Sales of SDH and DWDM gear will top $5 billion in China by 2004. But companies seeking a piece of the coveted Chinese market face formidable local competition. So says the latest report on the optical transport market in China, released this week by RHK Inc. (see Report: China Transport Thriving).
The market research firm says sales of optical gear in China are expected to show 60 percent growth for 2001, with nearly 54 percent growth anticipated for 2002. Most of the revenues, the firm says, are coming from SDH, which continues to rule the optical transport market in China, although wavelength-division multiplexing also is making significant inroads on metro and backbone networks.
These figures tally with RHK stats for the Asia-Pacific region overall. In an earlier report (see RHK Projects Asia Growth), RHK said that WDM is growing fastest in the region, including China, but is estimated to yield only $1.4 billion in revenue this year, compared to $4.3 billion for SDH gear.
Overall, the Chinese market accounts for roughly 31 percent of optical transport gear sold in the Asia-Pacific region, according to RHK. Drivers for the burgeoning market include deregulation and government-backed expansion of wireless and IP networks nationwide.
But outside companies looking to China to offset their market shortfalls elsewhere in the world had best beware. According to RHK, the leading local telecom equipment provider, Huawei Technologies Co. Ltd., continues to dominate the market.
Indeed, one of the most interesting aspects of the report is its evidence that local companies seem to have a clear upper hand in China's telecom economy, where the government's nod strongly influences buying decisions at the local level. Despite this, China's leading optical company remains mysterious to many of its international counterparts.
Huawei was founded in 1988 by Ren Zhengfei, a 57-year-old who made the Forbes magazine list of China's richest people earlier this year, which put his personal fortune at US$500 million. Zhengfei is reported to have worked for the People's Liberation Army as a telecom procurer, and it is widely accepted that the company received much early support from the Chinese military.
Huawei claims that in 1999 it earned US$1.5 billion in revenues, followed by $2.6 billion in 2000. The firm claims roughly 18,000 employees worldwide, a majority of whom are shareholders in the company.
The fact that Huawei continues to be privately held is a source of frustration to investors worldwide. Earlier this year, Huawei was involved in talks and alliances that could have gotten it listed on Nasdaq, but the arrangements fell apart when rumors surfaced that the company had supplied Iraq with telecom equipment.
Huawei has racked up a number of contracts internationally as well as in China, where it claims to have garnered over 50 percent of the installation contracts for China Unicom's metro broadband buildout, underway now.
Another company surfacing in RHK's stats is Zhongxing Telecom Ltd., the number two SDH provider in China and third in the overall optical transport market, according to RHK.
Founded in 1993 and headquartered in Shezhen, ZTE is a public company traded on China's Shenzhen stock exchange. Claiming roughly 12,000 employees, the company reported revenues of US$900 million in 2000. In contrast with Huawei, ZTE's foremost claim to market success seems to be in wireless equipment. On August 10, ZTE announced the opening of the first part of a CDMA network for China Unicom. It claims to have won the lion's share of that carrier's $1.45 billion RFP this past April.
re: Home-Growns Rule Chinese Roost The Bush administration has combatting Chinese industrial espionage at the top of its list. Its second target industry behind aerospace is telecom. It plans to focus on the 1'000's of engineers in the Valley and in the 128 corridor who unlawfully sell their optical and other technologies to the Chinese.
Everyone knows that Hua Wei's products are built on technology stolen from Lucent and others. If I were one of the many developers illegally selling my own start-up's technology to the PRC, I'd be getting pretty freaked by now. I know that Hua Wei, China Telecom and China Unicom are all already under investigation.
re: Home-Growns Rule Chinese Roost "Everyone knows that Hua Wei's products are built on technology stolen from Lucent and others."
That's total BS.
Cisco looked deeply into Hua-Wei's switch/router boxes, and concluded it is about 20-30% similiar to cisco IOS's look-and-feel, though there was definitely an attempt to make it as close as possible.
HuaWei has a metro DWDM box(much better than cisco's). Lucent still has nothing after years of planning and Chromatics. HuaWei's metro box was shipping when ONI was beta testing, and it is very different from ONI's.
From what I know, Hua-Wei has more top notch engineers than most startups. I met a dozen engineers from Hua-Wei a while ago(they have an office in San Jose), most of them have Ph.Ds from top engineering schools in China, US, Europe, etc.
Ren himself hold a few patents. How many does your CEO hold?
re: Home-Growns Rule Chinese Roost Engineers build these products and are the true owners of the technology. What is happening is a technology transfer. Many companies in the US have utilized the resources in China for manufacturing and now the PRC has the opportunity to utilize these resources as well; moreover, the demand for lower cost engineering and component resources has shifted to China as well. We can't stop the natural progression of business through rationalized acts of political "four-play" forever. It's time to step it up and stay ahead of the technology curve and or move on to bigger/better/faster technilogical advances. In the process, let's not slander any peoples of any nation as we are all in this process together.
re: Home-Growns Rule Chinese Roost Firstly, a simple question:
Who wants to discuss such serious telecommunication issues with a guy who even doesn't know the earth is round or square? Pls. put up ur hands! :)
Hey,Pal!Welcome to china! Talk to those friendly-í-ósagaciously and diligent engineers and U will figure out what u are confused now. Never be a frog in the well!
BTW: Because the earth is round, U can reach China either from west or from east.Before u leave, Don't forget to tell ur mama are going to visit China!:))))))
re: Home-Growns Rule Chinese Roost Some sat the technology transfer to PRC is the price you pay to get inexpensive labor, enginerring and other resources for first few years.
Hopefully by then that your own technology is being advanced and that the copy cat Chinese by means of agreements will keep them guessing.
I have heard many complain of these forced technology transfer to the chinese as they struggle to gain technology and world respect.
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The market research firm says sales of optical gear in China are expected to show 60 percent growth for 2001, with nearly 54 percent growth anticipated for 2002. Most of the revenues, the firm says, are coming from SDH, which continues to rule the optical transport market in China, although wavelength-division multiplexing also is making significant inroads on metro and backbone networks.
Indeed, one of the most interesting aspects of the report is its evidence that local companies seem to have a clear upper hand in China's telecom economy, where the government's nod strongly influences buying decisions at the local level. Despite this, China's leading optical company remains mysterious to many of its international counterparts. 
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