September 12, 2007 -- On August 24 NEC Electronics (China) announced the opening of a new office in Chengdu. On the same day, the company also announced it will set up a development center with Sichuan Changhong Network Technology, the subsidiary of Changhong, the world's largest TV manufacturer.

The company already has two offices in China - one in Shanghai and another in Shenzhen - which both opened in 2005. NEC also has regional headquarters in Beijing and Hong Kong, bringing the total number of sales points in the greater China region to five.

"The offices in Shenzhen and Shanghai are focused more on marketing, while the new office in Chengdu, at the initial stage, will put more emphasis on technical support for cable TV set-top boxes and other digital audio visual products," Zheng Li, vice president of NEC Electronics (China) told Emerging China.

The new office in Chengdu is the first step of NEC Electronics China's three-year expansion plan, which started this year. It will set up its China sixth office by the end of the year

"We are deciding between Dalian and Qingdao," said Zheng Li. Both cities are located in the north-east of China.

In 2006, the company saw 50 billion yen (US$432 million) in sales within China. "We plan to double China sales to 100 billion yen (US$863 million) by 2010," said Zheng Li.

"One of our reasons to locate our new office in Chengdu is to get closer to Changhong," said Zheng Li. "In addition, we will not exclude contact with other set-top box manufacturers in Sichuan, like Jiuzhou, which is also one of the biggest set-top box manufacturers in China."

Digital AV is one of the four focus areas in NEC Electronics China's expansion plan.

The Chinese government is planning to switch all analog television transmission to digital in 2015, and set-top boxes are essential for this change.

According to CCID Consulting, a Beijing-based research firm, China produced 54 million set-top boxes in 2006 (This figure does not include boxes used for receiving internet television). Coship, a Shenzhen-based set-top box maker ranked first with production of five million set-top boxes. Jiuzhou is the second with four million, while Changhong ranked the third with about three million.

"There are almost no local companies that can produce the core chip for the set-top boxes," said Shuchong Li, general manager of Semiconductor Industry Research Center at CCID Consulting. This means that few Chinese set-top box manufacturers own the core technology. So most the chips inside set-top boxes produced in China are supplied by foreign companies."

The biggest chip manufacturer is ST Microelectronics which is the world's fifth largest semiconductor manufacturer. According to CCID Consulting, in 2006, its market share in China's decoder chips, the core chip in set-top boxes, was about 35 percent. NEC Electronic China ranked eighth with 4 percent.

"Exchanging technology for market share, said Li. "This is the normal model for most Chinese producers who don't own their technology. All they have is the market; while with those foreign enterprises it is the opposite. That's why NEC Electronics cooperate with Changhong Network Technology: NEC could provide some technology for Changhong to ensure the market share."