INDUSTRY OVERVIEW
Certain information provided in this section is derived from various official or publicly
available sources comprising certain articles, reports and publications, the preparations
of which were not commissioned by the Group. The Company and the Sponsor have
exercised reasonable care in reproducing such official information from the sources
referred to in this prospectus. Such official information, however, has not been prepared
or independently verified by the Company, the Sponsor, the Joint Lead Managers, the
Underwriters or their respective directors or advisers. The Company, the Sponsor, the
Joint Lead Managers, the Underwriters, their respective directors and advisers or any
other parties involved in the Share Offer make no representation as to the accuracy or
completeness of this official information, which may not be consistent with information
compiled from other sources, and accordingly such information contained in this section
may not be accurate and should not be unduly relied upon.
INDUSTRY OVERVIEW
Capacitor Market Overview
Capacitors are widely used electronic components
A capacitor is a passive electronic component that stores energy in the electric field
between a pair of closely-spaced conductors. In its simplest form, a capacitor consists of
two conducting plates separated by an insulating material called the dielectric. The
capacitance is directly proportional to the surface areas of the plates, and is inversely
proportional to the separation between the plates. Capacitance also depends on the relative
permittivity of the substance separating the plates.
Capacitors have two main features:
.
Capacitors can charge or discharge electricity. This function is applied to
smoothing circuits of power supplies, backup circuits of microcomputers, and
timer circuits that make use of the periods to charge or discharge electricity.
.
Capacitors can block the flow of direct current. This function is applied to filters
that extract or eliminate particular frequencies. This is indispensable to circuits
where excellent frequency characteristics are required.
According to the type of dielectric, capacitors are classified as ceramics capacitors,
film capacitors, aluminium electrolytic capacitors, tantalum electrolytic capacitors and other
capacitors such as mica capacitors, glass capacitors and paper capacitors. The table below
compares the advantages, disadvantages and applications among main types of
capacitors.
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INDUSTRY OVERVIEW
Advantages
Disadvantages
Applications
Aluminium electrolytic
capacitors
large capacitance, small
size, low cost
easily to be affected by
change of
temperature, tend to be
ageing
power switch, display
monitor, TV, stereo,
communication
products, computer
Tantalum electrolytic
capacitors
low leakage current, good
frequency feature,
wide capacitance
range, mature chip
type technology and
product structure
lack of tantalum resource,
tend to pollute the
environment
mobile phone, computer
Ceramics capacitors
highly chip type, good
high frequency feature,
can with stand high
voltage, cheap price
small capacitance
communication products,
such as computer, main
board, mobile phone
Film capacitors
good temperature feature
and frequency feature,
low impedance
difficult to reduce the size
and convert to chip
type
home electrical appliances,
military equipment,
astronautics equipment
Source: Research Report on Aluminium Electrolytic Capacitor Market China 2007
According to Research Report on Aluminium Electrolytic Capacitor Market China 2007
prepared by Information Centre of China Electronic Components Association and Beijing
Zhi Duo Xing Information Technology Co., Ltd. (北京智多星信息技術有限公司), a market
information provider on the PRC electronics industry, despite the fact that the
disadvantages of aluminium electronic capacitors limit certain applications, they firmly
take above 30% capacitor market share on the strength of large capacitance and low price.
In addition, along with the development of electronic technology such as automotive
electronic and frequency conversion technology, aluminium electrolytic capacitors are
expected to occupy a larger market share. The chart below illustrates 2005 global market
share of each type of capacitors.
Source: Research Report on Aluminium Electrolytic Capacitor Market China 2007
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INDUSTRY OVERVIEW
Global aluminium electrolytic capacitor market overview
At present, Japan, Taiwan, Korea, Singapore, Malaysia and the PRC are main nations
and territories for the production of aluminium electrolytic capacitors in the world. According
to the Research Report on Aluminium Electrolytic Capacitor Market China 2007, the global
aluminium electrolytic capacitor market grew steadily by 2% to 5% per annum prior to 2001.
However, it declined by approximately 16% in 2001 due to the global economy recession. In
2002, recovery from the economic downturn led to a sustained recovery of global aluminium
electrolytic capacitor market which made a year-on-year growth rate of approximately 21%
and recorded a global sales turnover of approximately US$4,400 million. The recovery has
gained momentum in 2003 supported by the rising demand for consumer electronic products
and the global aluminium electrolytic capacitor market recorded sales turnover of
approximately US$4,620 million, representing a year-on-year growth rate of
approximately 5%, which accounted for approximately 30% of the global capacitor
market. In 2004 and 2005, the global aluminium electrolytic capacitor market remained a
steady year-on-year growth rate of approximately 4% and recorded a global sales turnover
of approximately US$4,805 million and US$5,000 million respectively. In 2006, the global
aluminium electrolytic capacitor market made a new record of a global sales turnover of
approximately US$5,300 million, representing a year-on-year growth rate of approximately
6%, and it is expected to further increase at a rate of approximately 7% to reach a global
sales turnover of approximately US$5,670 million in 2007.
The chart below sets forth the historical and forecasted figures for global aluminium
electrolytic capacitors sales turnover in terms of units from 2004 to 2007, which represents a
CAGR of approximately 7.9% for the period from 2004 to 2007.
billion units
240
205
200
220
190
175
160
120
80
40
0
2004
2005
2006E
2007F
Source: Research Report on Aluminium Electrolytic Capacitor Market China 2007
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INDUSTRY OVERVIEW
The PRC aluminium electrolytic capacitor market
(i)
The output of and demand for aluminium electrolytic capacitors in the PRC
In the PRC, more than 90% of the capacitor supply comes from aluminium electrolytic
capacitors, ceramic capacitors and film capacitors, and among others, aluminium
electrolytic capacitors contribute the largest portion. The chart below sets forth the
historical and forecasted figures for the output of and demand for aluminium electrolytic
capacitors in the PRC from 2004 to 2007, where the output and demand represent a CAGR
of approximately 8.7% and 10.4% respectively for the period.
120
100
80
60
40
20
0
Source: Research Report on Aluminium Electrolytic Capacitor Market China 2007
According to Research Report on Aluminium Electrolytic Capacitor Market China 2007,
as PC products and audio-visual products are becoming more popular, their main board,
display monitor and power supply device will stimulate the demand for aluminium
electrolytic capacitors. In addition, following the rapid development of technology, the
application area for aluminium electrolytic capacitors is broadened. As such, it is foreseen
that aluminium electrolytic capacitors will have a prosperous future.
(ii)
Global manufacturing of aluminium electrolytic capacitors tends to converge towards
the PRC
The PRC gains the preference of overseas aluminium electrolytic capacitor
manufacturers by virtue of the centralized manufacturing base for electronic complete
sets, low production cost, preferential tax policy and large labor force in the PRC. The
number of aluminium electrolytic capacitor manufacturers in the PRC has grown
significantly, with a number of Japanese, Taiwanese and Korean companies establishing
aluminium electrolytic capacitor manufacturing sites in the PRC. According to Research
Report on Aluminium Electrolytic Capacitor Market China 2007, the output of aluminium
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INDUSTRY OVERVIEW
electrolytic capacitors in the PRC amounted to approximately 86 billion units in 2006, which
is expected to increase to 90 billion units in 2007, representing approximately 42.0% of 2006
global output and approximately 40.9% of 2007 expected global output respectively.
(iii) Aluminium electrolytic capacitors in the PRC shows an import surplus
According to Research Report on Aluminium Electrolytic Capacitor Market China 2007,
the PRC is an important aluminium electrolytic capacitor manufacturing base as well as a
main consuming nation. The PRC exports a great quantity of aluminium electrolytic
capacitors as well as imports a considerable quantity of aluminium electrolytic capacitors to
satisfy domestic demand. As boosted by the booming end market in the PRC, new demand
and requirement have been raised for aluminium electrolytic capacitors from time to time.
However, small production scale and relatively low-grade products hinder indigenous
aluminium electrolytic capacitors’ manufacturers from meeting such demand.
Consequently, the PRC has to rely on import to meet domestic new demand and
requirement.
According to statistic figures released by the Customs of the PRC, international trading
in aluminium electrolytic capacitors has shown an import surplus from the standpoint of the
PRC since 2000. The import surplus reached a new record of approximately US$627 million
or 55.1 billion units in 2006. Moreover, growth of import of aluminium electrolytic capacitors,
in terms of US dollar, outpaces that of export for the period from 2000 to 2006. Such
international trading position displays strong domestic demand for aluminium electrolytic
capacitors.
The two charts below show the historical figures for export and import of aluminium
electrolytic capacitors in the PRC from 1999 to 2006, where export and import in terms of US
dollar respectively experienced a CAGR of approximately 14.2% and 33.2% for the period
from 1999 to 2006 while export and import in terms of units respectively experienced a
CAGR of approximately 10.8% and 17.3% for the period from 1999 to 2006.
100
1200
80
1000
800
60
600
40
400
20
200
0
1999
2000
2001
2002
2003
2004
2005
0
2006
2000
Source: China Customs Statistics Yearbook
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2001
2002
2003
2004
2005
2006
INDUSTRY OVERVIEW
Application of Aluminium Electrolytic Capacitors
Monitor, compact disc, color TV, power supply device and main board emerge as the
typical application of aluminium electrolytic capacitors. The chart below illustrates the end
market worldwide for aluminium electrolytic capacitors in 2005.
Source: Research Report on Aluminium Electrolytic Capacitor Market China 2007
According to China Centre of Information Industry Development, the increase in usage
of aluminium electrolytic capacitors in PC, home electrical appliances and communication is
benefiting from the rapid development of the products in converging sectors of computing,
consumer and communication. Whereas, the price of aluminium electrolytic capacitors
applied in these products has been subject to falling trend. The main reason is that the
production technology of aluminium electrolytic capacitors is approaching mature, and
manufacturers usually fight for purchase orders by cutting price as a result of fierce
competition. Nevertheless, these products still show strong demand for aluminium
electrolytic capacitors and the demand will continue to grow. The table below sets forth
the global output of main products in converging sectors of computing, consumer and
communication from 2004 to 2008, which shows overall high growth rates.
PC . . . . . . . . . . .
Laptop computer
Mobile phone . . .
Main board . . . . .
Digital camera . .
2004
2005
2006E
2007F
2008F
CAGR
(million units)
(million units)
(million units)
(million units)
(million units)
(%)
119
46
681
137
67
129
59
810
145
77
137
73
913
153
85
145
83
970
162
92
155
99
1,040
170
97
Source: Research Report on Aluminium Electrolytic Capacitor Market China 2007
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6.8%
21.1%
11.2%
5.5%
9.7%
INDUSTRY OVERVIEW
According to the Research Report on Aluminium Electrolytic Capacitor Market China
2007, consumption of aluminium electrolytic capacitors is relatively higher in traditional
home appliances, such as color TV and audio, which the demands are stable. Meanwhile,
aluminium electrolytic capacitors are experiencing stronger growth in computer and
communication areas. The table below sets forth the average numbers of aluminium
electrolytic capacitors required for the following products:
Consumption (unit) . . . . . . . . . . .
Pentium 3
main board
Pentium 4
main board
15–30
40–60
Display
15–118
Power
supply
device
10–32
Color TV
98
Audio
17–100
REGULATORY MATTERS RELATING TO THE INDUSTRY
According to the existing Catalogue for the Guidance of Foreign Investment Industries
of PRC, the aluminum electrolytic capacitors industry (including aluminum electrolytic foils)
is not categorised as a prohibited industry for foreign investment. As advised by the legal
advisers of the Company as to PRC laws, there are currently no laws or specific policies
imposed by the central government or local governments of the PRC to restrict foreign
investment in the aluminum electrolytic capacitors industry. However, since waste water,
exhaust gas and other waste materials will be produced during the aluminum electrolytic
capacitors manufacturing process which are hazardous to the environment, certain PRC
laws, regulations and policies are applicable to the production of aluminum electrolytic
capacitors. These laws, regulations and policies include:
—
Environmental Protection Law of the People’s Republic of China (中華人民共和國
環境保護法);
—
Law of the People’s Republic of China on the Prevention and Control of Air
Pollution (中華人民共和國大氣污染防治法);
—
Law of the People’s Republic of China on the Prevention and Control of Solid
Waste Materials (中華人民共和國固體廢物污染環境防治法);
—
Law of the People’s Republic of China on Assessment of Environment Impacts (中
華人民共和國環境影響評價法);
—
Law of the People’s Republic of China on the Prevention and Control of Noise
Pollution (中華人民共和國環境噪聲污染防治法);
—
Law of the People’s Republic of China on Prevention and Control of Water
Pollution (中華人民共和國水污染防治法);
—
Implementing Rules on the Law of the People’s Republic of China on the
Prevention and Control of Water Pollution (中華人民共和國水污染防治法實施細
則);
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INDUSTRY OVERVIEW
—
Measures on Administrative Penalty for Environmental Protection (環境保護行政
處罰辦法);
—
Measures on the Administration of Environmental Standards (環境標準管理辦法);
—
Procedures on the Administration of Environmental Protection on Construction
Projects (建設項目環境保護管理程序);
—
Regulations on the Administration of Construction Project Environmental
Protection (建設項目環境保護管理條例);
—
Provisions on Approval of Environmental Impact Assessment Documents
Concerning Construction Projects at Different Administrative Levels (建設項目
之環境影響評價文件分級審批規定);
—
Administrative Provisions on Completion Inspection Concerning Environment
Protection in Construction Projects (建設項目竣工環境保護驗收管理辦法); and
—
Interim Measures on the Administration of Water Pollutants Discharge Permit (水
污染物排放許可證管理暫行辦法).
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