Homegrown SCDMA system more popular

The apparently late arrival of China''s homegrown SCDMA telecom standard has had some people prematurely marking it down as an also-ran. But as the technology gathers momentum, this Eastern tortoise could soon be outstripping several Western hares. Totally brand-new technologies do not come to market overnight and, as a result, many technology start-ups borrow established technologies and improve on them, before introducing their own alternatives. Chen Wei also intended to take a "me-too" approach when he set up a technology start-up 10 years ago to develop a wireless access system for China. "At first we wanted to develop technologies based on the CDMA standard," recalls Chen, a former project manager in Motorola''s semiconductor division. Yet, Chen was discouraged. "We spent several months studying the patents owned by Qualcomm," he says. "And we found whatever we did, our technologies would be associated with Qualcomm and we would always lag behind." Qualcomm pioneered CDMA, a standard in the mobile telecom sector, and the US firm owns most CDMA-related patents. CWill, the start-up co-founded by Chen Wei and Xu Guanghan, was "forced" to seek independent innovation. The two Chinese technicians believed that, with CDMA apparently a closed door to them, only independent innovation could result in real technological strength. "We wanted to develop our own way instead of tying ourselves to established technologies owned by foreign companies." Without "independence," the firm would have to continuously pay Qualcomm for licenses to use its technology. In November, 1995, CWiLL and a research institute affiliated with the government formed a joint venture called Xinwei Telecom with Chen as the general manager. The government injected a large amount of funds into Xinwei to aid its research and development (R&D). Finally Xinwei developed SCDMA, a wireless access system with IPRs (intellectual property rights) fully owned within China. SCDMA is a big and rare success in China''s mobile telecoms industry where most core technologies relating to standards, mobile phones, chips and equipment are controlled by foreign technology vendors. Yet, SCDMA, a limited mobility service, has long been a hard-sell in China. "Many people had doubts that Chinese home-grown technologies could outperform foreign technologies," says Chen. "That kind of established mindset has long been our biggest challenge." Chen is not exaggerating. In 2003, the government issued a notice to telecoms operators, asking them to adopt SCDMA as a limited mobility system in rural areas. In a related move, the government banned operators from developing a similar service based on CDMA 450, a rival technology to SCDMA. Compared to CDMA 450, SCDMA is less mature but it is low-cost and a more efficient alternative. Yet, the country''s largest fixed-line carrier, China Telecom, is still developing CDMA 450 in some provinces, according to some government officials. Operator scepticism has long overshadowed the development of SCDMA. "Any technology has some flaws at the first stage. And it''s very hard for new technologies (developed by China), especially those with independent innovations, to snatch market opportunities as foreign technologies are already mature and stable," says Chen. The big problem is that, if the new technology has no chance to be tried, it will never be improved and stands no chance of succeeding. Without telecom operators'' support, Xinwei was forced to trial the technology in the city of Daqing, China''s largest oilfield, in 2001. Daqing was the only hope for Xinwei. Operators'' choice At that time, the country''s mobile operators used European GSM and US CDMA technologies, while fixed-line operator China Telecom, which was later split into China Telecom and China Netcom, used Xiaolingtong (Little Smart), a system based on a Japanese-developed PHS (personal handy system) technology. Xinwei and a local operator owned by Daqing Oilfield tried the SCDMA system and eventually turned it into a commercially viable technology. China Netcom, the country''s No 2 fixed-line operator, has given Xinwei some support, operating a SCDMA network in Southwest China''s Sichuan Province, with some 800,000 subscribers, and in other limited areas. SCDMA now has more than 3 million subscribers. Thanks to the up-take of SCDMA, Xinwei employs more than 1,500 people , compared to 280 three years ago. The firm expects sales from SCDMA technology to hit 3 billion yuan (US$370 million) this year. Yet, Xinwei missed a golden chance. Due to the late take-off of SCDMA, the Xiaolingtong service has more than 82 million subscribers. Compared to Xiaolingtong, SCDMA, which is also called Dalingtong (Big Smart), boasts larger base station coverage, better voice quality and caters well to sparsely-populated regions. "We want to eventually replace Xiaolingtong with SCDMA," says Mou Jun, general manager of China Netcom''s Sichuan subsidiary. "We need to give some chances to Chinese home-grown technologies. Without trials and applications, they will remain in the laboratory for ever." Cash-flush Chinese operators, can buy any technology they want, but in the long term they should support home-grown innovation instead of piggybacking technology from foreign vendors, the general manager adds. Hurdles ahead SCDMA is still facing some hurdles due to a lack of infrastructure supporting the system. Wu Hequan, vice-president of the China Academy of Engineering, says operators should allow SCDMA some time to catch up. The support given by the government to some new homegrown technologies in their initial stage "is not meant to support the developers, but instead meant to benefit the whole industry chain and eventually the domestic operators," Wu says. At least, the support should force foreign technology vendors to cut prices or royalties, the industry veteran says. The Chinese Government in recent years has become increasingly smart at using home-grown technology standards as a bargaining chip in negotiations with foreign governments and technology vendors. In December 2003, Chinese regulators prohibited the import or sale of certain types of wireless devices that did not comply with a domestic security standard known as WAPI. The Chinese Government later shelved the implementation of WAPI as it drew sharp response from the US government because it could hurt US companies such as Intel. Although the spat sparked some backlash at home, industry observers say China actually benefited greatly from the episode as it forced the US government to ease restrictions on high-tech goods to China. The Chinese Government has leant its backing to a number of domestic technology standards, including TD-SCDMA for 3G mobile communications, the Linux operating system, audio and video coding standard AVS and IGRS, a standard interconnecting electronic devices at home. It is also becoming increasingly aggressive in setting standards for the revolutionary radio tag technology RFID. Industry observers expect disagreements between China and foreign countries to grow as China rapidly learns from the United States how to use issues such as technology standards as an invisible trade barrier. Accounting firm Deloitte Touche Tohmatsu predicted in a report last year that China''s standards initiatives will shape global competition in the technology, media and telecommunications sectors for years to come. The firm warned that "companies may find themselves locked out of the world''s largest and fastest-growing market, or worse, unable to compete in a global marketplace increasingly defined by standards that originate in China." Xing Xiaojiang, an official with the National Development and Reform Commission (NDRC), one of the most powerful ministries in China''s State Council, urged Chinese firms to be open-minded and seek industry alliances to ensure a bigger influence in standard-setting. Datang Telecom, the parent of Xinwei and the major developer of 3G TD-SCDMA telephony, has been "somewhat conservative" in the IPR strategy in early days, the official notes. Datang has shyed away from joining other firms, especially foreign companies, in developing TD-SCDMA, which has long been lagging behind the foreign rival technologies of WCDMA and CDMA 2000. In 2002, the NDRC and the Ministry of Information Industry (MII) engineered a TD-SDMA industry alliance which has given a big boost to the Chinese technology. A number of foreign firms also joined the alliance. The Fifth Plenary Session of the 16th Communist Party of China Central Committee in October proposed the independent innovation as a major tool for the 11th Five-year Programme on National Economy and Social Development to build a strong national economy in the years to come. Xing says the NDRC is joining other ministries to work out preferential policies as well as special funds to support home-grown technology standards including TD-SCDMA, WAPI and SCDMA with Chinese IPRs, which could give China more power in standard-setting.

(source: business daily update)