Chinese Telecom Companies Look to Global Markets

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Huawei and ZTE are not yet household names in America. The two Chinese telecom companies are bidding on contracts and plan to become international corporations, like Motorola and Nokia.

STEVE INSKEEP, host:

You may not have heard of ZTE yet or Huawei, but both of these large Chinese telecom companies want to change that. They're part of the Chinese government effort to encourage its bigger companies to go out in the world and compete. In other areas, that policy has had mixed results. There's the recent unsuccessful bid by a Chinese oil company for the US company Unocal. But the successful purchase of IBM's PC computer arm by Chinese computer company Lenovo shows another model. NPR's Rob Gifford paid a visit to the telecom company ZTE's offices in Shanghai.

ROB GIFFORD reporting:

Every day, 120,000 new Chinese customers subscribe to a cell phone service. That's pushing four million every month, so you might think the big Chinese telecom companies Huawei and ZTE would have enough to think about at home. Clearly not. ZTE, earlier this year, signed a major deal with French giant Alcatel; Huawei was among the winning bidders for a recent contract with British Telecom. British news reports say Huawei's in discussions to purchase struggling telecoms icon Marconi. ZTE vice president Tzau Chang(ph) makes his company's global intentions clear.

Mr. TZAU CHANG (President, ZTE): Our company's aim is that we become a truly international company like any other bigger names, like Lucent, American Nortel and also like Ericsson and Nokia.

GIFFORD: Need some more statistics to persuade you which way Chinese telecoms are going? Try these: ZTE's sales of handsets and broadband networking gear grew 35 percent last year. Profits jumped 50 percent. Exports soared 179 percent. The company's president has said he wants overseas sales to account for more than half of revenues as soon as next year. And Tzau Chang says they're not just competing on cost.

Mr. TZAU: Yes, the cost is an important factor when people buy the goods. More important is that we to provide the good quality of the products. Just being cheap, that is not good enough in today's fierce competitive market. It's not enough.

GIFFORD: Founded in 1985, ZTE, like its big competitor Huawei, has grown along with China's big phone companies. Both produce handsets but also the basic telecoms infrastructure that's so essential in the age of cell phones and the Internet. Both of them have had broad success in the developing world, but it's clear ZTE, like Huawei, wants to play with the big boys and sell both telecoms equipment and handsets into the top-tier Western markets. So on the handset side, they've been working overtime, producing, for instance, the world's smallest, lightest and most compact third-generation video cell phone.

(Soundbite of noise in display hall)

GIFFORD: Well, this is where everything comes together and the future of Chinese telecoms and perhaps world telecoms are on display, the exhibition hall of ZTE's headquarters in Shanghai. And with me is Mr. Jo Jun Hua(ph) from ZTE.

Now tell me, Mr. Jo, what is this machine?

Mr. JO JUN HUA (ZTE): Ah, this machine, this is our latest video phone.

GIFFORD: Video phone.

Mr. JO: Yes.

GIFFORD: It's tiny. It's like a cell phone, right?

Mr. JO: Yes.

GIFFORD: And the system is all made by ZTE.

Mr. JO: Yes, everything is made by ZTE.

GIFFORD: OK. Well, let's test it out. OK. I've just come out in the corridor here, and I can't see Mr. Jo, but I now can see him on my phone, because he's just dialed me up.

Mr. Jo, can you hear me and see me?

Mr. JO: (On cell phone) Yes, actually, I can hear you.

GIFFORD: Wow. There it is, and this is soon going to be exported to the world, this tiny little video phone. I have seen the future, and it is, of course, made in China.

But as recent events with CNOOC's bid for Unocal and Haier's bid for appliance giant Maytag have shown, it's not always easy to break into the Western market. Duncan Clark of Beijing telecoms consultancy BDA says putting Chinese cell phones in the hands of the people of New York or Los Angeles or London is a few years away yet.

Mr. DUNCAN CLARK (BDA): It'll be a long time. We think it'll be five to 10 years before the Chinese regroup and are able to do that in the developed markets because they've had a lot of setbacks at home in the face of intense foreign competition.

GIFFORD: Chinese companies enjoy advantages not just in production costs but also in the low cost of research and development. Huawei boasts that fully half of its 30,000 employees work in R&D, and analysts say that together with their vast pools of engineering talent and abundant supply of customer service technicians in China and around the world, Huawei and ZTE really could change the structure of the telecoms industry in years to come.

Rob Gifford, NPR News, Shanghai.

INSKEEP: This is MORNING EDITION from NPR News. I'm Steve Inskeep.

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