Components shortages from the aftermath of the March 11 Japan earthquake and tsunami have affected the production of many electronics manufacturers, who have since been re-aligning their supply chains to look for alternative sources of key parts and materials. China, the largest producer of electronic products in the world, has undoubtedly been hit by this problem, on top of other issues like labor shortages and rising costs especially in the coastal regions. Compounding all this is the fact that a majority of Chinese companies are of low profit margins as they are largely engaged in low value-added production, and lack their own proprietary designs and technologies. In order to increase the competitiveness of the local electronics industry, the Chinese government has targeted it for upgrade during the 12th Five-Year Program (FYP) period from 2011 to 2015. This will enable the whole industry will move further up the value chain and increase technology innovation. Efforts will also be made to develop software design and by taking greater steps forward into next generation information technology, the landscape of China's electronics industry looks set to change significantly in the next few years. This augurs well for the electronics assembly industry, which will see greater demand for advanced electronics suppliers and solution service providers. To implement the FYP, the Chinese government has offered tax incentives to facilitate development of software and design and manufacturing of key components and integrated circuits in the country. Opinion has also been issued to foster imports of some other key parts, components and equipment in a bid to assist development of new strategic industries. In this environment, electronics players, especially those in the mature clusters, will be induced to upgrade their operations. A noticeable development is that companies in the coastal regions have started to utilize automation in order to cope with labor shortages, while undertaking more sophisticated and higher precision processes to increase the value of their services. Measures in the FYP are expected to encourage further development in the next few years, boding well for suppliers of automation products and equipment as well. As Chinese enterprises engage in more design-intensive activities for various advanced electronic devices and technological areas, their demand for relevant technology applications, solutions, chipcset designs and a wide range of precision parts and components will increase. This will create further opportunities for high technology electronics suppliers and service providers toexplore the next stage of China's industrial 'evolution'. | 
