Andrew Solutions, a brand owned by telecom multinational Comm¬scope (CTV.NYSE), specializes in designing hardware to support cellular and wireless data networks, including base stations, antennas, wiring and related software systems. Andrew’s wireless antennas port cellular signals throughout the Shanghai subway system, and its Suzhou factory is the company’s largest in the world. Chinnee Tong, Andrew’s vice president of China sales, spoke to China Economic Review about the company’s preparations for the fourth-generation telecommunications build-out, and how Andrew Solutions plans to benefit from high-speed rail and subway tunnels.
Q: In 2009 your company posted some pretty impressive revenue gains in China. Now it looks like things are slowing down. What’s going on?
A: Our revenue did increase by three or four times in 2009. There were multiple reasons. For one, the team had not been performing well in previous years, which was one of the reasons management recruited me. I came in to try to revamp the team, to put them back on track. The other reason is that 2009 was a special case. Revenue growth was driven by the fact that all the carriers were rushing to upgrade their networks from scratch for 3G. Because of the 3G launch, they purchased more than they needed to build out the network. But this year they are back to normal development.
Q: Do you expect another curve when China turns to building out networks with fourth-generation technologies like LTE?
A: Yes. I think Andrew has engaged in virtually every single LTE trial in the world with our base station solutions. As a result we have gained a lot of different experience. In China I think we will help by working with our operator partners when they launch LTE trials. Currently, Chinese operators are not really that active in 4G except for China Mobile (CHL.NYSE, 0941.HK), because they want to do TD-LTE [a competing standard]. For China Unicom (CHU.NYSE, 0762.HK) and China Telecom (CHA.NYSE, 0728.HK), I don’t think it is on their high priority agenda yet. They just got their 3G network licenses; they don’t even have enough traffic and subscribers on their 3G network yet, so I don’t think they are going to start any 4G [projects] for another five years.
Q: What about China Mobile?
A: China Mobile is different. They want to launch LTE Advanced –TD-LTE. That will allow them to have a future for their TD-SCDMA standard, which is their indigenous standard that almost nobody else uses. But for this technology to have a future, it has to be accepted into the global arena. So I think China Mobile is working very hard to get the global community to accept TD-LTE.
Q: What are other areas of opportunity? There’s a big push for internet protocol television (IPTV) now. Is that an opportunity for Andrew?
A: To us, whether IPTV takes off or not is irrelevant. We are the pipe. We are not pursuing the IPTV market, but our technology can support IPTV or network convergence. Whatever the data is, as long as it is going through the air, we can support it.
Q: You have a niche in running wireless antennas through subway tunnels. What does the big government investment program in high-speed rail mean for you?
A: The more high speed railroad they build, the bigger the opportunity will be for us. It will also allow us to distinguish ourselves against our domestic competitors. When the train is moving more than 350 kilometers per hour, the wireless data becomes very tricky, very sensitive, so you need good equipment to transmit it. Also, the more high-speed rail they build, the more tunnels they will build, and these will use our tunnel wireless products. We probably have the largest market share in China of tunnel wireless products.
Q: To what extent is your success dependent on Huawei and ZTE’s (0763.HK, 000063.SZ) success in export markets? India temporarily obstructed these firms from bidding for contracts, for example; does this sort of reputation problem trickle down to Andrew?
A: I’ll put it this way. All the major telecom companies are our customers, so we are not relying on any one of them. If Huawei gets blocked, yes that hurts, but it doesn’t hurt all our prospects. Alcatel Lucent (ALU.NYSE, ALU.Euronext), Ericsson (ERIC.NASDAQ, ERIC.OMX) and Nokia (NOK.NYSE, NOK1V.OMX) are all our customers. All the major equipment vendors buy from us. Whether other countries accept Huawei or not will not make much difference to us.
Q: How do you handle research and innovation in China?
A: On the antenna side we have smart beams and twin beams, technologies that help operators provide coverage in very dense environments like Shanghai where you don’t have many sites for additional antennas. Property owners don’t want you to install them for fear of radiation, along with a few other reasons. So we have to design new-generation antennas to actually support that kind of need. We also are seeing smart phones that require more bandwidth in terms of wireless data, and more stable, high quality connections. We are working on that too.
Q: What about wired connections?
A: We have developed a new generation of cable, and we’ve changed to aluminum instead of copper. Aluminum is lower cost, more available, a lot lighter and a lot more environmentally friendly. And we designed it so that the performance actually surpasses copper cable. Our company doesn’t design everything in the US and then try to market in China. For example, the aluminum cable was developed in the US, but the connectors and other components were developed in Suzhou. Within the next five years we will have more R&D moving to China.
Q: How does the weak intellectual property regime affect your operations here?
A: We do suffer from some infringement from our Chinese competitors. For example, one of our major technologies is a remote electronic tube, which allows an operator to control the angle of the beams of a cellular antenna. This allows them to improve the quality of the coverage or even increase capacity. And this technology is being used by all our indigenous Chinese competitors without acknowledgement of our copyright.
Q: Do you have a prescription for this kind of infringement?
A: I think in a few areas the legal system has to be more transparent. A lot of companies may not take legal action because they don’t know what they’ll end up with. Chinese companies need to improve their image from that perspective. I also think that Chinese companies need to learn to become world citizens by overcoming protectionist sentiments and boosting a partnership mentality. It’s natural, that sort of feeling, but if these companies want to go global, they need to learn to think past that.