China Is Red Hot

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So this is where all of the jobs are going.

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SEPTEMBER 17, 2003

China Is Red Hot

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China has become a key focal point for telecom suppliers. Despite a range of pitfalls, vendors are pouring money into furthering business with China's leading carriers, even as they continue to cut costs back at their Western headquarters.

Here's a sampling of recent developments:

Yesterday, Nortel Networks Corp. (NYSE/Toronto: NT - message board) announced plans to invest $200 million over the next three years in new and improved R&D facilities in China (see Nortel Beefs Up China R&D ). To put things in perspective, Nortel spent $968 million on worldwide R&D for the first half of 2003. Nortel will start its new push in China with a 55,000-square-meter campus in Beijing, half of which will be completed by the end of 2004.

Nortel plans to double its roster of R&D employees in China to a planned census of 800 by the end of 2003. At the end of 2002, Nortel had 10,000 R&D workers worldwide. Nortel already has three R&D centers and five manufacturing/service-support divisions in China. Nortel CEO Frank Dunn said in a prepared statement that the R&D will apply to "IP-based voice and multimedia services, third-generation {3G) wireless services, next-generation networking, and other leading-edge telecom solutions."

On August 27, Alcatel SA (NYSE: ALA - message board; Paris: CGEP:pA) announced it's spending $100 million on R&D in China this year. A "significant" portion of that is going toward developing 3G wireless technology. Alcatel also will increase investment in 3G wireless infrastructure.


Today, Redback Networks Inc. (Nasdaq: RBAK - message board) announced a nonexclusive partnership agreement with ZTE Corp., one of China's biggest integrators. This deal calls for ZTE to market and distribute Redback's SMS edge routers througout Asia, with a particular focus on China. Terms of the deal weren't disclosed (see {doclink 40229}). Redback has other reseller arrangements in China, but this is a step up, says spokesman Steve Schick, because ZTE is not only able to resell and support Redback's gear, it also has its own distribution network to bring into play.

Also today, Infineon Technologies AG (NYSE/Frankfurt: IFX - message board) opened a new headquarters for Infineon China in Shanghai (see Infineon Expands In China ), vowing to double its share of China's semiconductor market from 5 to 10 percent and to make its China subsidiary one of the company's largest. "It is extremely important for the success of Infineon to be involved in this fast-growing market," said CEO Dr. Ulrich Schumacher in a prepared statement.

The news above is just the tip of an iceberg that's been building for the past couple of years. Nortel, for instance, views China as a key area of telecom growth (see Nortel's Summer Abroad ). Its new R&D investment is only the latest of a long string of projects, including a large joint venture company, Guangdong Nortel.


Alcatel, via its subsidiary Alcatel Shanghai Bell, has become one of the four top sellers of telecom gear to carriers in China. According to market research firm iSuppli Corp., Alcatel Shanghai, along with Huawei Technologies Co. Ltd., UTStarcom Inc. (Nasdaq: UTSI - message board), and ZTE, account for 75 percent to 80 percent of carrier equipment sales in China.

China has several big attractions for telecom providers. It's a big market: According to iSuppli, sales of wireline carrier hardware in China will total $3.6 billion in 2003, about 7 percent of the worldwide revenues. China's wireless figures are even more impressive: iSuppli says sales of base stations and switching hardware in China will total $3.1 billion in 2003, almost 13 percent of worldwide revenues.

China's telecom markets, particularly in the areas of wireless and broadband access, are also growing faster than those elsewhere. Even in a down year, when revenues were affected by SARS and a general capex malaise (see Asia/Pac Carriers Pull Back ), leading carriers such as China Telecommunications Corp. (NYSE: CHA - message board) and China Unicom Ltd. have impressive numbers.

China Unicom, which specializes in wireless services, reported more than 80 percent year-over-year growth in operating revenues for the first six months of 2003 on September 10 (see China Unicom: Revenue Uplift ). China Telecom, which does wireline services only, showed growth on a lesser scale, reporting RMB39.536 billion (roughly US$4.7 billion) in operating revenues for the first six months of 2003, up 7.2 percent year over year. China Telecom's EBITDA margin was 58.3 percent; its net profit, RMB9.26 billion (roughly US$1.1 billion). Net profit margin was up 23.4 percent.

Figures like those are drawing attention. And there are other motivators. Analyst Jagdish Rebello of iSuppli says Chinese carriers are pushing vendors to invest in local manufacturing and R&D if they want to keep the flow of contracts coming.


Then there's the issue of lower personnel costs. "There's lots of engineering talent in China that costs about a tenth of what it does in the U.S.," says iSupply principal analyst Steve Rago. In his view, Alcatel, Nortel, and others are looking for labor savings. In addition, workers who trained on jobs in North America and Europe are finding themselves out of work, opting to return to China. These folk present a tempting alternative to paying higher salaries elsewhere.

The vendors don't acknowledge this aspect of their China campaigns -- not openly, anyway.
Infineon's press release about its new China HQ even indicates that investing in China will help the rest of the company. It quotes the CEO as saying more development in China "will also help us to safeguard jobs in Germany and at our other locations."

Nortel, which has lost over half its workforce to layoffs in the past couple of years, did not directly respond to queries about how it justifies its China buildout while jobs at home continue to suffer. But the company's most recent quarterly report is clear: "We will continue to manage R&D expense according to the requirements of our business, allocating resources and investment where customer demand dictates, and reducing resources and investment where opportunities for improved efficiencies present themselves."

¡X Mary Jander, Senior Editor, Light Reading
 

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Intel's signs R&D deal with China's Legend

By Tony Smith
Posted: 29/08/2003 at 08:57 GMT



Intel's Asia-Pacific investment spree continues unabated. Yesterday, the chip giant agreed to found an R&D centre for home networking and security technologies with China's largest PC maker, Legend.

The facility will be part of Legend' Beijing HQ, said Intel China president Wee Theng Tan, according to a Reuters report. The financial terms that underpin the agreement were not disclosed.

Nor was a timetable for the centre's roll-out. However, it is expected to host 30-40 engineers. They will focus their efforts on extending today's computer-centric home networking technologies toward the consumer electronics world, building in links between broadband Net access systems, wireless and wired LANs, and PCs, TVs, DVD players and Hi-Fi.

Legend is one of Intel's biggest customers in the region. It accounts for around 25 per cent of Chinese PC sales. But its rise to the top, rapid though it was, is now being challenged by low-cost PC producers offering commodity systems. Legend needs to differentiate its already highly commoditised offerings from the cheaper competition, and tying its PCs into broader home entertainment systems is one way it hopes to leverage its superior resources to differentiate its products.

To that end, Legend is also working with Sony, Microsoft, HP and Samsung to develop common specifications for such interlinked systems. ?/textarea>

 

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DoCoMo to set up R&D center in China


Wednesday, August 27, 2003 at 07:00 JST
TOKYO ¡X Cell phone giant NTT DoCoMo said Tuesday it will set up a new mobile communications research center in China, the world's biggest cell phone market, to help promote fourth-generation technology.

The DoCoMo Communications Laboratories Beijing Co will be established in the capital this year, DoCoMo spokeswoman Tomoko Homma said.

The center ¡X which will be wholly owned by DoCoMo ¡X aims to advance studies of fourth-generation wireless communications systems and beyond, Homma said.

DoCoMo has been experimenting with fourth-generation technology, which zaps information about 260 times faster than its third-generation service and is capable of relaying high-quality video. The third-generation service is about 40 times faster than current cell phones.

The company hopes to start fourth-generation commercial service by 2010 and predicts that its video will be as good as high-definition television.

Homma said the research center will take advantage of highly skilled local labor, initially employing about 10 workers and eventually taking on 40.

It will be DoCoMo's third overseas communications research center, after opening one in San Jose, Calif, and another in Munich, Germany.

China is the world's biggest cell phone market, with 207 million sets in use. (Wire reports)
 

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Info-Tech
Veritas to open R&D centre in China

BEIJING: US-based Veritas Software Corporation, world's leading storage software company, which gets part of its engineering solutions developed in India, would set up a wholly-owned company and a research and development centre in China, a top company official has said.

"This should be another major engineering centre for Veritas," CEO, Mr Gary Bloom, who attended a Veritas vendor conference here, said adding 30 per cent of the company's engineering is done in its overseas research organisations in India, Britain and Israel.

The Chinese facility will be mainly engaged in the development of Chinese versions of Veritas products and verify the compatibility with solutions with local partners. But in future, it will evolve into a key link in Veritas' global R & D network, Mr Bloom said. - PTI
 

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August 27, 2003
Intel to Build Major Plant in China
By Michael Singer

Intel (Quote, Company Info) Tuesday confirmed that it is investing US$375 million into an assembly and test plant in the western part of China.

The Santa Clara, Calif.-based chip making giant said construction of the facility in the city of Chengdu in Sichuan province should start in the second part of 2004 and is expected to open for business sometime in 2005 or 2006. The company said it will and employ about 675 people, mostly locals.

The plan is to infuse upwards of US$200 million to get the project started with the remaining balance being spread out as needed.

Back in 2001, Intel invested US$302 million to further expand its chip manufacturing facility in Shanghai to validate, test and assemble the Intel 845 chipset for the company's Pentium 4 processor platform.

Apart from the Chengdu and Shanghai facilities, Intel's presence in China already includes the Intel China Research Center in Beijing, the Intel Architecture Lab in Shanghai, and several R&D organizations. The company first launched its Chinese operations in 1985, and currently has more than a dozen representative offices on the Mainland. This is the first time Intel has picked a location for a plant in the western region of the country.

The announcement is just the latest in a series of moves the No. 1 chipmaker has been making to expand its presence in Asia. Currently, about 40 percent of Intel's sales come from the Asia-Pacific region.

Company CEO Craig Barrett was on hand in Penang, Malaysia earlier this week to help launch a $40 million design and development center. Barrett said his company is looking at investing in China, India and Russia next year for new growth opportunities and expanding its plants in Malaysia and the Philippines.

As part of his annual trip to Asia, Barrett is expected to meet with South Korean president Roh Moo-hyun. Sources tell the Korea Herald that the government there will ask Intel to "consider finalizing a major investment project," something in the magnitude of either a research center or a chip factory.
 

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NEC begins operations at new China R&D lab

Posted : 10 Sep 2003

NEC Corp. has announced that they have commenced operations at NEC Laboratories China located in Tsinghua Science Park in Beijing, China.

The new base, which is a division of NEC (China) Co. Ltd, will focus on research for mobile information systems for next-generation internet in the China market. With Chinese researchers working at the new lab, NEC aims to generate technology research results by concentrating on China market demands and characteristics.

NEC's research activities have been carried out at its Central Research Laboratories in Japan and at its laboratories in America and Germany. The addition of NEC Laboratories China is expected to further enhance its research activities. The new R&D center will carry out its research through close collaboration with other NEC laboratories worldwide.
 

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BEA new R&D centre in Beijing

BEA Systems establishes R&D center in China
Becomes third company in recent weeks to open Chinese facility



By Sumner Lemon, IDG News Service September 12, 2003




TAIPEI, Taiwan -- BEA Systems Inc. opened a research and development center in Beijing on Thursday, to support the company's Asian expansion plans. The center is the first such facility opened by the company in Asia, according to a statement.

Work at the R&D center will focus on the development of technology that will be used to help BEA build on its current products, such as WebLogic Platform 8.1, and explore new markets, the company said. Specific details, such as the number of workers to be employed at the R&D center, were not disclosed.

BEA is the third company to announce a Chinese R&D center in recent weeks.

On Sept. 9, NEC Corp. opened an R&D center in the Tsinghua Science Park in Beijing to develop mobile information systems for the next-generation Internet in China. The facility will initially recruit around 30 Chinese engineers to work at the center during its first year, NEC said. It plans to increase that number to expand to around 100 engineers within three years, it said.

Chip maker Intel Corp. also recently announced plans to establish a research and development center in Beijing. The center, which will be set up through a partnership with Chinese computer maker Legend Group Ltd., will focus on the development of secure computing and next-generation Internet technologies for the Chinese market.

 

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