In the "14th Five-Year Plan", Shenzhen clearly stated the goal of "building a global distribution center for electronic components and promoting the integrated innovation of electronic component international trade systems". The "Opinions on Several Special Measures for Relaxing Market Access in Shenzhen to Advance the Construction of a Pioneer Demonstration Zone for Socialist Modernization and Facilitating Trade and Investment Liberalization" approved by multiple ministries and commissions supported Shenzhen in establishing a market-oriented operated international trading center for electronic components and integrated circuits. The Guangdong Provincial Government recently proposed in the "Several Measures for Promoting Trade and Investment Facilitation Reform in Guangdong Free Trade Pilot Zones" that "Support the construction of the Asia-Pacific distribution center for electronic components in the Qianhai-Saikou area". Shenzhen's efforts to build a global distribution center for electronic components have received strategic support from the state and Guangdong Province. Against the backdrop of the "chip shortage" severely affecting the development of multiple industries such as intelligent terminals, intelligent vehicles, and high-end equipment, building a global distribution center for electronic components is of great significance for maintaining the security and stability of the supply chain of advanced manufacturing and strategic emerging industries in the Greater Bay Area and across the country, consolidating the leading position of the electronic information industry in the Greater Bay Area, gathering more industrial and innovative resources, and participating in the new round of international industrial competition at a higher level.
I. Opportunities and Challenges for Shenzhen in Building a Global Distribution Center for Electronic Components
(1) Strategic Opportunities
Currently, we are in the window period of the global "chip shortage". Affected by factors such as the increase in upstream raw material prices, insufficient supply of semiconductor equipment, the decline in global chip production capacity, strong downstream demand, and US trade intervention, the global chip supply and demand became seriously unbalanced starting from the end of 2020. The "chip shortage" has extended from the chip field to the manufacturing field. It is expected that it will be relieved by 2023. In 2021, the amount of imported chips in China was nearly 440 billion US dollars. Shenzhen has the strong demand support to build a global distribution center for electronic components.
The current market sales pattern dominated by the authorized distribution model is expected to be disrupted. With the continuous upgrading of chip manufacturing technology, the chip manufacturing process has gradually approached the physical limit, resulting in increased production costs. The process miniaturization has made it increasingly difficult to reduce the unit cost of transistors. In the future, core chip manufacturers, under the pressure of competition, are likely to expand their business either upwards or downwards, forming platform-based enterprises to intervene in the upstream and downstream industrial chains. On the one hand, they will jointly promote the innovation and research and development of chips in areas such as materials, structure, and medium with the upstream; on the other hand, they will drive the realization of the goals of low cost and integration through application demands with the downstream. The traditional chip product authorized distribution model is likely to shift towards a platform-based development model.
The global chip demand pattern will undergo a significant transformation. According to data from IC Insights, the global automotive industry's integrated circuit (IC) shipments increased by 30% in 2021, far exceeding the 22% growth rate of IC shipments last year. Automotive electronics will contribute to the significant growth in the electronics industry in the future. The Shenzhen automotive electronics industry resources rank among the top in the country. The industry foundation is good, with over 1,500 manufacturers by 2020, and an output value of approximately 150 billion yuan, accounting for about one-fifth of the national total. Currently, technology enterprises such as BYD, Huawei, and Tencent have invested a large amount of resources into the intelligent vehicle sector. The overall development level of the urban industry is basically comparable to that of Shanghai and Beijing.
(II) Major Challenges
The distribution of electronic components is controlled by international giants. According to data from the technology and electronic components supply chain media platform Source Today, in the top 50 global electronic components distributors in 2020, the United States accounted for 43, the United Kingdom, Germany, and Canada each had 2, and Japan had 1. The distribution system of electronic components is firmly in the hands of the United States. Among the top 35 domestic electronic components distributors in China, Shenzhen had 16, Shanghai and Hong Kong each had 5, and Beijing had 2. In the domestic distribution system, Shenzhen holds half of the market share and has certain distribution advantages.
The semiconductor industry in the Yangtze River Delta region holds a relatively leading position. In recent years, the Yangtze River Delta region has concentrated its efforts on developing the integrated circuit manufacturing industry, forming a relatively complete industrial chain covering from wafer manufacturing, packaging and testing to semiconductor equipment and semiconductor materials. In contrast, the advantageous industries in the Greater Bay Area are mainly concentrated in multi-layer ceramic capacitors, inductors, resistors, as well as panels, sub-millimeter light-emitting diodes, and printed circuit boards, etc. There are many gaps in the integrated circuit manufacturing industrial chain, and the overall position of the industry has fallen behind.
The import advantages of electronic components in the Chinese mainland are more prominent. Hong Kong is a traditional distribution center for electronic components in the Asia-Pacific region. Compared with mainland cities, it has advantages in customs clearance policies, taxes, financial services, flight density, and freight rates. Hong Kong is the main entry point for electronic components from all over the world into the Chinese mainland. Most of the electronic component imports in the mainland are transshipped and declared through Hong Kong before entering Shenzhen.
II. The Strategic Path for Shenzhen to Become a Global Distribution Center for Electronic Components
Shenzhen's efforts to build a global distribution center for electronic components should not only fully leverage the city's advantages and characteristics, but also accurately grasp the future development trends and directions of the industry. Resources should be concentrated in key areas to achieve breakthroughs first.
One approach is to establish an electronic component trading platform to promote the mutual development of trade and industries. By creating this platform, on the one hand, we can standardize market transaction order, facilitate trade facilitation and supply chain finance, and gather electronic component distributors, traders, and upstream and downstream enterprises, thereby increasing the transaction volume of electronic components in Shenzhen, establishing global pricing capabilities for key products, establishing a stable supply chain to ensure the stable development of local upstream and downstream industries, and on the other hand, promoting the clustering of industrial chain enterprises to enhance collaboration among enterprises, promoting industrial upgrading, strengthening the competitiveness of local related industries and products, increasing trade demand, and achieving the mutual development of industries and trade.
Second, we will strengthen the facilitation reform of electronic component imports by benchmarking against Hong Kong. We will establish an electronic component express channel, follow the customs clearance model for cross-border express shipments between China and Hong Kong, simplify the import customs clearance procedures, enhance online processing, increase subsidies for import taxes and freight, increase the frequency of import routes, and reduce the costs of import logistics clearance to the same level as in Hong Kong. We will also build bonded warehouses and short-term rent-free warehouses in the port's bonded zone to facilitate the import turnover process.
Thirdly, it is necessary for state-owned enterprises to take the lead in the implementation of the construction of the electronic component distribution center. Make full use of the execution ability, credibility and resource advantages of state-owned enterprises in the process of implementing and promoting the urban development strategy. Concentrate efforts on completing the construction of the physical space and the online system, and at the same time, as the provider of infrastructure and the supervisor of commercial activities, promote the healthy development of the industrial ecosystem. At the same time, it should also be considered that state-owned enterprises have situations such as long decision-making processes, inflexible mechanisms and poor market sensitivity. Except for strategic investments, for the parts related to competitive fields, after being coordinated by state-owned enterprises, they should be handed over to market-oriented entities for completion. In this way, a model led by state-owned enterprises and participation of various types of entities can jointly promote the construction of the distribution center.
Fourth, choosing the automotive electronics industry as a key breakthrough point. Currently, the consumer electronics industries such as computers and mobile phones have entered the era of product saturation, and the supply pattern of their upstream electronic components is basically stable. It is difficult to change the existing industry pattern by establishing distribution centers. The automotive industry is experiencing rapid development, and its industry pattern has not yet been solidified. Shenzhen has certain advantages in the automotive communication chips, in-vehicle intelligent terminals, in-vehicle sensors, platform operation and other industrial chains. Firstly, choosing the automotive electronics industry chain as a breakthrough point is not only conducive to seizing the development opportunities brought by the electrification, intelligence and connectivity of the automotive industry, but also to seize the gap in industry standards that have not yet been perfected. At the same time, it is also conducive to leveraging Shenzhen's existing industrial advantages. By reshaping the industrial ecosystem, it is possible to achieve the first success of the trading platform and distribution center in the automotive electronics field, and based on this, it can be promoted to other categories of electronic components in the future.
III. Support Measures for Shenzhen's Transformation into a Global Distribution Center for Electronic Components
One is industrial space support. Based on the current development direction of the automotive industry, we should proactively plan a world-class cluster area for automotive electronics, and set up corresponding spaces for functions such as data storage, specialized warehousing, exhibition and trading, and innovative research and testing.
Second, government collaborative support. Seek support from the customs department to carry out innovative activities such as bonded processing, bonded maintenance, and cross-border trade facilitation for electronic components within the free trade zone. Seek support from the People's Bank of China to provide convenience for cross-border transaction settlement of the trading platform. The Municipal State-owned Assets Supervision and Administration Commission will take the lead in planning, designing, and implementing the project of the electronic component distribution center and trading platform. The Municipal Commerce Bureau will assist in promoting the establishment of regular exhibitions such as the Hi-Tech Fair within the industrial space, and the Municipal Science and Technology Bureau will coordinate the step-by-step advancement of the construction of industry standards.
Thirdly, government policy support. The government continuously optimizes policies for the electronic components and integrated circuits industries. The development of the automotive electronics industry cluster is regarded as an important strategy and specific support policies have been formulated. The establishment of an electronic components trading platform system is accelerated, and support such as fee reductions and storage and transportation subsidies is provided to enterprises and individuals conducting transactions through the platform.