Agilent Technologies: The benefit of being local

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Agilent, the testing and measurement business spun off from Hewlett-Packard in 1999, has more claim than most to be regarded as a pioneer of doing business in China.

As HP, the company started the first hi-tech joint-venture on the Chinese mainland in 1985, some eight years after David Packard first visited the country.

By 2004, China was Agilent’s second-largest market, after the US, and the operation is regularly placed in the top 10 joint-ventures in the country.

This, according to the president of Agilent’s electronic measurement group in Asia, Su Hai, bodes well for his parent company as well as for the Chinese marketplace.

“China today is the factory for the world,” he says. “But China is itself a very big market for all kinds of products. No one can neglect China.”

Nevertheless, making the most of the business opportunity means meeting the demands of domestic Chinese and export customers alike.

China is widely seen as a source of low-cost manufacturing, especially in industries such as textiles and consumer electronics. But that is only a partial truth.

“The business we are in is not heavily dependent on labour but on the intelligence of our people,” says Mr Su.

“For ourselves, labour costs are not so much a reason to locate there. But if we are manufacturing in China, we are best placed to keep up with the pace of the Chinese market. We can produce the things that local customers need.”

Aligent’s business is helped by the fact that customers for its testing and measurement products are in some of China’s fastest-growing industries, including telecommunications, life sciences and semiconductors.

As a company selling almost entirely to other businesses, there are advantages to operating from a location close to both customers and to the supply chain.

Not only does Agilent manufacture in China, but its factories there are increasingly supplied by local partners.

Success in China also relies on finding the right joint venture partner from the outset.

Although it is now easier for foreign companies to invest in China than it was 20 years ago, a good local partner can still complement the skills of an incomer.

“When we started, HP provided the knowledge for the manufacturing operation and the business practices,” says Mr Su.

“The partner complemented that with local knowledge, including how to deal with the government and how to expand services and distribution.”

Agilent has continued to use joint-ventures to expand its reach, especially in the local Chinese market.

Most recently it established a joint-venture with Chengdu Qiafeng Electronics, specifically to develop and make test equipment for the Chinese market.

Mr Su maintains that far from being a market driven almost entirely by price, Agilent’s Chinese customers are becoming increasingly demanding as they, in turn, look to improve the quality and efficiency of their operations.

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