China goes for IT

The tower blocks and building sites of the instant city of Shenzhen loom over a theme-park model of Beijing's Tiananmen Gate and Square, scene of the 1989 pro-democracy demonstrations. Clive Akass visited motherboard maker QDI in the 'special economic zone' next to Hong Kong.

You could say it all began with Britain's battle for drugs. In the late 18th Century British merchants were having trouble doing business with China. This was partly because of restrictions on foreign traders, but mostly because they couldn't offer much that the self-sufficient Chinese wanted - until they tried Indian opium.

An alarming proportion of the population became hooked and the Chinese ruler banned the trade. War broke out when a British opium boat was stopped and in 1841, as part of the peace settlement, Britain gained the island of Hong Kong.

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These events still rankle with the Chinese, not unnaturally, although it must be said that attitudes to opium were different in those days - the Victorians, unaware of the perils of addiction, used the drug to quieten children. Now Hong Kong is back in Chinese hands, and the Chinese are keen to trade with the West. Indeed as you enter teeming Hong Kong it seems as if all 1.3 billion Chinese are bursting out to do business.

But even this beautiful harbour city is upstaged by Shenzhen, just across the border in mainland China. Barely two decades ago this was little more than a fishing village. Then China decided to make it the centre of a special economic zone, a buffer between the post-Mao masses and the capitalist salient of Hong Kong.

Shenzhen is now home to more than four million people and mile upon mile of skyscrapers - just about everywhere you look there are more going up. If you see a product marked 'Made in China', the chances are that it has been made in or round Shenzhen. Such is the demand for nimble-fingered labour that, with immigration from greater China controlled on the basis of need, there is a preponderance of women in the area. But claims of a ratio of seven to one are more male fantasy than counting; the reality is nearer six to four.

In the heart of Shenzhen City is the headquarters of China's top-selling PC maker Legend. This is not yet a big name in Europe despite having revenues of $2.5b. There is a fair chance the motherboard in your PC was made by its subsidiary QDI, which invited myself and a group of other IT journalists over to take a look.

Motherboard designs and roadmaps are dictated to a large extent by the big chipmakers; but Steven Wan, general manager of QDI's R&D centre at the Legend HQ, is proud of several innovations made by his team. QDI claims to have created the first jumperless mainboard, back in 1996. In 1999 it introduced a Bios-level quick recovery feature that backs up system files on a hidden section of the boot disk; and it has reduced boot-up time to six seconds on its latest boards, which is about as long as it takes for a hard disk to spin up to speed. Another feature, Stepeasy II, allows overclockers to tweak systems through software, adjusting voltages and processor speed via a friendly Windows interface, which also provides alerts when the temperature rises.

QDI boards and Legend PCs are put together on a company campus about an hour's drive from the city. The young women who check, assemble and double check the boards and systems earn just over £100 a month, working eight hours a day, five days a week. For some of them, we were told, the eight hours is spread over 12 hours a day.

QDI workers inspect motherboards for defects

The pay is low by European standards, but this is an elite labour force, the pick of technical-school leavers across the country, and they get company accommodation. Compare their lot (if you can) with that of the peasants of old China who can still be glimpsed working the paddy fields amid the endless blocks and building sites along the road from Shenzhen city.

With a low wage bill, low taxes, and the safety net of the world's largest home market, you'd think that Legend can't go wrong. But the company faces growing competition from Taiwanese vendors which have begun to target the mainland. And then there are the problems familiar from other emerging economies.

'In Europe we have to sell on quality. In China they only look at the price,' said Adams Xu, QDI business general manager. He reckons there are around 200 other board makers in the area, some of which are concerned only that a product lights up when you switch it on. 'They don't care how well it works or how long it is going to last,' he said.

(This reminded me of trying to buy a pen in India at a time when its home industries were heavily protected. After trying three that failed to write, I remarked that I'd prefer one that worked. 'Ah, you want best quality,' said the shopkeeper.)

But competition will soon filter out bad players and put pressure on the good. The big Taiwanese companies are capable of competing on both price and quality and are designing low-cost PCs specifically for China, setting a trend that could bring computer prices in the West to the level of a cheap TV.

Legend is not afraid of competition. It has started selling PCs and notebooks into Hong Kong, in what its representative says is a 'test bed for a global presence'. So you may yet see Legend PCs on sale here.

Where China is heading is anyone's guess, and the environmental impact of a consumer revolution there does not bear thinking about. But whatever happens, you can bet that Hong Kong and its instant twin city of Shenzhen will be in the thick of it.

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