While many technological firms were hit hard by the global economic downturn, they may benefit from the 3G ambitions of many Chinese local governments.

The authorities in major Chinese cities such as Beijing, Chongqing and Hangzhou are trying hard to attract investment from telecom carriers, chip makers and handset vendors in an effort to give a shot in the arm to the local economy.

"We want to create in the city a Chinese silicon valley for the mobile industry," said Gou Zhongwen, vice-mayor of Beijing. He said the local government plans to make the telecom industry a new economic engine for the capital in the next three to five years.

According to Zhao Xinxin, vice-secretary of the Beijing Economic and Technological Development Area, one of the largest technology zones in China, sales revenue from mobile phones in Beijing reached 157.4 billion yuan in 2008. There were 210 million shipments, making up 37.5 percent of China's total cell phone sales.

"About 15 percent of the world's mobile phones were produced in Beijing," said Zhao. "Although the world's telecom industry has been affected by the global economic slowdown, we regarded it as a great opportunity to expand here."

When the Chinese government launched 3G licenses last year, domestic and overseas companies hoped it would unleash a huge demand for chips, cell phones and telecom equipment.

As a result, many domestic firms started to establish new factories and research centers to ride on the 3G boom. Foreign giants also choose to move more of their production capacity and research and development forces to China to get closer to the market as well as reduce costs.

Zhao said Beijing plans to establish a new technology zone designed to attract the world's major firms in the telecoms industry. The zone, located at Yizhuang in southeastern Beijing, is expected to attract 30 billion yuan in investment over the next four years.

Beijing was known for its high-tech industry as early as the 1990s. The Zhongguangcun area, which lies in the northwest of the city, is home to many Chinese flagship technology firms such as the Lenovo Group and Baidu Inc.

According to the government plan, the new tech park, dubbed the "wireless silicon valley", will be based at the Beijing Xing Wang Industrial Park in Yizhuang, which was established in 2000 and backed by the Finnish mobile phone giant Nokia. The revenue of firms in the area reached 12 billion yuan in 2008, of which Nokia contributed about a half.

"The global financial crisis presented great opportunities for a reorganization of the industry," said Zhao, adding that Chinese telecom firms could play a big role in the integration of the industry.

Last month, about 20 telecom firms, including Jingxin Semiconductor and TechFaith Wireless Inc, signed a memorandum to invest 4 billion yuan in the new technology park.

Jingxi and Techfaith are both domestic telecom firms. They announced last year the purchase of the mobile chip business of the US chip maker Freescale Semiconductor, previously a division of Motorola.

The Chongqing government last month also said in an industry investment meeting that it plans to build China's first 3G industrial zone and wireless technology park. It plans to draw 18 investment projects from many technology companies, including IBM and Infineon, with total mobile investment intentions of 15.63 billion yuan.

Located in the consumer electronics industrial park of Chongqing Chayuan New City, the Chongqing TD-SCDMA industrial base will focus on the construction of a whole-value chain model, covering chips, terminals and applications.

Huang Qifan, executive vice-mayor of Chongqing, said the Chongqing government would provide preferential tax and financing policies to attract top companies from all fields to settle in the 3G zone.

Huang said the TD-SCDMA industrial park would ultimately comprise three industrial clusters, including 3G core chips, 3G hardware terminals and 3G application services.

It is expected to achieve an industrial scale of 10 billion yuan and direct sales of more than 100 billion yuan over the next three years. Huang said the output value of the 3G aspect would reach 151 billion yuan by 2015.

According to the latest figures from the Ministry of Industrial and Information Technology, Chinese telecom operators invested 160.9 billion yuan last year in building up the 3G network. There were 15 million 3G users in the country by the end of last year.

(China Daily 01/25/2010 page15)