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Overview of Optoelectronic Manufacturing Service in Mainland China Thomas Chaung Director of Sales Marketing LTK Industries Ltd. Oct 13, 2006


Table of contents Photonics Product categories Think Global China optoelectronic industry development retrospection Unprecedented opportunities and challenges LTK at a glance

Geographic View of Global Photonics Industry: 

Geographic View of Global Photonics Industry The U.S Optoelectronics Components Optical Fiber Communication Manufacturing Equipment Niche-market Products Asia Optoelectonics Components Flat Panel Display Optical Components Optical Input/Output Devices Consumer Products Europe Optical Fiber Communication Optical Storage Optical Components Testing & Measurement Equipment

Photonics Product Categories: 

Photonics Product Categories


China optoelectronic industry development retrospection The China government sees photonics as one of the key industries to drive China’s economic and technology growth in the 21st century. Over the past 20+ years, China's reform and opening-up have promoted China's laser and optoelectronic science to face the application market, the world and the future. In many national strategic scientific plans, laser and optoelectronic technologies are attached much importance.


In the national “6th Five Year Plan” and “7th Five Year Plan”, laser and optoelectronic technologies are listed as important items. The State Fund for Natural Sciences sponsored a number of researches in laser and optoelectronic technologies from 1986 to 1998. During “8th Five” and “9th Five” plan, much has been achieved in laser and optoelectronic: China optoelectronic industry development retrospection


6 industrial bases for optoelectronic achievements conversion (Beijing, Wuhan, Shanghai, Shijiazhuang, Shenzhen and Changchun) 16 optoelectronic industrial base are set up since 2000, the “Ten-Five” plan. 11 state key optoelectronic laboratories and 5 key laboratories affiliated to the State Educational Bureau have been set up. China optoelectronic industry development retrospection


5 National Engineering Research Centers in laser and optoelectronic are built, including CD, laser processing, optical fiber communication and optoelectronic components. 4 NERTCs are set up, including solid-state lasers, optics instruments, specialty display and Flat Panel Display engineering technologies. Average annual growth rate of the past 10+ years keeps double-digit. China optoelectronic industry development retrospection


Segmentation of the optoelectronic manufacturing marketplace in China Component and system manufacturers, contract manufacturing service providers, and manufacturing equipment suppliers formed the Optoelectronic manufacturing infrastructure Demand for optoelectronic manufacturing capacity is being driven by consumer products such as CDs, DVDs, laser printers and scanners, displays for mobile phones and personal digital assistants, digitals cameras, camcorders, LCD TVs, and automotive traffic signals; and by fiber optic communication products


Revenue ($ bn) Revenues of LED, LED Display and LCD (China)


Revenue ($ M) Revenues of Laser (China)


Due to the favorable investment environment and advantageous market, China has already become the factory of the world for electronics. It is estimated that by 2007, it will manufacture goods worth $270 bn ~ 20% of the world’s output. It is now striving to establish a similar dominance in the field of optoelectronics. Unprecedented opportunities and challenges


In fact, the high-tech economy is being driven by three major economic zones on the east coast: - Pan Pearl River Delta - Yangtze River Delta - Bohai 1.3 bn people, between the above, account for: - a GDP of more than $255 bn; and - 90% of China’s economic growth The Guangdong province alone accounts for 30% of China’s total exports and features more than 60,000 Hong Kong owned firms – 40% of which are involved in electronic goods manufacture.

China Regional Photonics Revenue: 

China Regional Photonics Revenue Unit: Billion in USD


Domestic companies, such as the telecom equipment makers FiberHome, ZTE and Huawei, have grown to become large, successful firms with an increasing international focus. Huawei had won a contract to supply British Telecom with its 21st-century network in 2005. The 2008 Olympic Games in Beijing is one of the driving demand for telecommunications equipment within China. Unprecedented opportunities and challenges


Other drivers: Development of the western part of China; Entry to WTO will greatly promote the improvement of investment environment; Government support for the research and development of the industry, e.g. 863/973 plan; Numerous incentive policies: tax breaks, low-cost loans; Many major cities have aggressively promoted the industry and created “optical valleys”; Competent and low cost supply base Unprecedented opportunities and challenges


Unprecedented opportunities and challenges China is especially strong in the design and manufacture of passive components and can already provide 80% of its domestic needs. However, Mainland is lacking the know-how and capability in the manufacture of optoelectronic chips and active components, such as semiconductor lasers, modulators and LEDs. Most active-component manufacturers are not vertically integrated; they source their semiconductor chips from Taiwan and overseas.


Traditionally, the benefits offered by China’s low-cost business model have encouraged companies to concentrate on manufacturing passive components. These devices have been labor intensive to produce and are at the lower technology end of the market. Chinese companies are now moving into the manufacture of higher-value active components and are improving quality to access international markets. Unprecedented opportunities and challenges


Unprecedented opportunities and challenges The risk-averse attitude of many Chinese companies has so far restricted investment in internal chip fabs. They correctly perceive optoelectronic chip manufacture as a higher-risk area requiring substantial capital investment and highly skilled engineering staff. However, there are strong indications that this situation will change: The Chinese government has identified this as a strategic weakness, and research activities are under way to develop an indigenous supply of chips


Unprecedented opportunities and challenges In general, for the very-high-technology end of the photonics market, Chinese companies are about 5 years behind other countries especially in active components. Ultimate ambitions of the industry ~ is to be a vertically integrated supplier, to bring all of the component supply in-house to minimize cost.


Unprecedented opportunities and challenges Challenges: The lack of a complete supply and support chain for the growth equipment; The lack of Chinese intellectual property in the area; and the capital cost of the growth equipment is also limiting development of the industry

Pros and cons: 

Challenges *Weak Quality Assurance *Issues of account receivable and bad debts *Appreciation of RMB * Concerns on IP Advantages *Support from government *Optimistic economy *Abundant talented people and low labor costs *Huge potential local demands Pros and cons

Cabletech Wire Products Factory: 

Established in March 1994 Area: 13,000m2 Number of employee: 2,337 Production capacity: 3 million pieces cable assembly per month Cabletech Wire Products Factory Fiber Optic Department


Major products of LTK For Consumer Electronic High-speed interface cables USB, IEEE 1394 HDMI, DVI Fiber Optics Broadband cables LAN cables For Telecommunications LTK also strives to develop Halogen Free products which are free from halogens such as Fluorine, Chlorine and Bromine.

Singlemode Patchcords: 

Singlemode Patchcords Physical contact: Ultra Physical Contact (UPC) Angled Physical Contact (APC) Standard assembly products: SC, FC, ST, MU, LC, MTRJ Application: Telephone, CATV, high-speed datacomm Specification: Bellcore GR-326-CORE Topography measurement: Adapt for maintaining polished ferrule quality


Multimode Patchcords Inspection: All assemblies are 100% visually and optically inspected Standard assembly: SC, FC, ST, MU,LC, MTRJ Application: Telephone, CATV, high-speed datacomm Specification: Bellcore GR-326-CORE Topography measurement: Adapt for maintaining polished ferrule quality Guaranteed Optical Performance PC Flat Insertion Loss (dB) <0.3 <0.3

Testing Equipment: 

Testing Equipment JDS 12-Channel JDS Single-Channel DORC Mini Interferometer DORC Array Interferometer


No of workers Average number of employees for the Optic Fiber Division Manpower growth in CBT Optic Fiber Division


Revenue (USD bn) Revenue growth of Optic Fiber Division of CBT


Established in 1981 and a member of Gold Peak Group Headquarters located at Hong Kong Science Park 7 manufacturing plants in Shenzhen, Huizhou, Shanghai and Dalian, all with ISO 9001 and ISO 14001 accreditation 30 sales branches worldwide 4,000+ employees Sales turnover around HK$1.7 billion in 2005 LTK at a glance


2006 HK Eco-Products Award – Notable Mention Milestones towards Green 1994 ISO9001 Certificate 1996 Company-wide “environmental” measures started 2002 BASEC BS2280 (Green Cable) approval 2003 SONY’s Green Partner verification 2003 ISO14001certification 2005 UL RSCS 2005 HK Eco-Products - Bronze Award 2005 Hong Kong Awards for Industries: Environmental Performance Certificate of Merit 2006 UL RoHS Green Label


Thomas Chaung LTK Industries Limited Tel: +852 2424 4399 Fax: +852 2418 1627 E-mail: thomas@ltkcable.com www.ltkcable.com Thank you !

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