Short March: Shantou In the Light On Innovation

UNCLAS SECTION 01 OF 02 GUANGZHOU 010987 SIPDIS SENSITIVE SIPDIS STATE FOR EB, EAP/CM, EAP/PD STATE PASS USTR USDOC FOR 4420/ITA/MAC/MCQUEEN, CELICO, DAS LEVINE USPACOM FOR FPA E.O. 12958: N/A TAGS: KIPR ECON EINV KPAO PINR CH SUBJECT: Short March: Shantou In the Light On Innovation REF: Guangzhou 10542 and previous (U) This document is sensitive but unclassified. Please protect accordingly. Not for release outside U.S. Government Channels. Not for internet publication. ¶1. (SBU) Summary: Two Shantou companies -- Guangdong Golden Glass and the Shantou Institute of Ultrasonic Instruments -- demonstrate that this eastern Guangdong city does have its share of innovative companies despite its reputation of being the "heart of the heart of darkness" in intellectual property rights (IPR) malfeasance. End Summary. ¶2. (SBU) In Consulate Guangzhou's "short march" sojourn in Shantou (reftel),local FAO Director Fang Haishun purposely wanted Congenoffs to visit two enterprises that are successful innovators with patents and other IPR to protect. This would offset the often negative impression that observers have of Shantou as a nitty gritty town that specializes in counterfeiting (septel). Accordingly we were escorted to the privately owned Guangdong Golden Glass Technology, Ltd., and the state-owned Shantou Institute of Ultrasonic Instruments (SIUI). Clear-Seeing and Clear-Thinking Golden Glass -------------- ¶3. (SBU) Guangdong Golden Glass (GGG) Chairman Zhuang Dajian enthusiastically welcomed the Consulate party, saying that the company has grown immensely since being founded in 1992. Now with a total registered investment of HK$54 million (US$ 7 million),GGG specializes in designing, engineering, manufacturing and installing complex and advanced curtain wall, structural glass wall, skylights, canopies, etc. Specifically, these include tinted energy conserving glass, glass capable of withstanding hurricane winds, and hardened glass that can withstand weapons fire and close proximity bomb blasts. Zhuang proudly demonstrated that GGG glass could withstand proximity blasts, immense weight (including being driven over by heavy trucks without cracking or damage),and impact by hard objects (metal and stone propelled against sheets). ¶4. (SBU) Zhuang said that GGG holds a small number of patents, but more importantly has considerable experience in designing and producing according to client design. Moreover, GGG has an outstanding track record of working with better known international specialty glass companies and has many partnership and technology/manufacturing agreements with Pilkington, Asahi, Glaverbel, Guardian, Saint Gobain, and others. These constitute the company's IPR strengths and underlie the choice of the company by the Tokyo subway system to supply the hardened glass to be used in new construction at the Tokyo Station in the system. Indeed, the factory floor was filled with specialty glass in huge pallets destined for the Tokyo project. ¶5. (SBU) As to why GGG chose Shantou to locate its main facilities, Zhuang said that municipal leaders had delivered on commitments welcoming such an enterprise. Moreover, the area had a sufficient supply of raw materials for making glass. Ultrasound Company -------------- ¶6. (SBU) At our next stop, SIUI President Li Delai said that the company specializes in medical ultrasound devices, inducers, and industrial flaw detectors, producing about 5000 ultrasound devices and 15,000 transducers per year, with sales growth in ultrasound devices from 2800 units per year in 2003 its current level. It also has the capability to build 100 different types of transducers. Li said that since beginning operation in the 1970s, the company has advanced from primitive black and white displays to color digital Doppler imaging. It has partnered with Tsinghua University in Beijing and the Guangdong Digital Signal Processing Institute for research and development and has 7 patents with 2 additional patents pending. GUANGZHOU 00010987 002 OF 002 Competitors, Partners, and Markets -------------- ¶7. (SBU) The major markets for SIUI are Europe, the Middle East, and Southeast Asia. The United States is the largest market for ultrasound devices and SIUI is now developing ultrasound devices to be used in veterinary practices. SIUI sells both domestically and overseas using its own brand name. Competitors include Toshiba, Hitachi, Philips, Siemens and General Electric (GE). SIUI has partnered with GE medical and Philips for purposes of marketing and product development. Most of the manufacturing equipment and raw materials for the ultrasound devices and transducers come from overseas. For example, crystals for transducers are imported from Motorola in the United States because they are of superior quality although much more expensive than local crystals. SIUI is a national key enterprise with state ownership. Li said that the company would be converted into a stock company over the next year. ¶8. (SBU) SIUI has a highly automated factory line, but what gives the company a slight advantage over its international and domestic counterparts is the fact that there is a major labor-intensive component to the production of ultrasound devices. This is in the necessity for individual employees to join optical fibers under high magnification view to the transducers. This is painstaking work requiring a high degree of expertise. Comment -------------- ¶9. (SBU) Both of these companies appeared well-run, with research and development components aiming to improve both products and manufacturing processes. Both also were paying close attention to design -- GGG because of its desire to expand its architectural glass market and SIUI in trying to "package" its ultrasound devices in a manner that making them more convenient for medical personnel to use. This creativity and innovation takes place in a city where the IPR bureaucracy is bumptious at best (septel) -- a good reminder on how the good coexists with the bad. Dong