China's blessing of rapid economic growth may also be the country's greatest curse -- if it cannot successfully manage the energy use and raw materials driving the expansion, that is. In just one generation, the world's most populous country has become its second-biggest economy as well as the most rabid consumer of energy products on the planet.
China is today the world's biggest automotive market. It's also the largest market for a wide range of raw materials used in the high-tech and electronics industry, including aluminum, copper, steel, zinc, and a wide range of rare earth metals. The government knows these are finite resources and has been trying to introduce measures to improve the sourcing and usage by manufacturers in the country.
Securing sufficient supplies of critical raw materials is important to China's continuous economic growth. The country also needs to be able to reassure international companies that they would have adequate supplies of raw materials and semi-processed parts needed for the manufacturing facilities those companies are moving to China. This is why China's leading companies have been very active in sourcing raw materials globally. (See: Five Sources of Risk in 2011.)
In recent years, the central Chinese government has quietly introduced a new policy of asking companies to develop products that require fewer scarce raw materials and have lower energy consumption. The policy has implications for the electronic supply chain. Parts suppliers, especially semiconductor vendors, are being compelled to develop and introduce parts that are more energy efficient or that have smaller form factors -- an essential element of improved energy conservation.
OEMs and communication services providers are getting in on the action, too. In the latest development, Nokia Siemens Networks has partnered with China Unicom to slash energy consumption in the telecommunication service provider's mobile base transceiver station in Anhui province. The goal of the partnership is to cut energy use 20 percent or more at the base stations.
"This is truly a win-win situation for us," says Li Chao, general manager of Anhui Unicom. "It will help us meet the government imperative to mobile operators to reduce energy consumption. In the long run, it will also help us reduce our network operating costs from 10 percent to 30 percent while improving service availability."
Nokia Siemens Networks will provide energy solutions for China Unicom's room air conditioners. "Our solution provides a comprehensive approach to reduce energy consumption in mobile operators' networks," notes Xue Rui, head of Nokia Siemens Networks' global services business in Greater China. "Not only do we help operators meet their green targets but also help them do so cost efficiently."
Telecommunications is one of the major sectors where China is pushing for change, but it is not the most critical. Companies operating in the industrial, heavy machinery, manufacturing, and mining sectors are also being asked to dramatically reduce total energy consumption by implementing advanced technology processes and even taking such simple steps as effectively winterizing buildings to conserve heat.
The move towards more effective power generation and usage offers opportunities as well as challenges for companies in the electronics sector. By mandating standards, China allows some companies to generate new sales while forcing others to raise capital expenditure to meet the new demands. After reviewing some of the latest reports on China's intentions I've come to the conclusion that the industry might as well get onboard.
Even if the high-tech sector does not welcome some of the changes being forced upon manufacturers it is quite clear the Chinese government won't back down. Why not exploit the changes rather than fight them?