Siemens Gets Competition in China
October 1, 2001HB/svu HONG KONG. A third-generation mobile-phone technology that was developed mainly by Siemens AG for the lucrative Chinese telecommunications market is being tested by rivals Philips and Fujitsu, a sign that confidence in the technology's commercial viability is growing.
Most analysts have so far been skeptical of the ability of Siemens' TD-SCMA standard to fend off tough competition from the European UMTS technology (W-CDMA) on the Chinese market. Although TD-SCDM is related to the European technology, it is not identical. The TD-SCDMA standard was jointly developed by Siemens and Datang Telecom, a subsidiary of state-owned China Academy of Telecommunications Technology (CATT).
Because this gives a Chinese company major copyrights to a new mobile-phone technology for the first time, Siemens has high hopes that the state will favor the standard when it issues third-generation mobile-phone licenses. State support is thus believed to be behind Philip's and Fujitsu's decision to enter China's TD-SCDMA market.
Philips is in the process of setting up a joint venture with CATT, aimed at developing mobile phones that are compatible with the new standard.
Fujitsu is going a step further. Together with the South China University of Technology, it plans to develop not only handsets but also network equipment for the new standard. The group is in talks with two major Chinese telecommunications producers. By the middle of next year, Fujitsu plans to launch a trial network in the south Chinese province of Guangdong. This will be the first time that a company has competed directly against Siemens in TD-SCDMA networks.
The German group plans to launch its trial network around the same time and probably in the same region. For this it is cooperating with Japanese electronics giant NEC. The handsets were developed by Siemens independently. But one decisive hurdle remains: a first field trial, in which the TD-SCDMA technology has to compete against the standards from Europe and the United States.
Siemens and Datang look to be assured of political support if their innovation proves equal to the competing standards, Hong Kong telecommunications analysts said. But neither Datang nor Siemens has so far received any signal from the government that it will chose their standard, people close to the companies said.
In terms of handset ownership levels, China today is the largest mobile-phone market in the world, and analysts expect it to continue offering higher growth rates than any other market for some time to come.
How much money Siemens can expect to make with TD-SCDMA will depend mostly on copyrights. Press statements by Datang and CATT stated that the Chinese hold "independent copyrights to the standard". A high-ranking official of the country's telecommunications regulator said only recently that his country would select the TD-SCDMA standard because it would free Chinese technology groups from making license payments to foreign concerns.