Tyco Electronics Power Systems last month signed a memorandum of understanding with China Putian Corp., a supplier of telecommunications systems headquartered in Beijing.
Under the proposed agreement, Wuhan Putian, a China Putian subsidiary based in Wuhan, will manufacture, sell, and distribute power systems integrating Tyco's Galaxy Power Systems' AC/DC and DC/DC products.
Tyco will provide design and quality specifications and loan temporary engineering and technical personnel to Wuhan Putian, which will begin building the systems within three to six months, according to Mickey Miller, vice president of the Mesquite, Texas, power systems business of Tyco Electronics Corp.
"Our local presence in China will produce a more competitive offering to regional customers and reduce costs," Miller said.
Leveraging China Putian's manufacturing, sales, and distribution network will enable Tyco Electronics Power Systems to rapidly access the China telecom market, and help meet its goal of increasing the percentage of its revenue generated in China from 5% now to 25% next year, he said.
The alliance provides the power systems division with a new market for its rectifier-type telecom power products, which can help fulfill China's growing requirements for wired and wireless communications infrastructure.
China's telecommunications industry is expected to grow at a compound annual rate of 7.9% through 2006, when revenue should hit $27 billion, according to Gartner Dataquest, San Jose.
Up to now, Tyco has mainly established access to the Chinese telecommunications market through sales of DC/DC and AC/DC power supply modules to Chinese OEMs, using its EMS partners' China plants, Miller noted.
Although Tyco Electronics Power Systems is still building its presence in China, parent company Tyco Electronics already has a strong China foothold with eight plants and 12,000 employees making mostly connectors and electromechanical parts like relays and switches. Tyco Electronics also has a design center in Shanghai.
China Putian generates annual revenue of $8 billion and has a workforce of more than 16,000. The company has installations in most of China's 26 provinces and joint ventures with other global electronics suppliers including Alcatel, Corning, Ericsson, Lucent, Motorola, Nokia, and Panasonic.
"The move is a good one for Tyco," said Mohan Mankikar, an analyst at MicroTech Consultants Inc., Santa Rosa, Calif. Noting that telecommunications power systems often incur higher shipping costs because of their weight, Mankikar said that "with rectifier-type products, you need to manufacture in the same region you sell in."
Among rival power suppliers, Emerson Electric Co., St. Louis, in October 2001 acquired Avansys Power Co. Ltd. from China telecom network equipment provider Huawei Technologies for $750 million.