nortel.jpgNortel joins the growing group of western technology firms beefing up their research and development in China.

The Canadian firm, which is facing stiff competition in the network equipment industry and yesterday reported less-than-stellar results, recently opened a facility in Beijing to develop next-generation kit.

Located at Wangjing, in Beijing's Zhongguancun science & technology park, the new centre is Nortel's third R&D facility in China — the other two are in Beijing and Guangzhou.

Nortel is just the the latest in a long line of western tech firms like Siemens and Microsoft that have unveiled new R&D facilities in China. As well as China's continuing attractions as a low-cost manufacturing base, these firms realise that it makes economic — and political — sense to do more R&D in China.

Nortel says it made the decision to build the centre back in 2003 as part of a strategy to commit $200m into strengthening its R&D capabilities in China, so it could hardly be accused of bandwagon jumping.

Mike Zafirovski, president and CEO of Nortel,told China Daily that the PRC is becoming increasingly important for Nortel, not only for sales, but also in terms of employment and R&D, although there has not been any significant shift in employment yet.

The topic is sensitive, because in the statement accompanying its financial results, Nortel said it would move some jobs from developed markets to “low-cost markets” such as China.

The networking equipment industry is a shadow of its former self and Nortel is probably the weakest of the big western players. It is losing money and while its rivals have merged to gain scale, Nortel has been left out of the current round of consolidation.

In this Globe and Mail article, Nortel pins some of the blame for its current problems on China's Huawei, whose growing strength is pushing down prices.

Because of its continuing dependence on old “legacy” technologies, Nortel is not a particularly attractive target for Huawei, although earlier this year the Canadian firm set up a JV with Huawei to make broadband access products — a market Nortel abandoned a few years back.

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