| Our Business
We are a leading developer of radio frequency, or RF, technology
and a leading provider of wireless coverage solution in China.
RF is the fundamental technology that enables wireless communication
equipment to transmit and receive signals. We provide our
wireless coverage equipment and related services as an integrated
solution to telecommunication operators to enable them to
expand the reach of their wireless communication networks
with no coverage or weak spots, such as buildings, highways,
railways, tunnels and remote regions. We design and manufacture
our wireless coverage equipment for use in our coverage solutions.
We tailor our wireless coverage solutions to the specifications
of our customers to meet their wireless network coverage needs.
Our customers include China¡¯s largest telecommunications operators.
Our core research and development efforts in RF technology
and our vertically integrated design, engineering and production
processes have allowed us to design, develop and produce in-house
our three lines of products, namely:wireless coverage solutions;RF
parts and components;and RF-based wireless access products.
Wireless Network Coverage Business
We derive our revenues primarily from the provision of wireless
coverage solutions. According to the CCID Report, we were
the second largest provider of wireless coverage solutions
in China in 2003 and 2004 in terms of annual contract value.
Our wireless coverage solutions include indoor wireless coverage
solutions and outdoor coverage solutions, as well as base
station coverage extension solutions. To date, we have developed
over 100 models of wireless coverage equipment and products
for use in wireless coverage solutions.
RF Products
In addition to the sale of wireless coverage solutions,
we develop, product and sell a portion of our RF part and
component to wireless operators, wireless communication equipment
manufacturers and other providers of wireless coverage solutions.
These customers use our RF parts and components in their own
wireless coverage equipment or wireless systems. We have developed
over 80 models of active modules which amplify RF and 50 models
of passive modules which otherwise receive, process and transmit
RF. Our RF-based wireless access products include W-LAN and
other wireless system products we sell to equipment manufacturers
and wireless communication carriers. In 2006,we plan to introduce
high-capacity digital microwave products to be used for the
wireless transmission of voice and data traffic.
We have a strong in-house RF technology research and development
capability. Our three research and development centers, staffed
with over 200 researchers and technicians with experience
in the wireless communication industry in China, are located
in Shenzhen, Quanzhou, and Nanjing. Our RF expertise has provided
a platform from which we intend to further broaden our product
offerings. Our integrated design, development, engineering
and production capabilities provide us with a distinct competitive
advantage over our competitors in China by allowing us to
quickly respond to customized design requests from our customers
while keeping down our production costs. We manufacture and
assemble our products in our two production facilities located
in Shenzhen and Quanzhou.
Leveraging on the Wireless Coverage Market
We provide most of our wireless coverage solutions to the
local affiliates of the two leading wireless operators in
China, the China Unicom group and the China Mobile group.
According to the CCID Report, we were the second largest provider
of wireless coverage solutions to both the China Unicom group
and the China Mobile group in 2004.Since 2004,we also sell
a portion of our solutions to the China Telecom group and
the China Netcom group. In recent years, the wireless coverage
market in China has benefited from increased capital expenditures
by PRC wireless operators. We believe that the market for
wireless coverage solutions will continue to grow in China,
affording us an opportunity to grow our revenues in the wireless
coverage market. According to the MII Report, revenue for
the wireless communication industry in China, including telecommunication
and data communication, is expected to grow by approximately
13.8% in 2005,11.9% in 2006,10.8% in 2007,9.9% in 2008 and
9.0% in 2009.In addition, we expect to continue to expand
our product portfolio to exploit opportunities in different
markets, such as W-LAN and 3G digital communication.
Key Financial Figures
We experienced significant growth in revenues from RMB 315.8
million in 2002 to RMB 360.8 million in 2003 and RMB 566.5
million(US$ 68.4 million)in 2004 and in gross profit from
RMB 188.7 million in 2002 to RMB 219.8 million in 2003 and
RMB 324.5 million(US$39.2 million)in 2004.Our net income in
2002,2003 and 2004 was RMB 128.6 million, RMB 148.8 million
and RMB 146.6 million(US$17.7 million), respectively. Our
operating income increased from RMB 140.2 million in 2002
to RMB 155.5 million in 2003 and to RMB 207.5 million(US$25.1
million)in 2004,with operating income margins of 44.5%,43.1%
and 36.7% in 2002,2003 and 2004,respectively.Because of significant
increases in wireless coverage investments in 2004 by the
China Unicom group in celebration of its 10th anniversary,
our revenues of RMB 241.7 million during the six months ended
June 30,2004 represented an approximately 429% increase over
the six months ended June 30,2003.Our operations and financial
performance during the six months ended June 30,2005 remained
normal although, as compared to our extraordinary year in
2004,we experienced a contraction. In the six months ended
June 30,2005,we had revenues of RMB 182.2 million (US$22.0
million),gross profit of RMB 104.5 million (US$12.6 million),net
income of RMB 8.2 million(US$1.0 million) and operating income
of RMB 30.2 million (US$3.7 million),with an operating income
margin of 16.6%.
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