<p><span lang="EN-US" style="FONT-SIZE: 12pt"><strong><font face="Arial">Industry Overview</font></strong></span></p><p> </p>

The global insulation materials market has immense growth potential as demand continues to rise.      

The insulation materials market has immense growth potential. China, for example, produced insulation materials worth RMB11.9 billion in 2007, a 72.0% growth as compared with 2006. The booming Chinese economy and increasing number of sophisticated electrical apparatus produced in China have fuelled the growth of the insulation materials market and the use of such materials in China. Also Southern China is a renowned manufacturing base for a variety of electrical appliances. It has seen continuous growth in domestic demand for household electrical appliances, growing at the CAGR of 16.3% from RMB$473.6 billion to RMB$866.5 billion between 2003 and 2007.

In overseas markets, import of household and kitchen appliances from China by the US had grown from US$4.6 billion in 2003 to US$9 billion in 2007, representing a CAGR of 17.8%.

Meanwhile, Silicone rubber insulation materials are the latest generation of insulation materials used in high pressure electricity transmission equipment. Application of silicone rubbers in critical high-temperature resistance parts and components such as electric wires, signal cables and protectors will expand notably. It would be proven by the following statistics:

–        In 1998, the total market value of silicone rubber components used in electric cables was less than RMB50 million. In 2007, the amount increased to RMB1,330 million, translating into an average annual growth of approximately 40%.

–        The annual production value of silicone rubber insulation materials in 2010 is estimated at RMB1, 940 million.

Instead of these rapidly growing, the demand for fibre-glass insulation materials has been steady. They are principally used in household electrical appliances instead of large-scale sophisticated electrical apparatuses. The annual growth rate of the fibre-glass insulation material market in China is expected to be around 12% to 16% between 2008 and 2010 and the annual production value is estimated at RMB7,300 million in 2010.