Shanghai's rising tide of prosperity

I climbed into the Zhangjiang Hi-Tech Park shuttle van going back to downtown Pudong and heard what I thought to be a local guy switching from fluent Mandarin to California-accented English. "You didn't learn to speak like that around here," I said. He laughed and replied that he grew up in San Francisco and worked for the Chinese company, Global Advanced Packaging Technology (GAPT), which I had just visited. As we chatted during the ride, he described Shanghai as "the only place in the world where you can see 5000 years of culture, then turn around and see 5 minutes of culture."

If we stretch those 5 minutes out to 10 years or so, the rate of economic growth in China's largest city has been phenomenal. The entire Pudong side of the busy Huangpu River, which divides old and new Shanghai, was little more than rice paddies and villages a decade ago. Now a sci-fi skyline soars over the bustling downtown core, and a few kilometers farther east the tech park has 564 contracted projects at last count, with more on the way.

Besides the pharmaceutical, biotech, and software firms located there, close to a hundred semiconductor-ecosystem companies play in the park, ranging from emerging foundry powerhouse Semiconductor Manufacturing International (Shanghai) Corp. (SMIC) to the sales and service offices of dozens of suppliers. GAPT's new plant, its lobby full of celebratory bouquets and its production floor sporting rows of brand-new back-end equipment, had its grand opening the day after my visit. Across the street, Ace Semiconductor was a couple of months away from ramping production in its impressive high-capacity wafer-level packaging plant. Around the corner, Grace Semiconductor was bringing tools in to its massive fab complex in hopes of getting wafers out the door later this year.

Another glittering temple to market economics, a brand-new airport, lies on the outskirts of the newly developed area. The wide boulevard heading back toward town doesn't have much traffic yet, and billboards promoting a prosperous present and an even more glorious future pop up alongside the road. The air terminal is also connected to central Pudong by an elevated monotrack—the world's first commercial magnetic-levitation train (developed with the Germans) will soon begin daily 450-kph service.

The relentless pursuit of commerce stretches from the street to the suite. Within seconds of exiting my hotel, throughout the shopping districts, and even on the Semicon show floor, vendors selling knockoff watches approached with a persistent "hello, Rolex?" Despite China's accession to the World Trade Organization, copycat and other fake-label goods still abound, especially in the cramped stalls of Shanghai's bustling street markets. Bootleg DVDs and CDs of Oscar-nominated films and Grammy-winning albums could be had for less than a buck a pop, while patent-challenged watches, pens, jewelry, clothing ("North Face" parkas were especially popular), and other relatively cheap consumables were also plentiful.

During many of my inexpensive, white-knuckle taxi rides, I saw dozens of major residential, business, and infrastructure construction projects. In the older sections of town, soaring skyscrapers often rose between rundown domiciles where steaming refuse was piled outside and laundry hung on clotheslines. You could fit all the building sites of Las Vegas's boom years into a small corner of what's happening in Shanghai. The regional and central governments want to make the city one of the world's great commercial centers. To achieve this heady goal, they are spending billions on roads, subways, and other public works, as well as encouraging the kind of massive foreign investment that has helped fuel the semiconductor boom.

Several local and expatriate industry people I spoke with questioned how the Chinese will actually pay for all the development when the bills come due. Many of them also wondered when the rising tide of prosperity will flow to the vast majority of the country's 1.3 billion people. Despite the possibility that the whole thing could come tumbling down like a house of cards, they maintain a bullish outlook on China's chipmaking future.

(For more about my recent visits and conversations with key players in the Chinese semiconductor realm, stay tuned for a special report in the June issue of MICRO.)