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Wireless tech providers see chance for growth in China

Posted: 11 Mar 2002 ?? ?Print Version ?Bookmark and Share

Keywords:wireless? telecom? mobile phone? motorola? eastern communications?

Wireless technology companies struggling to recover from a year of record losses continue to turn to China's telecom market for new business.

Motorola Inc.'s Semiconductor Products Sector is the latest example. The company, which has operated a production facility in Tianjin near Beijing for a decade, said Thursday (March 7) that it will supply its 2.5G wireless platform to Eastern Communications Co. Ltd, one of China's largest mobile phone manufacturers.

Motorola said Eastcon will use its i.250 GSM/GPRS platform to develop 2.5G wireless communications products for the booming China mobile phone market, which by Chinese estimates could reach 320 million subscribers by 2004. Some chip set development will be handled at the Tianjin plant to give Eastcon some local content, said Ed Valdez, Motorola's director of wireless platform marketing.

The company announced a similar deal in January with Acer subsidiary Benq. Corp. to use the i.250 platform.

In making deals with Chinese manufacturers, Motorola and other global wireless companies seek to use that nation's booming wireless market as a proving ground for longer-term 3G services, which are only starting to be deployed in Japan and parts of Europe.

China watchers also said that its membership in the World Trade Organization would help speed telecommunications reforms that could open the door to more deals between wireless technology developers and Chinese phone manufacturers. "We wouldn't have made this investment without seeing this [China telecom reform] trend coming," said Motorola's Valdez.

China's dormant efforts to reform its telecommunications industry have been resuscitated in recent months, according to Dan Brody of the U.S. Office of Information Technologies in Beijing. A telecom law drafting committee has met several times and has forwarded initial drafts of its reform proposals to China's Ministry of Information Industry (MII) for review, Brody said.

The proposal is "still a ways off from formally becoming a law," Brody said, but he called revival of the reform process significant.

Heated competition

Other chip makers, wireless handset vendors and consumer electronics manufacturers are also stepping up their efforts in China, the world's fastest growing mobile phone market.

Finland's Nokia teamed with 16 international and Chinese companies to establish a joint venture in Beijing called Commit Inc. Investors include Texas Instruments and LG Electronics, along with domestic Chinese companies such as the China Putian Information Industry Corp., the China Academy of Telecommunications Science Technology and Hyper Market International. Ltd.

Commit, which stands for China Open MultiMedia Information Terminal, hopes to provide China's telecom, PC and consumer electronics industries with services ranging from IC design to product solutions. The joint venture's goal is to help domestic companies develop proprietary technology and establish Chinese-owned brands.

Similarly, Sony Ericsson, a mobile handset joint venture between the consumer electronics giant and the Swedish wireless communication company, is establishing an R&D center in China, a Sony Ericsson spokesman in London said. The center, which will focus on mobile handset system designs and products, also will be integrated into each company's Chinese handset manufacturing operations.

According to industry estimates, GSM subscribers in China as of last June totaled more than 115,000, an annual increase of more than 111 percent. European subscriptions rose only 46.9 percent last year.

As a result, China is increasingly important to global mobile technology providers as mobile subscriber growth slows in Western Europe and the United States. Other market factors include delays in 2.5G and 3G rollouts and pressure on service operators to recoup investments in infrastructure upgrades.

Many handset vendors and service providers are transforming their businesses into original design manufacturers in Taiwan and China. Observers said the move is akin to the hollowing out of the U.S. computer industry 15 years ago.

The situation has prompted key players like Nokia to gear its Commit joint venture to research on chips and systems for multimedia information terminal products. Nokia said research will be based on 3G standards such as TD-SCDMA using Texas Instruments' Omap and other platforms.

In seeking to merge technologies, the joint venture will try to define information terminals capable of such functions as Internet surfing, mobile communications, mobile offices and video processing.

The Chinese government is also touting the joint venture. Zhang Qi, director of MII's Information Products Administration, said in a statement that Commit "will definitely become the backbone of the industry and certainly help ensure that China will determine the development trend of the whole industry through their own strength."

Separately, Nokia opened a research and development center in November at Hangzhou, just south of Shanghai, to focus on 3G products. Ericsson has deals with provincial companies to expand GSM/GPRS networks and supplies GPRS equipment to more than 50 Chinese cities in nine provinces.

Despite the growing international presence in China and progress on telecom reform, China's new foreign investment regulations for telecommunications joint ventures are drawing criticism. The regulations "seem designed to add as much complexity and ambiguity to the process as possible," said Brody of the U.S. IT office.

? George Leopold and Junko Yoshida

EE Times

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