BEIJING — It should have been Qualcomm Inc.'s time for celebration. One of China's leading telecom firms recently signed $1.5 billion in contracts for equipment using the San Diego firm's wireless standard.
That move by China Unicom is the most positive sign yet that Qualcomm's code division multiple access technology--known as CDMA--has a profitable future in China, which has an exploding mobile phone market now dominated by Europe's competing GSM system.
The current success has been a long time coming. In the years that Qualcomm has been chasing its China dream, it has been foiled numerous times. Contracts were supposed to be signed months earlier, but reportedly got caught up in domestic political squabbles and U.S.-China tensions.
Which might explain why Qualcomm's response to the long-awaited news was a cautious statement that it "looks forward to seeing the roll-out of CDMA in China this year." Qualcomm's protective stance reflects the scars of doing battle in one of this country's riskiest and potentially most lucrative industries. The fast-moving telecommunications industry is where some of the world's biggest names have been burned by China's unique way of doing business. It also is where the potential rewards, in the hundreds of millions of dollars, eclipse those of other markets.
The telecommunications industry is like the canary in the mine shaft, an early-warning system to detect whether China can carry out the changes the international community demands as the price of admission to the World Trade Organization.
The challenges are huge. China will have to alter the rules of competition without jeopardizing the power of the Communist Party, open lucrative government monopolies to foreign competition while protecting domestic franchises, and create channels for new information that could prove to be destabilizing.
As part of these complex reforms, the government is deregulating the telecom sector, moving from a single, state-owned provider--China Telecom Corp.--to a marketplace with half a dozen carriers, dozens of foreign and domestic hardware providers and a profusion of companies offering Internet services and related products.
The potential for a dramatically different post-WTO world--coupled with the fact that China's is one of the few economies still expected to grow at healthy rate in the coming year--has triggered a flurry of activity as foreign firms snare partners and cut deals designed to give them first-mover advantage.
