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To: Dale Baker who wrote (32613)	2/12/2003 3:30:00 AM
From: Dale Baker	Read Replies (1) \| Respond to of 118717

Interesting stuff on China: The Chinese Connection by: u049670 Long-Term Sentiment: Buy 02/11/03 04:09 pm Msg: 19566 of 19577 I've been reading Ubi's views on UTSI's strategy and the rebuttals from others and would like to offer a couple of observations based on my experience in China over the past 20+ years. I first visited China in 1979 and returned almost every year until 1997 when my family and I mnved to Beijing. We returned at the end of 2000 and still visit at least twice a year. First -- in almost every area of commerce the Chinese have bought from the premier Western sources intially but quickly move to purchasing from "Chinese" companies starting with WOFEs (wholly owned foreign enterprises, e.g. Motorola) or JVs (joint ventures and then moving to Chinese owned businesses. For example, the first TVs in China were Japanese import brands like Sony. Then JVs were developed that produced lowend TVs for the mass Chinese market. Today Chines companies own the lowend market and are starting to penetrate the middle market with their eyes set on a significant chare of the highend market. Another good example is refridgerators where GE/Whirlpool originally dominated but now Haier (a Chinese owned conglomerate) holds the largest share and is fact starting to export to the U.S. and other Western countries. Final example would be Legend Computers which was the weak sister in the PC market versus Compaq and IBM but now holds the largest share. I believe UTSI has noted this purchasing progression and has focused on creating a Chinese brand image with its alliances with Datang and others which will give it considerable advantage over the Nokias, Lucents and others who the Chinese view as foreign. Second -- the Chinese would dearly love to mandate Chinese technology for the Chinese market because of the tremendous impact on their foreign reserves. Already the Chinese are bringing to market numerous made in China software products (anti-virus, translation and even nascent operating systems) which are increasingly winning market share. I believe the Chinese are strongly vested in the success of TD-SCDMA and view it as we in the U.S. viewed the race to the moon. Add to that the long term Chinese perspective and the ability to stretch out the bureaucratic process and I arrive at a perspective that 3G licenses will not be awarded until TD-SCDMA trials are not only over but successful. Third -- as another contributor noted, the Chinese are very pragmatic. While the middle class and upper class are growing, they represent a very small minority by Western standards. So while China has its own yuppie consumerism, the largest portion of the Chinese market is more interested in value than gee whiz. Or from another view -- PAS/IPAS remains very high tech and affordable while meeting 95% of the needs of probably 80% of those who will have mobile phones by 2005. Bottom line -- the Chinese government will delay release of 3G licenses to ensure Chinese companies are fully competitive. Put another way -- if a company is either Chinese or deeply integrated with Chinese companies including codevelopment, then it will enjoy a decided advantage over another less Chinese company. Thus if UTSI continues to increase its Chinese brand image, it will succeed against those who are less Chinese.