Textiles, garments and toys are all inexpensive "Made-in-China" products world importers have long been acquainted with.

For high-tech products such as flash memory cards, mobile phone chips or telecom-related equipment, however, China is considered less competitive.

But things are changing. Many high-tech Chinese companies are now competing side by side with world-renowned firms and getting the upper hand over other competitors for their technologies and services.

Huawei Technologies and Zhongxing Telecommunications Equipment (ZTE) are two of the fastest-developing firms who are making the world take a second look at China's high-tech industry.

With an annual revenue of US$3 billion, Huawei Technologies is strong enough to compete with international IT giants such as Lucent and Cisco.

As the country's leading maker of telecom products, Huawei edged itself into the industry limelight last year by inking numerous contracts and agreements with many overseas telecom operators.

Figures indicate that sales for Huawei Technologies reached 31.7 billion yuan (US$3.8 billion) last year, up 42 percent from the previous year.

Among these figures, its overseas sales reached US$1 billion, representing growth of 90 percent.

As an aggressive exporter of network products, the company is expecting overseas sales will account for 40 percent of its overall revenue this year.

"Technology innovation and service are the key driving forces for our development," said Sun Yafang, board chairperson of Huawei Technologies.

She believes lower prices, which used to be a big lure Chinese companies used to withstand fierce market competition, are no longer a good selling point in the world market.

"Meeting customers' demands and providing leading technologies and solutions are of pivotal importance to survive the fierce competition," she said.

To maintain its leading position, Huawei, for example, has engaged itself in research and development (R&D) for 3G-related equipment and products.

According to Sun, the company has enhanced its cooperation with US-based Qualcomm Inc to roll out more solutions and services based on code division multiple access (CDMA) networks, including CDMA 800MHZ and CDMA 450MHZ.

Last year, Huawei landed a series of contracts with many foreign telecom operators to provide CDMA equipment and solutions, including companies from Algeria, Nigeria, Ethiopia, Russia and India.

In September, it inked an agreement with European Inquam to provide equipment for its CDMA 450MHZ network in Portugal, which marked the first time CDMA 450MHZ was adopted in western Europe.

Statistics from Huawei indicate that its end-to-end solutions based on CDMA 2000 have been adopted by more than 40 telecom operators in over 30 countries and regions.

"Our leading technology is a result of our continued emphasis on technology and efforts to meet the customers' changing demands," Sun said.

The company, she explained, has five research institutes in the United States, Sweden, India and Russia.

Forty-six percent of its employees are working in R&D and 10 percent of annual sales go towards this department.

The company made headlines in December when it signed agreements with Emirates Telecommunications Corp and Hong Kong's Sunday on the deployment of wideband CDMA (WCDMA) networks for the two telecom operators.

According to the contract with Hong Kong's Sunday, Huawei is to provide end-to-end WCDMA solutions including wireless base station systems, core networks, a mobile data management platform as well as mobile data business and applications and terminals.

Based on the network, Sunday is expected to roll out its 3G-based services at the end of the year.

Huawei also set up a joint venture with Siemens Mobile in February to explore the development of time division synchronous code division multiple access (TD-SCDMA), the home grown 3G wireless communications standard.

Based in Beijing, the total investment for the joint venture will reach more than US$100 million.

Of this amount, Siemens owns a 51 percent stake while Huawei Technologies owns the rest.

Huawei Technologies was one of the first of the TD-SCDMA Alliance's eight members, a group which was set up in October 2002.

The company announced in November that it entered the mobile phone handset market, making models for use with the next wave of third-generation (3G) mobile services.

Huawei is also a player in an already crowded worldwide handset market that includes domestic manufacturers like TCL and Ningbo Bird Co Ltd in China, as well as global giants Nokia and Motorola.

According to Huawei spokesman Fu Jun, Huawei has already begun producing handsets for use with mobile systems that use the CDMA-1X standard backed by US-based Qualcomm Corp.

Within Asia, systems using that standard are already functioning in China, the Republic of Korea and Japan.

Fu said Huawei is also developing handsets for WCDMA, which is the European standard Hong Kong's Hutchison Whampoa Ltd is using in its 3G service now on offer in Britain and Italy.

He added WCDMA handsets are being designed in various partnerships with Matsushita Electric Industrial Co's Panasonic, NEC Corp and Infineon Technologies AG.

"We should be ready (for WCDMA handset production) by the middle of this year," he said.

"But we don't have a specific plan for production yet."

Fu said that Huawei, which expects 2004 sales of about US$5 billion, has not disclosed production targets for phones based on either standard.

But the fast-growing company, which has said it hopes to make a public offering someday, has also faced controversy, including a copyright infringement lawsuit by US networking equipment giant Cisco Systems Inc.

"I believe both Huawei and ZTE are heading in the right direction towards overseas expansion," said Zeng Jianqiu, a professor with Beijing University of Post and Telecommunications.

"They are good examples for domestic equipment manufacturers seeking overseas business," he said.

According to him, exploring the international market is a trend all domestic manufacturers who want to become competitive in the global context should follow.

"However, domestic equipment manufacturers should learn more about the international rules and international market so as to better position themselves," Zeng stressed.

ZTE Corp, like its rivals Huawei Technologies and Shanghai Bell, has a wide range of overseas customers.

ZTE posted a 15.5 percent rise in fourth-quarter net profit last year, helped by resurgent demand for telecoms equipment.

"The domestic telecommunications industry grew rapidly and the global market was recovering in 2003," ZTE said in its 2003 annual results report published in the official Shanghai Securities News.

"We expect continued strong growth in the domestic industry and a quick recovery pace in the global market in 2004, allowing us to realize sustained and steady development," it read.

In 2003, net profit rose 32.7 percent year-on-year to 752.50 million yuan (US$91 million) as turnover jumped 45.7 percent to 16.04 billion yuan (US$1.94 billion), buoyed by strong sales of telecom exchanges and fiber transmission and digital data equipment, ZTE said.

"The overseas market is continuing to be a key propeller for our development this year," said Yin Yimin, president of ZTE.

He expects the company's overseas business will register an increase of 70 percent this year with its international orders surpassing US$1 billion.

The company has also said it is going to seek new growth areas other than its mobile phone business.

"We are going to kick off 3G mobile handset in the fourth quarter of the year," said Luo Zhongsheng, assistant general manager of ZTE's Handset Department.

According to him, the company will provide a series of 3G handsets both high-end and low-end.

Sources close to ZTE said that the company is planning to manufacture two kinds of 3G handsets based on WCDMA and CDMA 2000.

Last year, sales of its handsets reached 4.5 million units, up 66 percent from the previous year.

(China Daily April 14, 2004)