Founded on July 17^th 1997, Huahong NEC Electronics Co., Ltd. is one of the most advanced manufacturers of integrated circuits in China, whose production line of eight-inch processing commission is the first of its kind in the country. The company was formed with a capital totaling USD1.2 billion jointly invested by Shanghai Huahong (Group) Co., Ltd., Japanese NEC, US Jazz Semiconductors Co., Shanghai Huahong International, Shanghai Belling Co., Ltd., and Shanghai Zhangjiang (Group) Co., Ltd. Its headquaters is located in Jinqiao Export Processing Zone in Pudong, Shanghai.

Time passed quickly. Seven unusual years elapsed when Huahong NEC, which had undertaken the construction of the nation’s important 909 semiconductor project, made great endeavors against difficulties and responded steadily to the opportunities and challenges posed by both domestic and international markets. The project was completed and put into operation seven months ahead of schedule, and the designed production capacity attained five months earlier than planned. With technology upgraded by three levels, getting close to the world’s mainstream level, the company was exceptionally successful in increasing exports and foreign exchange earnings, greatly enhancing the development of the integrated circuit industry in Shanghai and the whole country. It has now become leader of the industry on China’s mainland, and ranks the seventh among the world’s processing commission enterprises. The success was neither easy nor accidental. It was the result of both elaborate company planning and the untiring efforts of all staff and workers under the care and support of the CPC Central Committee and governments at all levels.

Making an Opportune, Proper Decision

July 1997 saw a global depression on the semiconductor market when Huahong NEC was just founded. Many construction projects were stopped halfway while some world-famous semiconductor manufacturers sharply cut their production. On taking stock of the unforeseeable international market, the company made a bold decision to complete the construction of the production line and put it into operation ahead of schedule. Based on a careful analysis of the periodic changes of the world semiconductor market, it was believed that, by long-term development strategy, investments made and construction projects undertaken at the time of market depression were as much as preparations done for the next boom, for a temporary depression would certainly give rise to a new technique and a new boom, and the world market was most likely to recover in the second half of 1999. Thus, instead of stopping the project, the company quickened its steps of construction, daringly undertaking both civil construction and equipment installation and trial at the same time by dividing the entire project into several phases, which had been unusual for State-run enterprises. Work on the project was completed seven months ahead of schedule as a result of the concerted efforts of all Chinese and Japanese constructors who worked day and night on the site, overcoming numerous difficulties. The entire project was done with speed, quality and safety, with the complex and wing buildings winning the honor of “Model Construction” and the workshop awarded the “Luban Prize”, the highest honor for architectural projects in China. No serious accidents ever happened during the construction, and investment was strictly controlled within budgets. Meanwhile, changes and development of the market fully justified the company’s decision. The world semiconductor market increased by 17% in 1999, and by 20% in the first half of 2000. Profits were gained in the first year of the company’s operation. It was the precious seven months that gained the company a good business opportunity to make access to the international market.

Finding a Superior Cooperation Partner

Of a number of overseas businesses, Japanese NEC, listed among the top 500 in the world and leader of the world’s semiconductor industry, was selected as overseas partnership in the 909 project. The integrated circuit industry is new and highly technological, whose technology and part of whose equipment are strictly controlled by government export regulations. NEC obtained the export license for its technology after repeatedly approaching the Japanese government. In the process of construction and operation, NEC not only sent its qualified staff at all levels on long-term service as had been planned, but also organized an all-round supporting committee for the project to regularly investigate and solve problems on the site, and send short-time advisors to Shanghai as occasion demanded. In the transfer of technology, it fulfilled the contract by painstakingly organizing and arranging for Chinese employees to receive unreserved training in Japan. The friendly cooperation between the Chinese and Japanese sides led to the successful launching of the first production line in China of eight-inch silicon chips and 0.35-0.25-micon tech chips. Products processed or manufactured by Huahong NEC, such as all kinds of logic circuits, mixed signal circuits and memories, are widely used in telecommunication equipment, electronic consumer goods and computers, including ID cards, SIM cards, LCD drives and digital cameras, demonstrating the company’s power in sharing the market and the leading position it always takes in the silicon chip market on China’s mainland.

Acquiring a Commanding Technological Position

Since it was developed, the integrated circuit technology has been growing at the speed of doubling its degree of integration on an average of every 18 months and raising the technological level by one grade every two to three years. Technology is the accelerator of company development, whose advancement has always been placed at a critical position in a company. Great efforts were made by all sides to introduce and learn from the world’s advanced technology, so as to ensure that the company holds a commanding position in technology. That approved earlier by the State Council in the Project Proposal of eight-inch silicon chips and 0.5 micro chips was improved at the time of production to 0.35 micron through concerted efforts within the company, shortening a 10 to 15 years’ distance behind of China’s technology and catching up with the world’s advanced level in one stroke. In June 2000 the 0.24 micron technology was brought in, and the technological level of the whole production line was raised to 0.24 micron, with the manufactured products improved from 64M SDRAM to 128M SDRAM. Though ranking among the world’s technological leaders, the company never holds up in its development.  

 Moving towards a Complete processing commission Enterprise

After 2001, the international semiconductor market began to experience a depression rare in history. The world’s sales volumes were down by 30% over the previous year. Upon a comprehensive study of the market situation as well as its own characteristics, the company proposed resolutely to move from a manufacturer of the single DRAM products towards a flexible, market-oriented processor that would serve both domestic and foreign markets. By the end of 2002, DRAM processing had been lowered to 50%, and by the end of 2003 to 10%. Customer geographical distribution widened from only Japan to various provinces and cities in China, including Taiwan, and countries like South Korea, the United States, etc. The semiconductor industry, however, is always developing fast. Without advanced technology and sufficient production capacity, the company would lag behind and fail to hold its ground in the fierce market competition. Thus, it started the self-centered new strategy in August 2003 and succeeded in bringing in the investment by the US Jazz Semiconductor Co. to reinforce its own capital, and at the same time absorbed the digital, analogue and RF CMOS technology for 0.25-0.18 micron compatible processing commission chips provided by the latter. Meanwhile the 0.13 micron technology was developed through cooperation between the company and Shanghai Integrated Circuit Research and Development Center, which contributed to the further upgrading of the technological level of the chip production line, enhanced the company’s competitiveness in semiconductor processing, and strengthened its leading position in the industry, enabling it to gain access to local and international markets for higher-grade telecommunications products. With the expansion of market and customer population, the company stepped up its 40K production project while at the same time started merging with the Beiling Zhangjiang production line, so as to gain precious time for Huahong NEC to expand its production sooner to meet the customers’ demands. In June 2004, an approval was issued by the Department of Commerce for new foreign-invested enterprises, and Beiling Zhangjiang officially became a new shareholder of Huahong NEC, turning the Beiling Zhangjiang production line into the second workshop of Huahong NEC, making it possible for the latter to further increase its product variety and production capacity, and upgrade its technological level in the future.

Improving Efficiency through Scientific Management

Combining modern management ideas and patterns with the management practice in Chinese enterprises, the company, a mix of Eastern and Western cultures, has formed a unique management philosophy and pattern and set up a team specializing in management, administration and technology. Giving priority to the needs of customers and the community, the company has been making efforts to seek sustained development that benefits all the three sides – the company itself, the customers and the community, and persist, by adopting the world-approved, professionally certified and strict management system and scientific management approach, to ensure the quality of business and service and effective utilization of resources. It has been successively awarded the ISO9001 quality control certificate, ISO14001 environment control certificate and BS7799 information security certificate. Strictly carrying out the system of general-manager accountability under the leadership of the board of directors, the company has created a well-knit management institution that features clear-cut rights and responsibilities and effectively defined and organized working procedures, with which everyone, from the general manager to all employees must fit in. Moreover, the company makes particular efforts for coordination and balance. While constantly improving its service and response mechanism for the outside by streamlining the flow of business activities and smoothing communications with old and new customers to make the win-win cooperation more stable, it consolidated the operational and managerial setup within by rationalizing production cycles to satisfy the needs of old and new customers at home and abroad in all aspects, including product rate, time of delivery, etc. in an effort to maximize its operational value. It is on the basis of strict, scientific management that the company is always on the momentum of development, with the product rate rising steadily and productivity reaching new highs again and again. For a succession of years it has achieved the State and municipal special honors for contributions to foreign trade and foreign exchange earnings. 

Fostering Personnel over Construction

Steady and high-caliber personnel is also an important resource for the development of an integrated circuit enterprise. The past success and future development of the company both depend on a team of technical and managerial personnel. Following its constant policy of “fostering personnel over production line construction”, the company has made great efforts to bring in qualified people from overseas, turning a number of talented people from large, famous semiconductor companies at home and abroad into its technical and managerial backbones, while at the same time training and promoting its own employees. It is this team of returned talents with years of technological and managerial experience in the international semiconductor industry that has ensured the transfer of the company’s management rights from a team made up chiefly of members sent from Japanese NEC to a Chinese team chiefly formed of returned students and local people. Currently undergraduates make up 47.3% of the company’s total number of staff, and employees with masters’ or doctors’ degrees account for 8.6%. Of the 200-odd executive managers and engineers, over 30 are returned students.

Huahong NEC, as it is completed and put into operation, has far-reaching influence on the development of China’s integrated circuit industry, bringing China’s integrated circuit technology into the world’s mainstream (ASIC), and fostering a high-level team of technological and managerial personnel. It has made positive contributions to the development of China’s information industry by improving the investment environment for the country’s integrated circuit industry, stimulating the initiative of overseas businessmen in making investment in Chinese integrated circuit enterprises, and upgrading the level of the industry’s development in China. The company is now aiming still higher with surer and more vigorous steps.