Alcatel Shanghai Bell (ASB), the first foreign-invested company limited by shares in China's telecoms industry, is aiming for a 20 per cent business growth this year, a company executive said yesterday.

The bullishness despite spending cutbacks by Chinese telecoms operators is coming mainly from ASB's increasing research and development (R&D) activities in China and its growing cost advantages, according to Gerard Dega, president of ASB.

ASB yesterday announced it would establish a new R&D centre in Chengdu, capital of southwestern China's Sichuan Province, as part of its drive to expand R&D capabilities in China, the world's largest telecoms industry.

The centre will be an integral part of Alcatel's global R&D networks, Dega said.

French telecoms giant Alcatel holds a 51 per cent share in ASB while Chinese shareholders have the remainder.

The Chengdu centre, which Dega estimated will involve an investment of more than 100 million yuan (US$12.2 billion) per year, will partner up with ASB's R&D centre in Shanghai to provide the latest technologies and products to the market.

That underlines Alcatel's growing desire to build China into a strong global R&D base instead of a simple factory floor.

Alcatel is expecting "less and less manufacturing and more and more software development," said Dega.

The Shanghai R&D centre is already one of Alcatel's three largest R&D bases, recruiting more than 2,000 engineers. Last year the R&D funds for Shanghai hit US$100 million .

The Chengdu R&D centre, focusing on mobile technologies, wireless applications and optical network technologies, initially will employ more than 300 engineers and Dega vowed to increase the headcount in the coming years.

The centre, together the Shanghai R&D base, will account for 20 per cent of Alcatel's global R&D activities.

Last year, Alcatel's R&D investment accounted for 13 per cent of its annual revenues of 12.3 billion euros (US$15.1 billion).

Some products developed in the Chengdu centre will be exported to countries such as the United States and India, Dega noted.

Currently, 30 per cent of ASB's sales come from overseas markets.

Dega expected ASB to announce several major orders worth more than 5 billion yuan (US$617 million) from the Southeast Asia and Eastern Europe in the coming weeks.

That would include a GSM network equipment supply contract from Thailand worth 1 billion yuan.

Dega said he is confident of a robust growth of ASB's exports from China as the firm could take advantage of Alcatel's sprawling global sales networks and its well-established brand. Alcatel has operations in more than 130 countries and regions.

"A 50-50 ratio (between overseas sales and Chinese domestic sales) would be a good balance (in the future)," he said.

The president also said ASB is awaiting the investment boom to be brought by the deployment of 3G mobile telecoms networks in China.

Most telecoms equipment makers are now having a tough time due to the continuous delays of the awarding of the 3G licences from the Chinese Government.

(China Daily August 19, 2005)