With China’s wireless profile on the rise, big vendors are not only raising their stakes in the market, but also bringing local companies into their investments.
Joint ventures and other forms of partnerships are nourishing the businesses of players such as L.M. Ericsson, Lucent Technologies Inc., Nokia Corp., Motorola Inc. and Siemens AG.
Ericsson has 10 joint ventures in China, Lucent has two and Nokia counts four.
“China is Ericsson’s second-largest market,” said Michelle French, spokeswoman for the company. Ericsson’s partners include Beijing Zhaowei Electronic Co. Ltd., Flextronics International Ltd., China PTIC Information Industry Corp., Nanjing Panda Electronics Co. Ltd., Chongqing Southwest Radio Communication Co. Ltd. and Langchao Group Co. Ltd.
Lucent’s joint ventures are Guoxin Lucent Technologies Net Work Technologies Co. Ltd. and Lucent Technologies Qingado Telecommunications Systems Ltd.
Nokia has two joint ventures for handsets and two for infrastructure. Its first handset JVs is with Beijing Capital Co. Ltd. and is called Beijing Capital Mobile Telecommunications Co. Ltd. The other handset JV is Dongguan Nokia Mobile Phones Co. Ltd., with Dongguan Nanxin Industrial Development Co. Ltd.
For infrastructure, the first JV is Fujian Nokia Mobile Telecom Co. Ltd., with local partner Fujian Mobile Communications Co. Ltd. The other infrastructure JV is Nokia (Suzhou) Telecom Co. Ltd., while the local partner is Shanghai Alliance Investment Ltd.
Nokia would like to merge all its JVs into one company, according to David Ho, president for Nokia China. “It will give us more flexibility,” said Ho, adding the company expects Chinese government approval by the second half of this year.
Nokia also has three research and development centers, all of them in Beijing. They include a handset R&D center; its Nokia Research Center, which is a branch of its global NRC research center in Finland; and an infrastructure facility called NET R&D Center.
These JVs not only serve China, but other operations around the world. Ho said Nokia exported 46 percent of its products made in China, amounting to $2.1 billion for 2003. Domestic sales for China last year were $2.5 billion, while its total business was $4.6 billion.
Siemens has announced a huge JV with Huawei to develop TD-SCDMA products that reportedly will cost about $100 million, with Siemens holding 51 percent of the deal and Huawei holding 49 percent. Siemens also is involved in handset and infrastructure deals and relationships covering GSM, GPRS and EDGE technologies.
Ericsson, like Siemens, has been involved in China for more than a century. In 1992, Ericsson established its first joint venture in the country with Nanjing Panda Electronics. The company’s Chinese holding is called Ericsson Co. Ltd., which was established in 1994, with five wholly owned companies and 26 offices, including the 10 JVs.
French said Ericsson shares the same “core values and business conduct of codes. Meanwhile, we respect local culture. We have now established a strong local organization and capability in China.”
Ho said corporate culture is not an issue with Nokia. “We have a very comprehensive value system,” he remarked. “We communicate this and practice it in our JVs,” noting that the company is sensitive to its partner’s environment.
The big suppliers have established research and development centers in the country. Ericsson has JVs in Beijing, Shanghai, Nanjing, Qingdao and Dalian. Nokia has two main R&D centers, both of which work with the centers in Finland. The centers work on customizing the phones and features. On the infrastructure side, the company looks at testing standards and technology for specifications regarding W-CDMA, CDMA2000 and the homegrown Chinese technologies.
China is Nokia’s third-largest market, following the United States and the United Kingdom. “China is an integrated part of our global manufacturing worldwide,” said Ho, and the company employs 45,000 workers there.
China became Ericsson’s global supply hub in 2002, according to French, and it has been accelerating its local R&D at a yearly growth rate of 25 percent since 2000, when it recorded an accumulated investment of $290 million.
“China is becoming a strong telecom player and has a large source of highly competent engineers and skilled workers,” said French. “Our activities in China secure us a competitive cost level globally.”
