Siemens believes in tech convergence
By Zi Mu (China Business Weekly)
Updated: 2004-08-03 14:45

German technology giant Siemens AG hopes an increasing trend towards the convergence of wireline and wireless networks in China will boost its business across China.

Siemens last week took a controlling stake in a Chinese wireline network equipment supplier -- Beijing International Switch System Co (BISC).

Siemens' interest in BISC -- now known as Siemens Communication Network Equipment Ltd, Beijing (SCNB) -- was increased from 40 to 67 percent.

The change in the shareholding structure will enable SCNB to work more closely with Siemens' mobile business unit in China. That will put the firm in a better position to compete in the world's largest telecommunications market.

The move comes hot on the heels of Siemens' announcement to merge its wireless division, Information and Communication Mobile (ICM), and wireline division, Information and Communication Networks, into a single entity.

That merger will take effect, worldwide, on October 1.

The divisions previously operated independently.

Siemens is seeing demand grow worldwide for convergent telecommunication offerings, and that is also apparent in China, said Anton Schaaf, chief technology officer of Siemens Communications Group.

Siemens is better prepared for the convergence of wireline and wireless technologies, said Lothar Pauly, who will head Siemens' communications group.

His appointment takes effect on October 1.

"We will be the only manufacturer to offer the entire product portfolio, end-to-end (for the convergence)," he said.

Rivals, such as Nokia, Cisco and Motorola, are not as competitive as Siemens in the convergence of wireline and wireless technologies, in terms of combined strength, Schaaf added.

Siemens is the world's No 1 maker of digital cordless phones, the No 2 enterprise telecommunications network gear maker, the No 3 wireline supplier and the No 4 mobile phone supplier.

BISC's reshuffle is also aimed at China's future third-generation (3G) wireless communications market, Pauly said.

He expects the Chinese Government to hand out the 3G licences in 2005, and that fixed-line carriers China Telecom and China Netcom will receive licences, in addition to cellular duopoly China Mobile and China Unicom.

Converged wireline and wireless solutions will help Siemens gain favour from the two fixed-line carriers when the government gives them the green light to deploy their 3G networks, he said.

Operators and enterprises demand one-stop shopping for seamlessly interacting technology solutions, he said.

Siemens is expected to be a major winner in China's 3G equipment market.

China's operators have yet to indicate which 3G standard they will adopt.

There are three standards: Europe-initiated WCDMA, US-backed CDMA 2000 and China's TD-SCDMA.

Industry professionals widely expect China Mobile will adopt WCDMA and Unicom will choose CDMA 2000 as a natural technology upgrade path.

China Telecom and Netcom are expected to favor WCDMA, experts suggest.

China's TD-SCDMA, with strong government backing, is widely expected to find its niche.

Siemens is the world's No 3 WCDMA equipment vendor.

Unlike rivals Ericsson and Nokia, the firm supports TD-SCDMA and has invested heavily in the technology with China's Datang, the standard's major developer.

To boost SCNB's capabilities, Schaaf said Siemens will triple the number of its research and development (R&D) engineers.

"China is the benchmark for global competitiveness," he said.

SCNB will expand its portfolio beyond EWSD, a widely installed telephonic switch system, to new products such as NGN (next-generation network), IP routers and wideband access equipment.

In 2002, EWSD accounted for 90 percent of BISC's sales.

Schaaf said he expects the figure will decline to 50 percent in the next fiscal year.

Siemens is "satisfied" with the 67-percent stake, he said. The firm, he suggested, will not try to turn SCNB in a wholly owned company.

Holding controlling stakes in joint ventures in China has become the latest trend for foreign communications giants.

Nokia last year announced its plans to merge its four joint ventures in China into a new entity. It said it will hold a 60-percent stake in the firm.

The merger is expected to be approved by the Chinese Government before year's end.

Sony Ericsson in June secured approval from China's Ministry of Commerce to increase its stake -- from 10 per cent to 51 per cent -- in a joint venture handset manufacturing facility in China.



Close