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East West Alliances

Some Examples of Relevant Strategic Alliances Advanced Micro Devices (AMD) and Beijing University Founder Group -- in an effort to increase its market share in China AMD recently formed an alliance with the Founder Group. The latter will make and sell computers based on AMD's 64-bit microprocessors; while AMD sees this move as a way to make a new start to its business in China. Founder Group sees the alliance as a response to increased competition from Intel, which has dominated the local market. Initially, they will target the publishing sector, of which the Group has a more than 80 Jamba! and Chinadotcom both sides are looking to the partnership as a way to expand their markets. Chinadotcom hopes to further expand its distribution platform for wireless products, particularly its in-house developed wireless applications, to Europe and the United States. Jamba! (European wireless entertainment provider) expects to expand into the mobile data services markets in Greater China by using Chinadotcom's presence in Hong Kong, the mainland and Taiwan. The combination of Chinadotcom's mobile application and software development capabilities with Jambas technology platform is also expected to increase the product offerings from both companies. Jamba! offers wallpaper programs for handsets, single and multiplayer Java-based wireless games, polyphonic ring tones and multimedia messaging services to subscribers in Europe and the US. It also has relationships with key European mobile operators. Yahoo and Sina -- Sina (the leading mainland internet portal) and Yahoo have teamed up to offer auction services in China. The co-branded website will provide services for small- and medium-sized businesses in China and offer auctions and fixed-price sales. The partnership will leverage the two companies' respective user bases. Sina has 83 million registered users; Yahoos China traffic figures are estimated to be 78 million. The alliance also combines Yahoos expertise and technology in the auction platform with Sinas market reach and brand in China The venture follows eBay's purchase of the remaining stake in Shanghai-based Eachnet.com and the recent launch of free auction services in Hong Kong. It is expected to help Yahoo improve its market position on the mainland. HP and Red Flag Software Red Flag Software (China's state-backed Linux distributor) and HP announced a joint agreement to promote the use of Linux in the Chinese enterprise market. The two companies are to set up a Linux laboratory at the HP Experience and Solution Center in Beijing. The center will be used for testing products and for other R&D. Even though China is HPs fastest growing market in Asia, the company is looking to accelerate development of its sales and marketing infrastructure outside of major cities such as Beijing and Shanghai and into second-tier cities (such as Chengdu and Xian) and third-tier cities (with populations under 5 million) to take advantage of the increased purchasing power in these places. The strategy is to partner with mainland systems integrators and professional distributors and to focus on the growing use of the Linux operating systems in large and small enterprises, as well as by the government. 3Com and Huawei Technologies While Cisco has 60 per cent share of Chinas $1.6 billion market, Huawei has forged a joint venture with 3Com, who will invest $160 million, various patents and licences and take a 49% stake in the partnership, rising to 51 per cent after two years. The joint venture will manufacture and sell under the Huawei-3Com name in China and Japan and use the 3Com name in other markets. Huawei will provide most of the 1,500 staff in China and the manufacturing. 3Com hopes, through the partnership to tap into Huaweis 10,000strong research and design team and ease its way into the fast-growing mainland routers and switches market. What Huawei really covets is the 3Com brand name. Huawei has already moved well up the value chain of a typical original equipment manufacturer - it sells into 40 countries, has a strong product line and R&D capability to go with its low-cost production. But in getting the pricing power and profits of a Sony or Nike, the missing part of the jigsaw is the brand. But building a brand, especially a global name, takes time and is expensive

2 Siemens and Huawei Technologies -- Huawei has formed a $100 million joint venture with Siemens Information and Communication Mobile to compete in China's nascent 3G mobile technology market. The Beijing-based jointventure, TD Tech, 51% owned by Siemens, was set up to develop and manufacture equipment compatible with the domestic 3G standard, TD-SCDMA. The partnership is expected to employ 350 staff, including 100 from Huawei. Its near-term goal is to start rolling out equipment for the establishment of TD-SCDMA base stations by mid-2005. TD-SCDMA is standard jointly developed by Siemens and China's Datang Mobile. Although there is no timetable for the issue of 3G licenses in China, global telecom players are preparing to access the world's largest mobile phone market, with some 300 million subscribers. The other two 3G standards competing with TD-SCDMA for China's 3G licences are CDMA2000, developed by US-based Qualcomm, and Europe's W-CDMA. The TDSCDMA standard is apparently backed by the central government. Motorola and Proview International Holdings -- Computer monitor maker Proview has formed an alliance with Motorola in an effort to break the dominance of Japanese and South Korean rivals in China and internationally. Last year, Samsung, Philips, TPV Technology and LG Electronics were the top four brands in the mainland's personal computer monitor market. Motorola intends to use Proview's low-cost production and established distribution network to gain greater market share. The alliance is expected to lift Proview to the first-tier market by increasing its shipments by 250% in three years. The alliance was granted a license to produce and sell liquid crystal display (LCD) and cathode ray tube (CRT) monitors and LCD and plasma television sets under the Motorola brand. The partnership is Motorolas first foray into the highly competitive mainland market for LCD displays and televisions. Proview will start selling the Motorola brand products in China this year and in the US and Europe early next year. The product range will be widened to include DVD recorders and players, optical digital drivers and car audio-video products. This alliance is the latest in an industry-wide consolidation trend. Last year, Beijing-based BOE Technology Group acquired a controlling stake in locally-listed TPV, the world's secondlargest manufacturer of PC monitors. Sun and Chinaunicom -- China Unicom, the world's third-largest mobile phone operator, has signed a far-reaching agreement with Sun Microsystems to develop and promote Java-based mobile data services for the mainland's wireless phone market. The multi-year deal builds on a three-way alliance between Chinaunicom, Sun and services provider Beijing ZRRT Communication Technology. The three partners have set out to create and deploy advanced mobile data applications and services in China under the brand name "UniJa". To foster wide adoption of the UniJa platform, the alliance will also set up a Java Technology Lab to explore new communications industry requirements, develop next-generation services, and carry out mobile certification and testing. A complete Javaecosystem business model for carriers, handset manufacturers, value-added service providers, and application and content developers is now in place Intel and Richtek Richtek (a Taiwan fables IC design firm, specializing in power-management ICs) is working with Intel to develop next-generation power-management chips. They have begun shipping the chips supporting Intel's Grandsdale chipsets. The move prompted HP and Dell to begin placing orders with Richtek and is expected to boost the chip designer's annual revenues. Infineon and Nanya Technology With the objective of expanding and strengthening their positions in the highly competitive DRAM market, the German spinoff from Siemans Semiconductor, and Taiwans sole DRAM supplier for OEMs, have forged a successful alliance. The objectives are to share risks in this highly volatile market, cut costs, and gain market share. Not only are these goals being achieved, but there has also been important exchange of tacit knowledge between these two firms as they integrate highly different corporate and national cultures. Philips and BenQ -- BenQ Corporation, a major Taiwanese mobile phone and display maker, and Philips Electronics formed a partnership to develop and make optical storage products. With an initial investment of $20 million (Philips taking a stake of 51%) the partners expect their companies combined share of the optical storage market to increase to 15% from their current combined level of 8% and to become more profitable. The partnership

East West Alliances

3 also aims to attract "knowledge-based" industries to Taiwan, referring to an emphasis on research and development over regular manufacturing. HP and Hon Hai -- Hon Hai Precision Industry Co., Ltd. of Taiwan and Hewlett-Packard recently announced a strategic partnership in their customer-supplier relationship. The agreement is for co-developing new products. Until now, Hon Hai has simply produced HP products according to HPs designs. The alliance appears to reflect a to revised strategy for HP, after Carly Fiorinas departure, to address mounting competitive pressure from rivals, particularly the quickly rising Lenovo of mainland China. The partnership also shows Hon Hais determination to shift itself into a technology developer from a pure manufacturer. The companys chairman said his company would set aside 3% of its annual revenue, or approximately $500 million, for R&D. Although they have not announced what products they will seek to co-develop, it is believed they will focus on consumer electronics such as LCDs, DTVs, digital music players, as well as nanometer materials and nanometer cells. Hon Hai has a strategic alliance with Intel, that was formed in 2002. Infineon, Richtek and System General -- German chipmaker Infineon Technologies and fabless companies Richtek Technology Corp. and System General Corp. of Taiwan have been discussing strategic cooperation after Infineons recent acquisition of AMDTek Inc., another Taiwanese chip designer. The two Taiwanese companies specialize in power-management integrated circuits (ICs). Infineon plans to cooperate with Richtek in power-management chips for motherboards and with System in alternating current/direct current ICs. Richtek is also working with Intel to develop next-generation power-management chips and has begun shipping the chips supporting Intel's Grandsdale chipsets. Hewlett-Packard and Dell Computer recently placed orders with Richtek for the first time. IBM and Kingdee International Software -- With an eye to generating more business from multinational companies, China's Kingdee International Software Group plans to forge an alliance with IBM. Kingdee, a Hong Kong-listed firm since 2001, would be looking to IBM for generating new projects in the mainland and across Asia, especially with foreign multinational firms. Kingdee, which is based in Shenzhen, supplies business-automation software including enterprise resource planning, customer relationship management and supply-chain management programs. It has over 200,000 customers, made up mostly of public and private sector accounts maqinland China. While Kingdee is already one of the leading providers of enterprise software in China's mid-tier commercial market, it is striving to become one of the top 10 enterprise software vendors in the world by 2010.

East West Alliances

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