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8/4/2005
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China Confirms Plan To Create $6 Billion Electronics Venture

The country will merge China Electronics Corp. (CEC) and the China Great Wall Computer Group Co., which make integrated circuits, hard drives, monitors, power supplies, cell phones and radar systems. CEC also owns chip foundry Shanghai Huahong-NEC Corp. The combined assets will total $6 billion.

TAIPEI, Taiwan — China’s state planners have confirmed they will merge state-owned conglomerates China Electronics Corp. (CEC) and the China Great Wall Computer Group Co., creating an electronics powerhouse with assets totaling more than $6 billion.

CEC and Great Wall make products ranging from integrated circuits, hard drives and monitors to power supplies, cell phones and radar systems. CEC is also the parent company of chip foundry Shanghai Huahong-NEC Corp., China’s first 8-inch wafer fab.

Word of an impending deal surfaced last week, and the State-owned Assets Supervision and Administration Commission (SASAC) confirmed it on their website Wednesday (Aug. 3) Great Wall Technology, a Hong Kong listed subsidiary, also confirmed the deal, which will put Great Wall under the control of CEC. No timeline was given on the merger.

The merger comes as China’s policy makers struggle to reconcile free-wheeling capitalism with the legacy of state control over every aspect of the economy. In many cases over the years, the central and provincial governments created and subsidized redundant companies that are now in fierce competition with each other, surviving, in part, on continued government backing. Hoping to change that, Beijing is pushing for mergers in various industrial sectors.

The telecom sector may be the next target. Rumors have swirled for some time that the government would like to move from four telecom carriers to three, possibly by splitting up the assets of China Unicom, a wireless carrier that runs the country’s only CDMA network. Such a consolidation could be sticky business, however, as the nation’s telecom firms are also listed on overseas stock exchanges.

According to their Web sites, CEC had assets worth $4.88 billion in 2003, and manages 16 wholly-funded subsidiaries, 30 shareholding companies, two overseas firms and six listed companies, including Amoi Electronics and chip foundry Shanghai Huahong-NEC Corp. The Great Wall Group, has assets worth $1.5 billion and manages seven subsidiaries, 14 holding companies, four associated companies and four listed companies, including Great Wall Computer, one of China’s largest PC makers. One of its partnerships includes a joint venture with IBM to make servers.

Reports in state-owned media suggested last week that the merger might include Panda Electronics Group Co. Ltd. and China Putian Corp, which would tip the asset value of the new company over the $10 billion level, and account for annual group-wide sales of at least several billion dollars. No mention of these firms was made by SASAC on Wednesday.

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