Motorola Inc. has signed another contract with a Chinese company that has been manufacturing and selling Motorola-labeled cellular infrastructure equipment in China since 1991.
“These arrangements aren’t OEM (original equipment manufacturer),” said Tom Hinton, vice president and general manager of Motorola’s Greater China Cellular Infrastructure Group. “It extends the distribution channel reach, more than anything else.”
Motorola signed a $58 million contract with China Eastern Communications Co. Ltd., or Eastcom. The contract allows Eastcom to build and distribute Motorola’s latest cell site equipment for Global System for Mobile communications technology, including the M-Cell family of digital base stations.
In return, Motorola will provide Eastcom with support service, training and system design. Motorola also has a strategic holding in Eastcom. The two companies have been working together for five years, with Eastcom progressively rising to higher stages of technology transfer. Eastcom now is just beyond the assembly stage, according to Motorola.
Illinois-based Motorola has invested more than a billion dollars in China in recent years, saying it is considered the “number one foreign investor” in that developing Asian country.
The goal of the Chinese government in allowing foreign intervention in Chinese business is to accelerate the technological abilities of Chinese manufacturers.
But the Chinese government doesn’t insist that Motorola work through a joint venture rather than build wholly owned factories in China, Hinton said. Motorola doesn’t have a wholly owned infrastructure factory in China because it is more cost effective to work with Chinese manufacturers.
“There are no rules about it, but we are sensitive to their wishes and to the strategic needs and imperatives of the market,” Hinton said. The contract arrangements maximize sales opportunities in China, Motorola said.
Until recently, Eastcom belonged to the Chinese Ministry of Posts and Telecommunications. It was formerly called Hangzhou Communications Equipment Factory, the state’s largest manufacturer and supplier of mobile communications products, Motorola said. Earlier this year, Eastcom became a publicly listed company on the Shanghai stock exchange, with two categories of stock: domestic stock and stock traded by foreign parties.
“The [Motorola] contract further strengthens our long-term strategic relationship,” said Eastcom Chairman Shi Jixing, “and will provide a well-founded basis for our organizations to explore and develop the digital cellular market.”
The Zhejiang Technical Import and Export Corp. also is a partner of the Motorola-Eastcom venture. Zhejiang is a state-owned entity that facilitates high technology import and export agreements for businesses operating in the Zhejiang province.
