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Optical/IP

The Chinese Are Coming, Says Poll

When Bookham Technology plc (Nasdaq: BKHM; London: BHM) held an open day last week, it disclosed that China's Huawei Technologies Co. Ltd. is now a 10 percent customer.

This is something of a revelation for those who think that trade in optical components with China is a one-way street. In this case, Bookham is shipping optical components into China -- the opposite of what most people would expect.

Ironically, Bookham's founder and chairman, Andrew Rickman, was particularly outspoken about the threat posed by Chinese optical component vendors when he spoke to Light Reading nearly two years ago (see US to China: Do You Copy?).

All the same, most people go along with the view that Chinese vendors will rank among the biggest in the world before the end of the decade, according to early results of Light Reading's March Research Poll on Competition from China. Here's a quick snapshot of the results so far:

  • Two thirds of respondents think Chinese telecom equipment vendors will rank alongside the likes of Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Cisco Systems Inc. (Nasdaq: CSCO), Lucent Technologies Inc. (NYSE: LU), Nortel Networks Corp. (NYSE/Toronto: NT), and Siemens AG (NYSE: SI; Frankfurt: SIE) by 2008.

  • Half the respondents think Chinese vendors of optical components and subsystems will be among the world's biggest by that time. A similar proportion think that Chinese vendors of telecom chipsets will achieve a similar level of success.

  • About two thirds of respondents would invest in a Chinese vendor, subject to conditions in some instances. They may get a chance to do so. Huawei is said to be planning an IPO (see ...and East Looks West).

  • Most respondents have a fairly low opinion of Chinese vendors. 54 percent say that intellectual property is routinely stolen, and 42 percent say Chinese vendors don't innovate.
To take the poll yourself and see the latest, detailed results, please click here.

— Peter Heywood, Founding Editor, Light Reading

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optical_man 12/5/2012 | 2:17:28 AM
re: The Chinese Are Coming, Says Poll The river will soon flow uphill.

Guess what, this is what makes America great.
I love a Challenge, and this one will be a defining moment in American history.

Think outside the box for the next few years. If you think routers and switches will remain the sole property of the U.S., well.......

Think of some new things. It'll come to some of us (wish it was me, I'm not that visionary).

The guts of 'communications' is already leaving American manufacturers.

Remember how 'cool' cell phones were in the early-mid 90's?
Remember when Nokia laid off EVERY cell phone Engineer in Texas when the Asian's figured out how to read a Nokia blueprint, and Nokia built factories over there?
The brains at Nokia are working on the next gen of phones, and they're hiring Engineers right now to build those next gen phones. (that'll last 3-5 years, but I hope you are seeing my point in your minds eye)

Just think of things you can put on those Global Network guts/components that your forefathers built back in the old Century (yeah, I know, that's You about 10 years ago, but we've all aged 50 years in the past 1/2 Score years, so work with me here People!!)
:-)

The basic infrastructure is in place, thanks to you, (and will be doubled by our Asian friends in 2-5 years). It's up to us to figure out what should be on it.

Wireless security algorithms? Ok. that sounds like sophisticated s/w that will come out of some U.S. University phd student's head.
How about a Video compression algorithm that makes "Star Wars" downloads = 1 mb? Even better (for you/me and our customers, the RBOC's who'd love nothing better than to deliver Star Wars to consumers 1 mb at a time...).

Get the coffee pot out, it's gonna be an all nighter if we're gonna pass this test.
zher 12/5/2012 | 2:17:27 AM
re: The Chinese Are Coming, Says Poll naive
truelight 12/5/2012 | 2:17:24 AM
re: The Chinese Are Coming, Says Poll A great nation and people that has invented many many things: irrigation systems, paper, gunpowder, shipping, golf, etc.

Imitation is the best form of flattery which the Chinese do exceptionally well at. Once the VC community can figure out a way to get money in and get the profits out then we can expect to see innovation come to the forefront.
googol_byte 12/5/2012 | 2:17:22 AM
re: The Chinese Are Coming, Says Poll Irrigation - maybe.
Paper - OK.
Shipping - sure, I'll give you that.

Golf? Not a chance. Sure Tiger Woods is half Asian but there's no way golf came from China.

chip_select 12/5/2012 | 2:17:21 AM
re: The Chinese Are Coming, Says Poll
And who might these Chinese vendors be? I don't know of any Chinese ASIC company that sells their ASSPs externally.
BlueWater66 12/5/2012 | 2:17:19 AM
re: The Chinese Are Coming, Says Poll In optical components I agree. Look at margins, yields and automation of JDSU, Finisar, OCP, Bookham and Triquint. Their production lines are filled with women at tables passing trays and doing hand assembly. Ideal for the Chinese.

One word of warning thought, the financial stability of the Chinese banking system, the way investors approach the Chinese, and their ability to truly hold a flat $1USD = 8.2 Yuan. The 8.2 Yuan is huge. If you let the currency float, it would probably be closer to 4 Yuan to the Dollar.

I suspect weGÇÖll see an up-down-up bubble as the financial realities hit China. TheyGÇÖll do great for the next couple of years, but no one (not even the Chinese) can maintain that precarious financial state forever. Holding 8.2 yuan is hard work and really expensive!
materialgirl 12/5/2012 | 2:17:15 AM
re: The Chinese Are Coming, Says Poll Does anyone recall the late 1980s when "The Japanese were coming?" They beat the pants off of Detroit (thank heavens) with quality autos, bought Rockefeller Center and half of Hawaii, and were about to kill us with the fifth generation computer. Oh MY.
niblick 12/5/2012 | 2:17:12 AM
re: The Chinese Are Coming, Says Poll Golf started in Scotland.

With a username like "niblick" I should know it:-)
whyiswhy 12/5/2012 | 2:16:58 AM
re: The Chinese Are Coming, Says Poll Peter:

Japan: Yes, they kicked our ass in efficient manufacturing and quality control. It took them awhile, but they did it.

But, the issue of "cheating" is another topic. They did and still do "cheat" (please note the quotation marks). Japanese companies get "loans" from "banks" at no interest...I have even read of some "negative interest" deals.

By protecting their internal markets like Ninja warriors, and forcing their "consumers" to pay higher prices than they charge overseas, and with investors willing to take a hit for the "long term good of the country" rather than their short term selfish pocket books, Japanese executives are INHERENTLY able to do better over the long term.

We can only pray that the Chinese adopt the main problem of our (the US) system, and focus on short term greed. At the pace their economy is growing, they will be completely screwed in five years. The price of oil wil be $50 per barrel, and the exchange rate will be 1:1.

-Why
Peter Heywood 12/5/2012 | 2:16:58 AM
re: The Chinese Are Coming, Says Poll Actually, I think there are some striking similarities with the Japanese in the 80s.

The Japanese automobile manufacturers integrated quality control into manufacturing and built much better cars more cheaply - and folk in the West accused them of cheating.

Now Chinese telecom equipment manufacturers like Huawei are doing much the same thing, and suffering much the same insults.
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