Chinese Optical Firm Raises Expansion Funds

HONG KONG (03/14/2000) - Seeking to grow its business, Shenzhen, China-based dense wave division multiplexing (DWDM) equipment manufacturer Optilink Technologies Co. Ltd. has raised HK$82 million (US$10.5 million) in funding through its major shareholder, Hong Kong-based Vision Telecommunications Holdings Ltd., Computerworld Hong Kong has learned.

The funding, which will be used to finance Optilink's expansion, was raised by Vision through a deal with Hong Kong-based property developer Soundwill Holdings Ltd., said a company statement. Vision, which holds a 70 percent stake in Optilink, is owned by Soundwill Chairman Grace Chan.

Under the terms of the deal, Soundwill will purchase a 20 percent stake in Vision for HK$82.1 million, according to the statement. The remaining 30 percent of Optilink is owned by Beijing University.

This funding will be used to "reactivate" Optilink, which has been dormant since completing China's first DWDM network - a four-channel 10Gbps DWDM link between Shenzhen and Guangzhou - in 1997, said Winnie Chan, director of Optilink Technologies.

Optilink's roots lie in DWDM research that began in 1992 at Beijing University. By 1996, research had reached the point where commercialization of the technology was deemed feasible.

To pursue commercialization of its DWDM technology, Beijing University established Optilink in conjunction with three companies owned by the Guangdong provincial government.

DWDM technology is used to increase the capacity of fiber-optic networks by transmitting multiple light signals simultaneously over a single optical fiber.

The Shenzhen-Guangzhou DWDM link, which has operated smoothly for more than two years, is part of a backbone network connecting Hong Kong and Beijing, the Beijing-Jiujiang-Kowloon core backbone project, said Chan.

Although that project went smoothly, Optilink was not able to build on its success due to a disagreement between the firms holding shares in the company, Chan said. That dispute centered on how many resources the companies should contribute to Optilink, she said.

To help break the deadlock, the Shenzhen government put officials at Beijing University in touch with Soundwill's Grace Chan. Chan, who owns a majority stake in Vision Technologies and has extensive business connections in Guangdong province, invested in Optilink in July 1999 with the intention of getting the company's operations back on track.

Today, Optilink has 40 employees, including 20 engineers, according to Optilink's Winnie Chan. Most of the company's staff is based at the company's main office in Shenzhen, she added. The company also operates a sales office in Beijing.

Reflecting the company's close ties with Beijing University, Optilink's basic research and development activities are still conducted at the university's National Laboratory on Local Fiber-Optic Communication Networks and Advanced Optical Communication Systems, said Chan. Commercialization of this research and manufacturing takes place in Shenzhen, she added.

In addition to the 4-channel DWDM equipment used in the Shenzhen project, Optilink has also developed 8-channel and 16-channel DWDM equipment, said Chan. The company plans to begin development of a 32-channel system later this year, she said, adding that the product will be ready to ship sometime in 2001.

Optilink will compete head-on against multinational networking companies that have strong DWDM offerings, including Nortel Networks and Lucent Technologies.

Both Nortel and Lucent have strong, established businesses in China. However, as a Chinese company, Optilink enjoys several advantages over foreign competition, said Chan.

First, due to lower staffing and development costs, Optilink will be able to offer more competitive pricing, said Chan.

Second, Optilink will have an advantage with Mainland customers that prefer to purchase networking equipment from domestic vendors, said Chan, citing China's armed forces, the People's Liberation Army (PLA), as an example.

According to Chan. the PLA plans to begin deployment of DWDM equipment this year and has decided for "strategic reasons" to purchase only domestic DWDM equipment for deployment - excluding Lucent and Nortel from consideration.

Third, Optilink will benefit from extensive business connections with Mainland officials, particularly in Guangdong province, one of China's fastest growing markets for data networking, said Chan.

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