Bell switch plant coup for Pudong

THE Sino-Belgium joint venture, Shanghai Bell, last month began construction on what will be the largest telecommunications switch manufacturing plant in the world.

The facility, to be built in the new Pudong hi-tech commercial zone across the Huangpu River from Shanghai, will produce more than four million digital lines annually by 1995.

The scale of the project, which will more than triple Shanghai Bell's productive capacity in 1995, reflects the massive telecommunications infrastructural development programme underway in China.

The factory will include its own integrated circuit fabrication facilities, and will become operational, in phases, between March and November next year.

Shanghai Bell Telephone Equipment Manufacturing Co is a three-way joint venture which is 60 per cent-owned by China's Post and Telecommunications Industry Corporation (PTIC), the production arm of the State Ministry of Posts and Telecommunications.

The venture's foreign ownership comes from a 32 per cent holding by Alcatel Bell - the Belgium subsidiary of European transport, energy and communication conglomerate Alcatel Alsthom - with the remaining eight per cent held by the Belgium government.

The venture, which manufactures and provides software for Alcatel's System 12 digital switch equipment, was established in 1983 and started production in 1986. It is among the highest-profile joint ventures in China and is certainly one of the most profitable.

Shanghai Bell expected to produce 1.35 million digital lines during 1992, generating revenue of US$235 million and expected to boast profits of considerably more than $30 million.

The new Pudong plant brings together, into three buildings on a 70,000-square metre site, various manufacturing, assembly, storage and development facilities spread over locations in Shanghai.

The plant is to be built for an estimated cost of $150 million and will be funded entirely by Shanghai Bell.

As a part of its Pudong expansion plans, the Shanghai Bell joint-venture partners have extended their co-operative agreement another 15 years to 2013.

Shanghai Bell has been among the chief beneficiaries of the central government's eighth Five-Year Plan (1991-1995) which made telecommunications infrastructural development a national priority.

The Five-Year Plan calls for the installation of an additional 15 million telephone lines. In a market that boasted just 20 million lines when the plan started, the target is an ambitious one indeed.

Shanghai Bell director and general manager Mr Bert DeGraeve said the company was starting to see real growth after difficult early years.

He said the company had benefited from its relatively long history of co-operation with mainland partners, and the fact that many foreign suppliers had withdrawn their presence in China after the 1989 Tiananmen Square massacre.

Customers who started buying the Alcatel System 12 in the late 1980s on soft loans or government grants were returning to place further orders, and paying for the equipment with turnover generated by their original orders, Mr DeGraeve said.

''This year [1992] we will install as many exchange lines as we did in all the previous years put together,'' he said.

With the success of Shanghai Bell, the Alcatel 1000 System 12 has become one of the dominant switching systems in China.

Coupled with systems imported from other Alcatel subsidiaries including Australia, Belgium, France and Germany, Alcatel claimed to serve more than 40 per cent of China's digital switching needs.

Foreign suppliers - most notably Siemens of Germany and NEC of Japan - have begun ramping-up production at China-based facilities, though on a considerably smaller scale compared with the Shanghai Bell plans.

Other companies, in particular the US-based AT & T, have become far more aggressive in pushing products in China. The US has complained that China is studiously avoiding purchasing US-made equipment in favour of Japanese and European manufacturers.

AT & T made its biggest-ever switch sale in China last month, with a $4.3 million contract for the company's 5ESS switches signed with the Changchun City Post and Telecommunications Bureau in Jilin province.

According to Shanghai Bell's Mr DeGraeve: ''The China market is probably the most competitive in the world right now. You have all of the world's biggest players here.'' Also moving to the new Pudong manufacturing site is Shanghai Belling Microelectronics, an integrated circuit manufacturer which is a joint venture between Shanghai Bell and the Shanghai-based Radio Factory 14.