WASHINGTON-Motorola Inc. last week inked $1.1 billion in contracts with Chinese mobile-phone operators, transactions that come at a time of rising trade tensions between the two countries.
In all, $2.3 billion in deals-mostly wireless-were announced here last Tuesday at a U.S.-China technology event. Motorola’s $556 million contract with China Unicom is geared to upgrade the operator’s GSM networks and contribute to the expansion of its 1x CDMA wireless systems. The Schaumburg, Ill., company’s $510 million pact with China Mobile Communication Corp., the nation’s biggest cell-phone operator, will help build out the carrier’s GSM systems and improve data services in Beijing and 13 provinces.
Lucent Technologies Inc. snagged $350 million of contracts with China Unicom and China Telecom, the country’s two biggest telecom carriers.
Other China telecom contracts were picked up by Intel Corp., UTStarcom Inc., Nortel Networks, Cisco Systems and L.M. Ericsson. Ericsson said its contract for additional phase III CDMA2000 infrastructure expansion work with China Unicom is good for approximately $93 million. In December, Ericsson notched a separate phase III contract valued at $50 million.
Intel and Cisco, whose presence in the wireless space continues to grow, declined to reveal the dollar value of their contracts. Nortel also refused to discuss details of its China contract.
UTStarcom, a California-based leader in IP access networking and services, signed a $200 million contract with China Telecom to deploy its wireless Personal Access System infrastructure equipment in cities throughout 12 provinces in China.
“This is a monumental event that represents further strengthening of U.S.-China trade relations,” said Commerce Secretary Donald Evans. “Our trade with China is very important to the United States. The $2.3 billion in purchases underscores the importance of China’s high-tech market to our U.S. companies. These agreements will help generate corporate revenue, and they will support high-tech manufacturing jobs in many American communities.”
The event, which drew government and industry representatives from the United States and China, follows high-level talks in recent months between the Bush administration and Beijing officials on trade and other issues.
In December, the U.S. Trade Representative sent Congress a report saying China has failed to implement market-opening reforms required by the World Trade Organization. China became a WTO member in November 2001. While administration officials said U.S. exports to China are increasing, America’s trade deficit with China is now more than $125 billion.
During last week’s signing ceremony, Chinese officials talked up bilateral cooperation but conceded nothing insofar as U.S. complaints about lackluster Chinese compliance with global trading rules.
However, with the business opportunities in China arguably greater than anywhere in the world, the Bush administration has largely avoided caustic rhetoric about the staggering trade imbalance with China, the yuan valuation and other issues. Yet, seeing the U.S. economic recovery is not producing jobs this election year and that some view imports and outsourcing as culprits, the White House has been forced to give U.S.-China trade greater visibility.
China is the largest mobile-phone market in the world, with plenty of growth on the horizon. Most of the Asian nation’s 1.3 billion people have no telephone service, wired or wireless. Going forward, wireless appears to be the technology of choice. Last November, the number of wireless subscribers-263 million-eclipsed the nation’s 259 million landline customers.
Indeed, technology is an engine of growth for China. Some describe the U.S.-China relationship as a perfect match. China lacks tech expertise, but offers low-cost labor. Enter the United States and other tech-savvy industrialized countries.
“China’s telecom and information-technology markets are growing at nearly three times China’s national gross-domestic-product growth rate. U.S. companies such as Motorola are proud to be contributing to the development of China’s telecom and IT markets,” said Michael Kennedy, vice president of Motorola.
Matthew Flanigan, president of the Telecommunications Industry Association, said the deals underscore the huge opportunities for telecom vendors. “It is critical that U.S. industry be able to compete and to pursue business there,” he said.
TIA, whose telecom equipment members support free trade, joined Bush administration officials in criticizing the South Korean government for mandating wireless standards that benefit Korean companies at the expense of U.S. wireless suppliers.
“TIA firmly believes that governments or other non-commercial factors should not influence an operator’s choice regarding which technology would best suit the needs of its customers,” wrote Flanigan in a Dec. 5 letter to Han Sung Joo, the Republic of Korea’s ambassador to the United States.
On Jan. 8, the U.S. trade representative elevated South Korea to its priority watch list, but the move was based primarily on film and music piracy.
Despite mixed trade developments in telecom and high-tech sectors, TIA sees gradual improvement in the equipment market.
Total spending in the U.S. telecom sector rose 4.7 percent in 2003 to an estimated $720.5 billion, said TIA. The trade group’s 2004 Telecommunications Market Review and Forecast said double-digit increases in wireless services, services in support of equipment, and specialized services offset decreases in equipment spending and local- and-toll-service revenues.
TIA predicted the U.S. telecom industry will grow at a projected 9.2-percent compound annual rate between 2004 and 2007, reaching $1 trillion. The network equipment market bottomed out in 2003 at $14 billion, and a 2.3-percent increase to $14.4 billion is predicted for 2004, according to TIA.
Service providers, according to the report, are looking to voice over Internet Protocol, bundled services, data transport and TV to generate additional revenue, requiring new investments in equipment. TIA forecasted network equipment spending would total $18.5 billion by 2007, climbing at a 7-percent compound annual rate from 2003.
