China Market Insider China Seeks Independence from Industrial Gas Giants

Related Vendors

Asia Waypoint

TURCK GmbH

Maag Pump Systems AG

TRM Filter d.o.o.

For many years, industrial gases were bought in China from Linde and its competitors Air Products and Air Liquide without thinking much of it. But now Linde & Co. and their market power are suddenly seen as a problem in the People's Republic.

Beijing/China – The Ministry of Industry and Information Technology (MIIT) and several other ministries held a coordination meeting on industrial gases at the beginning of the year. There were talks of ‘choke points’, i.e. dangerous bottlenecks, andfreeing the Chinese industry from foreign monopolists, reports the financial newspaper Shanghai Zhengquan Bao.

The reason for this fundamental change in sentiment is the trade war between Washington and Beijing. Ever since former US President Donald Trump started slowing down China's economic rise with the help of trade boycotts, all the warning lights have switched on at once at the headquarters of the Chinese Communist Party.

Because high-grade industrial gases in particular are also needed in the production of computer chips and other electronics, the party is now demanding‘domestic substitution’ not only for semiconductors but also for industrial gases. In other words, foreign producers in all key industries should be replaced by domestic Chinese producers as soon as possible in order to prevent further political blackmail from abroad.

Publicly available statistics show that the “market for electronic gases is almost 80 % controlled globally and almost 90 % in China by the international giants Linde from Germany, as well as Air Products and Chemicals from the USA, Air Liquide from France and Taiyo Nissan from Japan”, writes the financial newspaper in a warning tone.

As can be seen, Linde is still predominantly perceived as a German company in China, even though Carl von Linde’s grandchildren moved the headquarters of their ‘Linde plc’ to Dublin and their operational headquarters to Guildford in the UK after their last international merger with Praxair. But that doesn't really matter — not only Linde, but all foreign suppliers of industrial gases have recently been seen in Beijing as part of a problem that needs to be solved.

In the ‘Stranglehold’ of Foreign Giants

The topic of which special gases for the production of integrated circuits or high-quality screens can already be produced in China and at what percentage has dominated the reporting of the Chinese trade media for months. It sometimes has features of self-flagellation when experts repeatedly invoke their home country's dependence on the ‘stranglehold of foreign giants’ over gas for industrial gases.

“Of the fifty or sixty most important speciality gases, our localisation rate has reached less than a third,” the Shanghai financial newspaper quotes Bai Jiu, the former head of the electronics division of Linde Group China, who has apparently now also discovered his patriotic streak. However, Bai Jiu also provides a reality check for all central planners who dream of a rapid replacement of Linde & Co. by domestic manufacturers. Due to inferior technologies and equipment, the “competitiveness of domestic suppliers of electronic gases is still relatively weak”, Bai Jiu is quoted by the newspaper.

Now, however, money is being poured into the development of Chinese capacities, and a lot of it. The ‘IC Big Fund (II)’, China’s state investment fund to build a Chinese semiconductor industry as quickly as possible, is also investing in companies in the upstream supply chains of chip production. Chinese manufacturers of performance materials and speciality gases have recently started receiving strategic investments.

The Chinese state has also recently been spending more money on R&D in industrial gases. Chinese specialty gas companies ‘such as Huate Gas and Jinhong Gas have finally taken the lead in breaking the technological monopoly of the foreign giants’, China’s media may therefore cheer.

For example, Huate Gas in the southern province of Guangdong, a Chinese company with an annual turnover of the equivalent of around 68 million dollars in the field of industrial speciality gases alone, has already “achieved the domestic substitution of 20 different products such as hexafluoroethane and trifluoromethane with a high degree of purity, lithography gases, particularly pure carbon tetrafluoride or octafluoropropane”, Chinese media applaud.

Chinese Gas Market Growing Rapidly

Since not only the petrochemical industry, but also the electronics, photovoltaic and healthcare industries are growing rapidly in the People's Republic, the forecasts for demand of industrial gases are very optimistic. Between 2010 and 2018, the market for industrial gases in China grew at an annual rate of 16 %, much faster than the global market (around 9 %), writes the ‘Dongxing Chemical Industry Insights’. Growth has slowed slightly, but will continue to reach around 10 % per year in China in the coming years (compared to around 7 % – 8 % in the global market), the trade publication writes.

It can be assumed that the international industrial gas groups, above the global market leader Linde, will continue to profit from this development for a while. How much longer, however, has recently become unclear.

Chinese competitors such as the Yingde Gas Group in Shanghai or Hangyang (Hangzhou Oxygen Plant) are ready to take on more and more orders from Chinese state-owned companies. In the field of speciality gases for the electronics industry, too, there are more and more Chinese companies that have recently “replaced imports”, among them Jiangsu Nata Chem, writes Dongxing. Competitors such as Jinhong Gas or Jiangsu Yoke Technology are also investing heavily in the business with high-quality industrial gases.

* Henrik Bork, former China correspondent of the German Süddeutsche Zeitung and the Frankfurter Rundschau, is Managing Director at Asia Waypoint, a Beijing-based consulting agency. ‘China Market Insider’ is a joint project of the Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

(ID:47486430)