China Trade Vote Changes High-Tech Landscape

With the dust barely settled after last week’s U.S. House vote to extend permanent normal trade relations (PNTR) to China, many Internet technology firms and electronic commerce companies are looking to the Far East to determine their fortunes.

Qualcomm, Inc., a company that had hoped to become a household word among the Chinese people, is instead struggling to reposition itself in the world marketplace after China’s number-two phone company announced it will not adopt the company’s mobile phone technology.

Qualcomm originally anticipated a major move into China after signing an agreement with China’s Unicom phone company earlier this year. However, Unicom reversed itself after gaining full approval for trade relations with the U.S., opting instead to have its approximately seven million subscribers use the Global Standard for Mobile Communications (GSM) wireless standard.

What the blow will mean to Qualcomm’s long-term future is uncertain, but on Tuesday the company’s stock was down 4 11/16 on the Nasdaq.

Microsoft Looks East

Meanwhile, the embattled Microsoft Corp. sees possible redemption in the Chinese market, predicting its revenue growth in the country will double this year.

According to Graham Brent, general manager for Microsoft Hong Kong Ltd., Microsoft’s Windows operating system is installed on about 60 percent of all China-based Web servers. Brent said Microsoft’s China division is its sixth largest revenue-generating market after Japan, South Korea, Taiwan, Hong Kong and India.

Microsoft is even predicting a 30 percent growth rate in Hong Kong, despite expectations that Hong Kong’s growth will slow down in the second half of 2000, due to higher interest rates.

Overall, Microsoft plans to spend $90 million (US$) in Asia, offering new services and expanding its already pervasive market share.

Investments Show Results

While Microsoft sets its sights on dominating the software market, Dell Computer Corp. has already invested about $800 million in more than 90 technology startup companies around the world, including a respectable number in the Asia-Pacific region.

Even before the vote to normalize trade relations with China, Dell was in the process of expanding its manufacturing facility in the Southern Chinese province of Xiamen. Ultimately, the expansion will quadruple its production capacity. Dell is also one of seven Nasdaq-listed stocks that saw their first day of trading in Hong Kong on Wednesday.

IT Companies Bullish on China

Even with a number of new technology and e-commerce initiatives already in the works for China, most U.S. IT companies still see the world’s most populous country as a huge untapped market.

Last week, after the House of Representatives passed the bill to extend PNTR, a number of IT companies and industry trade organizations spoke out about the necessity of tackling the Chinese market in order to grow the new economy.

Although labor unions warn that normalizing trade relations with China will mean a loss of manufacturing jobs in the U.S., IT companies are rapidly moving forward to extend their operations into the previously untouchable market.

Some observers say the unions should be applauding the passage of PNTR, because it will actually strengthen the U.S. economy and bolster the already strong U.S. job market.

“Nothing is changing in terms of Chinese access to the American market,” said Greg Garcia, manager of corporate and government relations for 3Com. “What changes is China is opening up its market to U.S. goods and there are a lot of jobs in the U.S. that are supported by exports.”

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