Orange County’s exports to China have more than quadrupled in the past decade, putting the country on par with Japan as a market for goods made here, according to a recent report from California State University, Fullerton.
Skyrocketing development, a growing middle class and easing restrictions on trade have China vying for the No. 3 spot among the county’s biggest export markets.
China now ranks fourth after Canada, Mexico and Japan.
The country has become a major market for local companies in a short amount of time.
In 2000, shipments to China were about $370 million and made up 2% of the county’s exports, according to a study released earlier this month by the Institute for Economic and Environment Studies at Cal State Fullerton.
By 2008—the most recent federal data available—the share of local exports going to China had grown more than four-fold.
They reached $1.8 billion, or 9% of all local exports, in 2008.
After the global economic downturn, exports to China this year are projected lower at $1.5 billion. But the country has held up better than others as China still accounts for 9% of local exports.
“The most noteworthy development of this decade … has been the spectacular rise in trade volumes between Orange County and Asia,” said Mira Farka, an economics professor who co-authored the study of local exports based on federal data.
The county’s exports have grown on the back of China’s steady economic growth, which “has proven very resilient,” Farka said.
China’s $9 trillion economy is on track to grow more than 9% this year. In 2009, while the U.S. economy shrank, China’s grew 8.7%
Japan, long a top market for exporters here, has been on the wane.
Local exports to China are expected to overtake shipments to Japan in the next few years, according to Cal State Fullerton.
Japan still is the county’s biggest Asian export market, followed by China and South Korea. But the overall share going to Japan has fallen from about 12% in the early 2000s to about 9% this year.
“China’s economy surpassed Japan’s economy in terms of size late last year,” said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. “As their economy is getting bigger, clearly they will buy more from overseas.”
Electronics are a key local export, and China’s computer and consumer electronics factories are big buyers.
“The China market is very important for us,” said Russell Garcia, vice president of sales and marketing at Irvine-based chipmaker Microsemi Corp.
A lot of Microsemi’s chips that go into consumer electronics get sent to China and assembled into digital TVs, laptop computers and industrial motors, he said.
Big development projects also are driving demand for Microsemi chips, according to Garcia.
“At the beginning, China was a place where you went and did assembly only for consumer products,” he said. “But now China is building up its own infrastructure and its own industrial capabilities.”
Microsemi, which sees about $520 million in yearly sales, doesn’t break out revenue by country.
Sales to China are “one area we expect to grow over years to come,” Garcia said.
Networking Boom
The growth of broadband Internet and other computer networks in China has been a boon to Newport Beach chipmaker Mindspeed Technologies Inc.
In 2008, China surpassed the U.S. with the largest number of Internet users. Estimates peg some 375 million Chinese will become Internet users by 2012, Mindspeed Chief Executive Raouf Halim recently told analysts.
Mindspeed’s chips are used in routers, switches, gateways and other equipment found in corporate networks and networks that span parts of cities.
The company’s seen a big boost in sales from large contracts with networking gear makers in Asia for its chips that convert phone calls to digital signals so they can be sent over fiber-optic lines.
“We have invested and done a really excellent job on growing our business with a particular emphasis on China and Japan,” Halim told the Business Journal in an earlier interview. “It’s paid big dividends for us.”
Sales to China make up about half of Mindspeed’s $200 million in yearly revenue.
Its biggest customers are large networking companies, including China Unicom Ltd. and Huawei Technologies Co., as well as Japan’s Nippon Telegraph and Telephone Corp.
Santa Ana-based circuit board maker TTM Technologies Inc. made a big bet on China with its April buy of Hong Kong’s Meadville Holdings Ltd. for $521 million.
The Meadville deal promises to double its sales and gave TTM seven plants in China and another 13,000 workers.
The acquisition also puts TTM in a position to serve fast-growing markets and get about three-fourths of its projected $1.2 billion in 2010 sales from Asia.
That’s because the Meadville operations—in addition to making run-of-the-mill, relatively low-priced printed circuit boards—also make specialized ones that go into consumer electronics such as touch-screen tablet computers and feature-rich smartphones.
Roughly a quarter of its printed circuit boards—which are loaded with chips and built into other electronics—are exported to China and other parts of Asia, spokesman Clay Swain said.
China being home to many of the world’s contract electronics manufacturers makes it a big market for board and chipmakers alike.
TTM’s sales to China have been increasing because “there’s still demand for the inexpensive labor,” Swain said.
