Reuters Summit-Networking giants face growing challenge in China

NEW YORK, Feb 26 (Reuters) - Multinationals that once dominated China s multibillion-dollar market for networking gear are having to share a growing slice of the high-tech pie with an aggressive field of domestic up-and-comers.

Chinese spending on networked systems -- especially more complex ones for wireless communications -- will continue to go mostly to global giants like Motorola Inc. (nyse: MOT), Lucent Technologies Inc. (nyse: LU) and Nortel Networks Corp. <NT.TO> (nyse: NT) for at least the next three years, analysts said.

But a growing volume of business for simpler applications is going to a field of domestic players with names like Huawei Technologies, Zhongxing Telecom Co Ltd (ZTE) <000063.SZ> and Datang Telecom & Tech Co Ltd. <600198.SS>.

"In China, they mount a threat at mid- to low-end enterprise," said Samuel Wilson, a senior analyst at JMP Securities. "But it will be at least five years before they mount a threat to high-end enterprise."

The multinationals have plenty at stake in China, having invested billions of dollars in a nation that was one of their few bright spots during the global telecoms spending downturn of the past three years.

During that period alone, China s top four telecoms carriers spent between $30 billion and $70 billion to build up their networks, according to estimates from Chinese state-run agencies and outside consultants.

But lately the foreign multinationals are feeling the heat from the likes of Huawei and ZTE, China s No. 1 and No. 2 makers of telecoms gear.

Motorola, Lucent and Nortel showed their continuing clout when they dominated a $1.5 billion round of spending by China Unicom Ltd <0762.HK>, China s No. 2 mobile carrier, in late 2002. But ZTE also received $190 million of that business.