CHINESE TELECOMS EQUIPMENT MAKERS HOPE TO CRACK WESTERN MARKETS

GENEVA, Oct 14 (AFP) - Chinese makers of telecommunications equipment, out in force at a trade fair in Geneva this week, plan to use low production costs along with research and development skills to conquer the US and European markets.

Barely known just four years ago, Huawei and ZTE of China, which specialise in equipment for fixed-line and mobile phone networks, are just beginning to make a mark on the international stage, but their competitors take them very seriously.

"ZTE has developed very quickly but is still a small player and essentially a China-based company," Shi Lirong, vice president of ZTE, told a news conference at the trade fair, Telecom 2003.

"We hope to be a global telecoms manufacturer within five to 10 years," he said.

The firm generates 25 percent of its revenue from overseas sales and aims to double this ratio to 50 percent by 2008, according to the executive.

ZTE earned 1.33 billion dollars (1.13 billion euros) in revenue last year and wants to boost that figure to 10 billion dollars in five years.

Rival Huawei, which enjoyed sales of 2.7 billion dollars in 2002 -- of which one fifth came from abroad -- has similar ambitions, targeting to increase its sales by 30 percent this year.

In the third quarter to September, the Chinese firm was the second largest in the world s DSL line market, behind Alcatel of France.

Huawei also attributes its success to cost and technological prowess.

"We are more cost competitive because our research and development staff are established in China and this market is rich in software engineers," said Lars Bondelind, vice president of R and D.
The firm invests more than 10 percent of its revenue in research, amounting to 363 million dollars in 2003, with 10,000 people involved out of a total workforce of 22,000, he told reporters at the trade fair on Monday.

The two firms have evolved in a similar way, setting up in China -- where they both enjoy a strong position -- before moving into other emerging markets.

ZTE has business in Nigeria, India and Zambia, while Huawei is present in the Middle East and Asia.

But the pair were more cautious about tackling the United States and European markets.

After resolving a conflict with US giant Cisco, which accused Huawei of infringing its intellectual property rights, the Chinese firm has forged a partnership with 3Com Corp. to distribute its goods in the North American market.

For its part, ZTE said British telecommunications firm BT and Spain s Telefonica have tested its products. The firm also plans to instal mobile phone networks for Portugal Telecom in Africa.

ZTE said it hoped to be included on the "shortlists" of international operators, particularly in the area of third generation (3G) technology.

To maintain their performance, analysts said the two firms should remember to concentrate on the demands of their clients on top of keeping down costs and investing in research.