Shanghai is now home to Siemens' largest operation outside of Germany
In December 2000, Siemens decided to take its involvement in China a step further: It dispatched Mr. Klebsch, a handset-development engineer, to China to set up its first R&D center outside of Germany.
Within six months, he had hired 50 engineers, all in Beijing, to work on a high-speed wireless network and on software development. It had taken him twice as long to do similar hiring in Germany a couple of years before, he says. "The advantage of China is that everything is fast," he says.
In April, 2002, Munich gave the Chinese team a new task—the reengineering of Siemens mobile phones for low-end markets from the Middle East to Eastern Europe.
To make the phones less expensive, the Chinese engineers removed Internet hardware and other costly features.
With more than 500 models available at any given time, the Chinese mobile-phone market is among the world's most competitive.
It's also the biggest, with annual sales of about 65 million units, and the fastest growing.
Siemens generates nearly half of its $4.93 billion of sales in China with telecom equipment, much of it from handsets.
In 2003, Siemens' share of the mobile-phone market had dropped to about 5% from nearly 10% in 2000
A new class of Chinese manufacturers had entered the market and were using flashy designs and bargain prices to rob customers from incumbents like Siemens, Nokia Corp. and Motorola Inc.
The sharp decline forced Siemens to confront a hard truth: The Chinese found the German phones boring.
Siemens's phones came in dark colors and were shaped like candy bars.
The Chinese rivals offered an array of bright colors and funky designs.
The company's main problem was that the Chinese were flocking to clamshell-shaped mobile phones, a style the company didn't offer.
Company officials decided they needed to move quickly to close the gap in their product line.
In the spring of 2003, Rudi Lamprecht, the head of Siemens's wireless division, decided to take a chance: He assigned the Chinese team to develop a new clamshell phone.
He wanted to save money and see if the engineers could handle the job.
The project was the most technically difficult so far for the Chinese team.
To compete with the latest clamshell offerings from its competitors, Siemens had to offer something special.
The Chinese engineers decided they wanted the phone to have a special horseshoe-shaped antenna that could double as a hook for a carrying strap; a particularly complicated problem.
None of the other Siemens handsets had anything like it, so most of the components had to be designed from scratch.
They also wanted the phone to have two displays, an inside one for features like an address book and games, and an outside one that showed the time and caller's name when the phone is closed.
The technical specifications for the phone were more than 100 pages long.
Mission accomplished
The result, delivered in time for celebrations marking the 100th anniversary of Siemens's Shanghai office in May, 2003, was a silver phone with orange lights embedded around a clamshell frame that flash in different sequences to signal calls, messages, and alarms.
Sensitive to political fallout at home, Siemens rejects suggestions that it plans to shift R&D jobs out of Germany.
Still, new R&D positions are increasingly being created abroad and not in Germany.
Siemens plans to hire more software engineers in China and build a central research facility there.
—Clips from The Wall Street Journal Online by Matthew Karnitschnig, 2003.
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