjunction with one of the largest engineering populations in the world has set the stage for a technological revolution that is changing the list of the world' s top players in the optical communications industry.
HUBEI: R&D HeartlandLocated in central China along the Yangzi River, Hubei Province is one of China' s largest commercial hubs. The capital city of Wuhan offers two airports, two international harbors, and several national railways and highways in addition to being a nexus for several of China' s 16 optical trunk lines. Wuhan ranks third among China' s municipalities in science and technology, supporting more than 500 research institutes and universities, including the Wuhan Research Institute of Posts and Telecommunications (WRI). In 1980, WRI led China in U.S./China investment when it joined with Corning Lasertron to create Wuhan Telecommunication Devices (WTD).Wuhan Telecommunication Devices has gone on to develop many "firsts" for China, including the country' s first 1310-nm laser diode, the first 1550-nm distributed-feedback laser diode, and the first uncooled multi-quantum-well diode. The company has moved on to a lead position for optical network systems and subsystems, including transceivers and transponder modules, pump lasers, optical receivers, and LEDs. Most recently, WTD developed a Ni/Au coating method for virtually any standard single- and multi-mode unclad fiber used with high-power diode lasers or detectors. The process includes tailoring the fiber end to form lenses of virtually any shape, including angled, Chamfer, and conical.
WTD takes great pride in its highly educated workforce and its ability to develop not only its own products, but the manufacturing equipment to produce them. The company also has established strong working relationships with world-class research organizations such as Lucent' s Bell Laboratories, Corning, Tsinghua University, and the Semiconductor Research Institute of the Chinese Academy of Sciences. Strong, steady growth has led to a workforce of 600 employees with a mission "to deliver innovative telecommunication devices and services that enhance our customers' lifestyles and add value to business."
Nearby Accelink Technologies was created from the WRI Solid-State Device Institute in 1974, and specializes in R&D, manufacturing, management, and technical services. Its product lines include many types of multiplexers/demultiplexers and passive components, Raman and erbium-doped fiber amplifiers, test instruments, and integrated photo-electric components. Accelink has facilities and equipment for thin film filters, fused fiber, fiber Bragg gratings, UV etching, packaging and testing, and arrayed waveguide coupling.
With its long history in optical device research and manufacture, its rapid growth, and many contributions to Chinese telecommunications projects, Accelink has set a mission to place itself in the top tier of global companies. On its way to accomplishing this goal, the company plans to develop its own automated packaging processes and invest even more effort in expanding its domestic and international markets.
GUANGDONG: Industrial GemThe cities, rivers, and dramatic coastline of Guangdong Province have been an important part of China' s cultural and industrial history, as well as its future through the creation of a Special Economic Zone in Shenzhen. This former fishing village has been transformed over a few decades into a modern city of seven million population. Located just across the border from Hong Kong, the province is the center of the country' s export market.Companies such as Shenzen Hi-Optel Technology have built on the strong university base in Guangdong, partnering with Huazhong University of Science and Technology to create the R&D Center of Optical-Network Devices and Technologies. This private/public partnership has allowed Shenzen Hi-Optel Technology to create a strong portfolio of components based on the philosophy of creating "key elements for the optical network." With this approach in mind, the company produces components, modules, and subsystems that contain functionally integrated active and passive components.
Product lines include transmitters and receivers at up to 2.5 Gbit/s, passive optical components, as well as CWDM components. With 160 employees, Shenzhen Hi-Optel Technology has strong sales in China and a growing presence in North America.
FUJIAN: A Worldly View From the peaks of this mountainous land, Fujian province and its capital Fuzhou look out on the Taiwan Strait and the South China Sea. This proximity to international trade routes and a long naval history have been the foundation of Fujian' s industrial achievement. The province has also benefited from China' s first Special Economic Zone, leading to dramatically increased per capita income and infrastructure improvements. Last year, Fujian beat China' s national growth rate, boasting a GDP growth rate of 12%. Provincial leaders expect Fujian' s GDP to double by 2010.Local optical-component companies such as Koncent Communication have benefited from the financial boom. Koncent Communication added its YVO4, LiNbO3, and quantz crystal expertise to the Fujian manufacturing base in 1999, quickly building sales in pigtails, polarizers, beam combiners, isolators, attenuators, couplers, and collimators.
With more than 1500 employees and 350,000 sq ft of manufacturing space, Koncent is also making inroads in WDM, DWDM, and CWDM systems and subsystems assembly. The company has built long-term relationships and strategic partnerships with leading companies in the industry and offers contract OEM manufacturing on a dedicated production line. This attention to service provides customers with low-cost assembly of components and the ability to rapidly ramp up production of new products.
TAIWAN: A Tiger' s storyProving once and for all that size does not necessarily matter when it comes to commerce, Taiwan' s emergence onto the modern global economic stage has been nothing less than extraordinary. Within its 36,000 square kilometers — between the southern reaches of Kaohsiung and the northern brilliance of Taipei—Taiwan has become an export giant.The photonics industry alone grew 56.2% from 1999 to 2000, reaching $9.6 billion. During that same time, fiberoptic communication production grew from $200 million to $320 million. Despite the recent global economic slump, analysts predict that Taiwan' s fiberoptic market will continue to grow far beyond global averages as local companies such as Advanced-Connectek (ACON) and Technology Thesaurus Corp. (TTC) continue to grow their core competencies in components and expand into subsystem and system design and manufacture.
Located in southern Kaohsiung, Technology Thesaurus started with a group of five engineers with competencies in remote fiber test systems, erbium-doped fiber amplifiers, optomechanical optical switches, and other subsystems. Since the company' s formation in 1990, TTC has grown to 100 employees. The company intends to continue building on its successful product line, expanding the product base to include DWDM light sources and optical switches.
For Technology Thesaurus, teamwork and an accumulation of technical knowledge are the keys to successful products. To help prepare for future technical and market challenges, the company runs its own TTC-Tech School, where the staff is continually trained on basic theory, engineering, maintenance, and operations. At the same time, Technology Thesaurus is expanding its cooperation with universities, research laboratories, and other companies in the industry.
At the other end of the island, Taipei' s ACON has grown from a stamping operation concerned mainly with connectors of all types, to a major supplier of optical components. The company has used its long experience in cabling to capitalize on shortages in high-quality ferrules, couplers, and connectors. Emerging product lines using broad ion-beam deposition techniques have expanded the companies base to include DWDM thin-film filters, transceivers, and other passive and active components, while full in-house testing capability has made ACON a vital manufacturing partner for optical companies around the world.
As ACON looks to the future, the company expects that integrated, tunable products will be vital to successful optical networking. Reconfigurable, tunable, and multi-wavelength products are on the list of products the company will develop as it takes advantage of its expertise and heritage to integrate active and passive optical technologies.