Germany's Siemens Wednesday opened a software development centre in Hangzhou, capital of Zhejiang Province, as part of its drive to tap more into the country's future 3G mobile communications market.

The centre, involving an investment of about 300 million yuan (US$36 million), will focus on developing data applications for future 3G mobile networks and billing systems for convergent networks.

The move came hot on the heels of Siemens Communications Group's sell-off of its struggling mobile phone business to Taiwan's BenQ, underscoring the firm's strategic shift to the more profitable telecoms network businesses.

The centre will work closely with Chinese mobile operators and local universities to tailor products for the Chinese market, said Christoph Caselitz, President of Siemens Communications Mobile Networks.

The centre will be staffed with about 50 engineers by the end of this year.

Siemens plans to aggressively expand the headcount, said Caselitz. And "200 (engineers) is the minimum we are committed to" in the near future, he said.

The president said there was a trend that "software is becoming the most important thing" in the telecoms network business.

Intensifying the localization of R&D activities would help Siemens tap into the vast and low-cost software talent pool in China.

Siemens is already operating three software development centres in Nanjing, Beijing and Shanghai.

Setting up research labs confirms a trend that major global telecoms equipment makers are beefing up local 3G research and development capabilities to grab an upper hand in China's future 3G market.

Siemens' chief rivals in the mobile network business - Ericsson and Nokia - have also established such labs in China and are aggressively recruiting local engineers.

Ericsson has eight R&D centres while Nokia has two 3G R&D centres in Hangzhou and Chengdu.

Siemens is set to be a big winner in China's 3G market as it supports WCDMA and TD-SCDMA, two of the three 3G standards which are widely expected to be used in China.

Nokia only supports WCDMA. Ericsson supports WCDMA and CDMA 2000 but made a tentative step to support TD-SCDMA by partnering with local vendor ZTE Corp in May.

Siemens and China's Datang Telecom are the major developers of TD-SCDMA, which is regarded as a Chinese home-grown standard with strong government backing.

Siemens started producing WCDMA equipment in a manufacturing facility in Shanghai for exports.

The Chinese Government has yet to indicate when to award operators with the licences to build out 3G networks.

Siemens has been aiming to become one of the top two suppliers of 3G mobile network equipment and solutions in China's future 3G market.

Siemens was the third largest supplier of the 2G GSM network equipment to China Mobile in the first quarter of this year, according to Beijing-based research house Analysys International.

For China Unicom's GSM network, Siemens was the top supplier of both radio and switch equipment, with a 29 per cent and 40 per cent share.

Source: China Daily