China: Threat or opportunity?

Cognex, one of the nation's leading machine-vision companies, recently announced that it had opened an office in Shanghai to take advantage of the rapidly increasing need for machine vision in China. The firm has plenty of company, as US companies try to satisfy China's growing appetite for technology.

Despite the recent SARS scare, EDN China Editorial Director William Zhang cites these continuing signs of electronics growth:

• Laptop computer sales are on target for a 30% jump from 2002 levels.
• Mobile phone users now total more than 200 million, with 36 manufacturers competing for the business.
• Nearly 400 IC design offices are operating in China—a third of them owned by multinational companies.

While foreign companies seek a piece of the action in China, they also fear incursions on intellectual property. General Motors, for example, is investigating a new Chinese-produced subcompact that looks curiously like one it had targeted for the Chinese market through its Daewoo unit. Cisco also has accused Huawei Technologies of pirating its Internetworking operating system.

How can a US company prosper in China without "giving away the store?" Joseph Vilella, president and founder of Vectron, has had to answer that question. His San Diego-based automated inspection company is in the final stages of an agreement with the China Ministry of Information Industry (CMII), which could lead to extensive sales of its K2-AOI circuit-board inspection system.

In 2002, the CMII approached Vilella about his AOI technology. The key attraction: Instead of relying on comparisons between a board under test and a golden board, the Vectron machines follow a parametric model—analyzing acquired images with respect to CAD data and surface-mount-component libraries.

Though encouraged by the potential for selling in China, Vilella suggests three essential steps for other entrepreneurial companies considering the Chinese market:

• Build in technical safeguards to defeat piracy of hardware and software. In the event of tampering, the Vectron machines will automatically shut down. Only Vectron-authorized personnel can service the firm's equipment in China.
• Provide strong application support, both on the ground in China as well as long distance via the Internet.
• Find trusted Chinese representatives who can help your company deal with cultural differences and cope with the government bureaucracy.

Above all, Vilella counsels patience. "You can't expect things to just fall in place out of the blue," he says. "But at the end of the day, the payoffs can be quite good."

Contact Lawrence D. Maloney at lmaloney@reedbusiness.com.