NEW YORK-Vari-L Co. Inc., a Denver-based designer and manufacturer of advanced components
for wireless telecommunications, reached an important patent milestone in China recently that gives it the green light
for a marketing joint venture there.
The People’s Republic of China awarded patent protection for Vari-L’s voltage-
controlled oscillators and phase locked loop synthesizers.
“[These] are integral components in wireless
communications applications ranging from base stations to handsets and pagers,” said David Sherman, president
and chief executive officer.
The patent award clears the way for Vari-L to proceed with its sales and distribution
joint venture with the state-run Chen-Hui Co., based in Beijing.
The products to be marketed under the joint venture
will be manufactured on Vari-L’s new high-speed production line at its Denver facility, which also can accommodate
several additional high-speed production lines, should demand warrant them.
The new line, which was nearing
completion at the end of January, will enable the company to produce 8 million more units annually, allowing Vari-L
“to compete for new business in expanding subscriber applications markets,” the company
said.
Sherman said Vari-L has no immediate plans to manufacture its products in China, although “overseas
production would be a natural outgrowth of our cooperative relationship sometime in the future.”
Vari-L’s
patent and licensing agreement in China may be all the more significant considering recent developments
there.
“A news report from China last week indicated that the country has begun tightening its licensing
requirements for telecom equipment vendors,” commented Nikos Theodosopoulos, telecommunications
equipment analyst for Warburg Dillon Read, New York.
WDR’s “initial reaction” to the reported new
rules is that they are “consistent with the trend of recent government policies from two perspectives,” he
said in the investment bank’s “GlobalTelebits” report.
Chinese telecommunications equipment
manufacturers have improved their technology and therefore are becoming more competitive internationally.
Consequently, “the government can afford to be tougher on foreigners in terms of forcing them toward
localization,” Theodosopoulos said. “We believe the government is making a concerted effort to enforce
the export conditions of joint ventures and level the playing field for local manufacturers.”
Over the past five
years, lax enforcement of restrictions in many original contracts for joint ventures has caused the Chinese equivalent of
the Treasury to lose tax revenues on goods manufactured for export. Typically, these early joint-venture agreements
limited domestic sales to about 30 percent of the products manufactured in China.
“In many cases, what was
supposed to have been exported ended up in China-one form of smuggling,” Theodosopoulos said. “The
government loses money when this happens [because] various taxes go uncollected.”
