Kingtype: Sussing Out the Chinese CATV Equipment Market

Travelling the Silicon RoadCHENGDU, China — While in China this past month, Electronic News Editor Jeff Chappell sat down with the founder and current board chairman of Chengdu Kingtype (Electronic) Group Co. Long Yon Gaing to talk about China, its burgeoning electronics industry, standards, and, specifically, the market for cable, digital and satellite television electronics.

Kingtype, the biggest manufacturer of CATV equipment in China, is one of the first domestic, privately held companies to form under China’s economic reforms of the early 1990s. In addition to the Chinese market, it also exports equipment to other parts of Asia, as well as to the United Kingdom.

What follows are excerpts of the conversation.

Electronic News: Can you tell us a little bit more about the history of the company and how it came about?

Long: Under the leadership of Deng Xiaoping, the central government in the late 1980s and early 1990s embarked on the policy of opening up China and its markets. It was at this time that several engineers including myself organized the company. There were six of us that started Kingtype in 1992. After 13 years, we’ve seen steady growth and great progress. The government’s policies have helped us achieve stable growth. Our current net assets are worth 260 million yuan [$32 million].

After so many years of development, we now stress technological innovation. We’ve had to address many problems of the years, but we’ve developed high quality products. We are the best among CATV equipment suppliers in China; we’re the No. 1 brand. Our company has also been directly involved in developing CATV standards in China. Others and I in the company were invited to serve on the National Broadcast and TV Standards Committee.

Electronic News: As a supplier of digital and analog CATV broadcast equipment and set-top boxes, do you do all of your own system design in-house? And are the components of your system produced domestically or abroad?

Long: Yes, we provide system design and system integration. Much of the materials and components, as related to semiconductor content in our products, come from outside China, while the rest of the system components come from domestic companies.

Furthermore, our industry is very professional, or business-to-business; it’s not like the consumer electronics industry. The domestic capability of China to design and produce its own chips is still relatively weak, so we must get our chip components from outside China, and will continue to do so for the time being. In the future, however, particularly for our set-top boxes, which just went into production, and satellite receivers, which we’ve just begun to start manufacturing, we perhaps might begin to use domestically-designed components.

Nowadays, the Chinese government is heavily supporting domestic chip design, manufacturing and the related software technologies. It is developing very fast. But today, our main products are CATV infrastructure equipment, such as network transceiver equipment, optical transmission equipment and wireless emission products, and system management software. And also digital signal broadcast equipment. We do make set-top boxes and satellite receivers, as well, but the set-top box isn’t that popular in China; digital television is still a small market.

As we’ve learned from the U.S. market, it’s not an easy one. This market is tough, and we also face outside competition. You see, unlike the United States, CATV in China is a public broadcast and service medium. So it is difficult to sell related products to the consumer. We would like to see China follow the U.S. FCC, which has set a new policy requiring that digital tuners be integrated with television sets in the future within the United States. As the set-top box isn’t popular here, we think we should follow this example in China.

Electronic News: With the growth of China’s economy, could that possibly spurn the growth of the market for consumer-related CATV and digital equipment, such as set-top boxes?

Long: Of course we will see considerable development in the future, and this will help promote the whole industry. Next summer China’s first direct satellite television broadcasts will begin, for example. That is when we plant to start selling our new satellite receivers. And the future integration of a digital tuner with the TV, this will promote sales of digital television. Once common people have the means to receive digital broadcast signals, it will spawn more digital programming – at that point we’re looking at a bright future.

Electronic News: Can you tell us about the state of broadcast and TV standardization in China?

Long: How fast the industry develops depends on China’s standards development. There are a lot of old standards: DVB, MPEG-2, and so forth. And now there are new global standards emerging, such as H.264. Here in China, we want to develop our own standard: AVS . Of course, the semiconductor industry is also concerned about this problem. These varying standards affect their design and manufacturing, and their design and manufacturing in turn affect ours.

Electronic News: So China’s own domestic standards will help China’s internal IC industry then?

Long: It should promote domestic IC design. It is why we set up our own standards. The H.264 standard, it costs too much money for domestic chip companies to design and produce related components. The MPEG-4 [a standard technically identical to H.264] actually is a good standard. …

Personally, I prefer the H.264 standard. But as a member of the committee, we can’t support it. But it does have a lot of support from the chip industry at large, however. If we did support it, we might see our own market [for related end-user equipment] develop more quickly. The number of chipmakers designing for the emerging AVS applications is still quite small. But this isn’t only my opinion. A lot of other committee members feel the same way. If the H.264 standard can eventually offer us a reasonable cost, we will accept it. That’s why China is waiting for the standards to mature a bit. We’ll wait and see. And that’s why we haven’t put our set-top boxes into mass production, because of the standards issue. DVB was the standard, now we are waiting for the new standard.

Electronic News: Can you tell us why Kingtype chose to set up shop here in Chengdu?

Long: Sichuan [Chengdu is the capital of Sichuan Province] is a base for the electronics industry in China. It stems from the era of Mao Zedong. In the interest of national security, the central government at that time adopted a policy of moving key industries inland.

Nowadays, the environment and talent here is quite rich. There are several excellent universities here, and a lot of electronics companies in China originated here; a lot of other companies in other cities – Shanghai, Shenzhen, etc. – their founders came from here.

The maturation of government policy has helped Chengdu grow, as well, but perhaps it has helped other cities such as Shenzhen even more so. But it will all lead to a more prosperous Chengdu. This city has demonstrated a lot of advantages under the new policies, such as the engineering talent available. There are a lot of multi-national corporations here now, too. And the living environment – the cuisine, the lifestyle – that’s why we chose Chengdu as our base.

Electronic News: Is there anything you would like to add, or anything else we should cover?

Long: Right now Kingtype is the main provider of CATV equipment in China. The next step for us is to cooperate with an overseas partner. We can learn advanced technology and management techniques from them; they can gain valuable access to the Chinese market. We are interested in mutual market development and R&D. It can be a win-win.

We also want to begin exporting more of our products beyond China. In fact, several companies outside of China have contacted us about OEM partnerships, inquiring about production of equipment for export.

Electronic News Travels to ChinaI’d also like to mention our involvement in two-way HFC [hybrid fiber coaxial] network equipment. [In 2004, the State Administration of Radio, Film and Television set up an HFC network technical lab within Kingtype. The company handles technical training for HFC operators in China.] Our company also wants to share its leading edge two-way HFC technology with the world. We’ve attracted a lot of attention already from Americans in this industry that came to see our two-way HFC technology; it’s won a lot of praise. We can build the related infrastructure for two-way HFC networks; our labor costs are low – it’s an advantage for us. But I want to stress the importance of the advantage of this type of network. Just in the last several months, we’ve done projects in this market, and it’s been well-received by consumers.

Editor’s Note: As explained at length elsewhere on this site, this is a news story written by me that originally appeared on the now-defunct Electronic News’ website, which is long gone. It’s former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge). You can still see a copy of this story at EDN.