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Agilent No 1 in China's 3G testing equipment market

(China Daily)
Updated: 2008-06-23 15:00

While China has just launched its own 3G mobile phone service, Agilent Technologies, the world's largest measurement equipment provider, already appears to be an early winner.

The US company estimates that it now holds more than 60 percent of China's TD-SCDMA network testing equipment market. And this is only the preliminary lap, compared with what it could achieve once TD-SCDMA service shifts into high gear.

In 2000, when the company decided to start researching Chinese mobile technology, it was considered a wild gamble, as few outside China believed the concept would become real someday.

"Identifying market opportunities, especially in a fast growing market like China is always a challenge," says Bill Sullivan, CEO of Agilent. "You have to move quickly to meet potential demand and then create the right product to get you into the door."

A wild bet

Agilent, which can trace its roots back to Hewlett Packard, has been the world's largest testing and measurement equipment provider for years. Its products are widely used in industries such as electronics, life science and food and environmental safety. Less visible than its high-profile clients such as Nokia and Sinopec, Agilent's products are used in every phase from R&D to product testing to network monitoring.

More importantly, once a new technology idea, like China's TD-SCDMA, is proposed, industry players will need test equipment makers like Agilent to provide the tools to research the concepts.

That was the exact scenario when China decided to establish its own 3G mobile technology TD-SCDMA in 2000. At that time, few people had confidence that the idea would be put into commercial use and become a strong competitor against two other existing 3G standards. But Agilent was the first company to provide the necessary equipment for the homegrown-standard.

3G is the newest mobile phone technology that provides faster data transmission and allows video calls and faster mobile Internet access. Korea, Japan, Britain are among the countries where it is already in commercial operation.

The TD-SCDMA standard is currently in use in eight cities, including Beijing, Shanghai, Guangzhou and Qingdao.

"It was a wild bet for us to get into TD-SCDMA in 2000," recalls Fu Xiandong, vice-president of Agilent China. "Trying to limit our risks, we used a step-by-step approach for our investment. "

In the following years, Agilent established a telecom research center in Beijing, which now houses about 300 engineers, some of whom work on the Chinese 3G standard. Moreover, it also has worked closely with a research institutes under the Ministry of Industry and Information, which is responsible for the technical specs for the Chinese standard.

In 2002, the US company became the first one to roll out test and measurement equipment based on the TD-SCDMA standard and it later decided to add 64 million yuan to strengthen its research on the standard in 2006.

This bet turned out to be a trump card for Agilent as now almost all the major telecom companies and equipment makers in China have chosen Agilent for TD-SCDMA-related products. And the company will see even stronger growth once China Mobile, now the world's largest mobile carrier, starts to build its commercial TD-SCDMA network across the nation.

More importantly, the company appears to secure a niche in the world's largest mobile service market for the coming years as the nation has moved to research on its 4G standard, which springs from the TD-SCDMA technology. And its pioneering advantage in the TD-SCDMA market will help Agilent maintain its lead in China.

"We are always trying to identify the areas where we can make a contribution, differentiate ourselves, and could be seen as a valuable partner, " says Sullivan. "Just as we did with the TD-SCDMA technology over the years."

Made in China

Over the years, multinationals have tried to establish research and development centers in China, many of which are used to localize their existing products for the nation's unique demands. Gradually, some of them found the nation's talents could also create products that would appeal to consumers in other markets.

In the January of 2005, Agilent established a joint venture in Southwest China's Sichuan Province to develop low-cost radio frequency (RF) signal generators and spectrum analyzers for the Chinese market. The instrument is widely used for electronic manufacturing testing of products such as cordless phones, digital radios and GPS modules.

Although Agilent's product portfolio already included a wide selection of RF signal generators and spectrum analyzers at that time, its small- and medium-sized Chinese clients somehow found them too expensive, with some advanced functions seldom used.

"There is a huge demand for less-expensive and less-sophisticated products, but we just don't have them on our portfolio, " says Fu.

Seeing the potential, Agilent wanted to come up with something targeting at the market segment. At the very beginning, it assigned the task to its development team in the US. However, the progress was difficult and slow, as developers there often felt confused about what frugal Chinese companies would want.

"It's like asking the Ferrari guys to make a Chery QQ subcompact," says Fu.

That's why it established the joint venture in Sichuan. As the largest electronic instrument maker in the nation, Qianfeng Electronics Technology understood well what the local market needed and proved to be the right partner for Agilent.

Shortly after the joint venture, the US company then sent about a dozen staffers from its Beijing headquarters to lead the team in Sichuan. In 24 months, the venture not only came up with the four RF signal generator models Agilent wanted, but also the marketing strategy that would sell them.

Agilent and Qianfeng Electronics was able to provide RF signal generators with only most-frequently used functions at a price of around $7,000, about half the price of its previous cheapest model. The new generators also proved popular in 70 countries other than China, as now more than 80 percent of the sales come from overseas markets.

The US company now has three major research teams in Chengdu, Beijing and Shanghai and it also looks to strengthen its research capacity continuously to carve a larger niche in the market.

"China is now our largest market outside the US and we expect to continue solid double-digit growth here," says Sullivan. "Whenever innovation comes out in the nation, there will be a new growth opportunity for us."