AST Research to Enhance No. 1 Position in China with New Tianjin Joint Venture, Also Announces China’s Biggest PC Contract
IRVINE, Calif. — September 9, 1993 — With more the 1.2 billion people, China is the world's most populous country with the world's fastest-growing economy.
To extend its leading market share position within the world's fastest-growing economy, AST Research Inc. Thursday announced plans for AST China, a joint venture with the People's Republic of China government. The joint venture will have headquarters in Tianjin, incorporating full-service marketing, sales, service and manufacturing operations.
AST, the fourth-largest PC manufacturer in the United States, was one of the first American companies to sell PCs in China and is currently the No. 1 market share holder. The company's sales have grown to capture more than 25 percent of China's $440 million total PC market, which, according to International Data Corp., will expand at a 22 percent annual rate through the year 2000.
During this period of high growth, more than 70 percent of China's market share is forecasted to be comprised of U.S.-based computer companies.
The joint venture announcement for AST China was made at a contract signing ceremony held in Beijing involving more than 500 guests, including Safi Qureshey, AST president and chief executive officer, senior Chinese government officials and AST resellers and customers.
In addition to AST China, the company also announced it has opened new sales offices in Shanghai and Chengdu, and has completed the largest PC contract ever negotiated by any PC company in China — an $80 million deal with Legend Technology Ltd. involving an estimated 40,000 386- and 486-based PCs over the next 11 months.
As one of AST China's largest resellers, Legend has bolstered its Beijing sales operations by appointing sub-dealers in Guangzhou, Hangzhou, Nanjing, Xian and other key cities in order to prepare itself for the anticipated rise in demand for AST products.
"China represents the world's most promising market for PCs and other high technology products," said Qureshey. "Economic reform has been very successful and the recent promotion of the country's public-oriented economic system will result in higher demand for PC systems."
AST began selling products in China in 1985 and was one of the first companies to recognize the vast market potential within the region. Since then, the company's products have continually grown in popularity, vaulting AST to its premier market share leader position.
"Our new joint venture marks a leap forward in the evolution of the company's long-term commitment to the Chinese market," said Qureshey.
"Our goal is to become China's most-valued partner for PC systems. We are in a unique position to better serve the Chinese market by offering a broad selection of high-quality products, backed by a superior service and support network that will be based entirely within the country.
"Our partnership with the Chinese government will play a key role in AST's strategy to capture additional worldwide market share. It will not only strengthen the company's No. 1 position in China, it also will serve to enhance our presence throughout the entire Asia/Pacific region."
In addition to manufacturing PCs, AST China will work with the Chinese government and local resellers to develop the market for PC-based products to private businesses and home users through marketing, training and educational programs. Presently, more than 90 percent of PC sales in China are to government agencies.
Over the next year, AST plans to establish a nationwide sales and service network for resellers and end users, consisting of eight sales offices and more than 10 service centers.
In addition, the company will begin to address the home computer market through department stores and other consumer channel outlets.
"Manufacturing is only one element of the equation," said Phillip Wong, AST vice president, Asia-Pacific, who oversees the AST China operations. "Through the efforts of our partnership, we intend to help establish a thriving local market for high-tech products that will help revolutionize the way the Chinese people work and live.
"Local full-service operations will not only enable AST to supply Chinese government agencies with computers, it will also provide the necessary infrastructure to help business and home users take maximum advantage of new technologies." State-of-the-Art Tianjin Facility
Located in Tianjin, approximately 60 miles southeast of Beijing, AST China is scheduled to begin operation in September 1994. The project is a result of a joint venture, majority-owned by AST, with the Tianjin Economic-Technological Area Business Development Co., a government agency established by the Tianjin Electronic and Instrumental Industry Authority and governed by China's Ministry of Electronic Industry.
Under terms of the joint venture agreement, AST will retain 90 percent ownership, with total investment not to exceed $16 million.
AST China will operate from a 260,000 square-foot facility located in the Tianjin Economic-Technologic Development Area, an economic zone established by the Chinese government in 1984 especially for foreign joint ventures and/or wholly owned foreign enterprises. Construction of the building, which is located next to Motorola's China headquarters, will begin in November.
Once operational, AST China will manufacture, distribute and repair PC systems, while providing post-sale technical support to the company's customers and end users. Employment during the first year of operation is expected to number more than 400, consisting of manufacturing, marketing, sales, administration and technical support personnel.
AST China represents the company's eighth manufacturing facility worldwide, and the third in the Asia/Pacific region. It joins world-class facilities in Hong Kong, Taiwan, Scotland and the United States to provide worldwide supplies in each of AST's major markets.
Production efforts — which will initially consist of final assembly, with printed circuit board assembly phased in at a later date — will be led by Billie Lui, who was recently named vice president of AST's Asia manufacturing operations.
"We expect that the increased demand and manufacturing capacity created by AST China will further enhance the company's volume purchasing leverage, which will enable AST to deliver products, worldwide, that are even more competitive than they are today," said Qureshey.
AST selected Tianjin as the site for its China headquarters because of its proximity to Beijing, in addition to the region's conveniently located air, sea and ground transportation infrastructures, which will enable quick and efficient product deliveries to customers. Unique Marketing Position
With its broad selection of products, AST is in a unique position to supply innovative PC-based solutions to Chinese government agencies, private businesses and home users.
In addition to traditional keyboard-based PCs, AST will leverage its market leading position in pen-enabled technologies, recently acquired in the Tandy/GRiD acquisition, to develop PCs and applications software that are well-suited for the Chinese stroke-based written language.
Products such as the GRiD Convertible and PalmPad will be marketed — in combination with applications software developed by AST's PenRight! software operations — as quicker and more efficient solutions to information capture, processing and communications functions which are now performed only with keyboard-based systems.
Company Background
AST Research is ranked No. 367 on the 1992 Fortune 500 list of America's largest industrial companies. In July 1993 AST acquired Tandy Corp.'s PC manufacturing business. The acquisition makes AST the No. 4 U.S. and No. 6 worldwide personal computer company, according to International Data Corp.'s calendar year 1992 unit volume shipment data.
These figures includes AST, Tandy, GRiD and Victor brands manufactured by AST.
AST's award-winning product lines include desktop, file server, notebook and pen-enabled computers marketed under the Advantage!, Bravo, Premmia, Manhattan SMP, PowerExec, GRiD and Victor brands. PenRight! is a DOS-based graphical-user interface and handwriting recognition system.
AST reported overall record year-end revenues of $1.412 billion for fiscal year 1993. The company is represented in 100 countries and operates 41 international subsidiaries and sales offices.
AST's corporate headquarters is located at 16215 Alton Parkway, Irvine, Calif. 92718. Telephone 714/727-4141, 800/876-4278. Fax: 714/727-9355.
CONTACT:
AST Research, Irvine
Emory Epperson, 714/727-7958