Chinese market offers huge opportunities for Scottish startups

Published on Tuesday February 23rd, 2016

By China Daily 23 February 2016

Chinese market offers huge opportunities for Scottish startups

China’s market provides scale, but the increasingly sophisticated Chinese consumers’ needs for technology products and the innovation levels of Chinese technology partners also act as impetus for Scottish firms to accelerate their technology advancement, they say. China’s large technology consumer market and rapid industry growth is creating tremendous opportunities for Scottish technology startups, which often invest heavily into the research and development of new cutting edge technologies and require large scale deployment to recoup costs.

“China is the obvious destination for any technology company to go to, because if you have one percent market share in China, it’s more business than if you secure 50 to 70 percent business in the UK,” said Harald Burchardt, chief operation officer of PureLifi, at the World Mobile Congress in Barcelona.

PureLifi, which sells so-called lifi technology products, currently has sales on a small scale in western markets, but is keenly eyeing partnerships with Chinese telecommunications giants such as Huawei for mass market deployment of technology.

Lifi technology uses light to transmit information at very high speeds, much like the function of wireless wifi, but its small scale deployment means costs are currently higher than wifi. PureLifi is a technology spin-out from the University of Edinburgh.

“If our technology can be integrated into the networks of big Chinese telecom infrastructure providers like Huawei, then it can be commercialized on large scales. We currently manufacture in the UK, but we would be keen to consider shifting manufacturing to China if we find the right partners,” Burchardt said.

Scotland has historically enjoyed a high concentration of technology startups due to government support for the sector and universities’ research expertise for technology. Leading global technology firms like IBM and Hewlett-Packard have been in Scotland since the 1950s, and today 45,000 people are employed by electronics and electronics-related firms, accounting for 12 percept of manufacturing output.

This vibrant technology scene produced innovative firms like sensewhere, a startup founded in 2009 in Edinburgh focusing on accurate positioning technology, which is deployed for the first time in China after Chinese internet company Tencent made an investment in it last year.

Tencent already integrated sensewhere’s positioning technology to its Tencent Maps and Tencent QQ applications, and the same will be integrated into WeChat in the coming months.

With sensewhere’s positioning technology, users inside large buildings are able to access more accurate information on their exact location, so they can better navigate to a particular shop or restaurant, or find their family and friends.

This is particularly useful when users need to know their locations within big malls, as traditionally it is harder to detect a user’s exact position within indoor spaces compared to outdoor spaces. Tencent also enjoys the benefit of pushing targeted adverts and promotions to their users through its applications based on more accurate information of user locations.

Blake Bullock, vice president of business development at sensewhere, said:

Tencent's forward looking vision made our partnership a great success, and the additional capital Tencent invested into sensewhere was crucial for the firm's growth.

Like sensewhere, the Linlithgow-based Calnex Solutions also grew rapidly in China since entering the market in 2008 and it now supplies mobile phone network testing equipment for the likes of Huawei, ZTE, China Unicom and China Telecom. China now accounts for 20 percent of revenue of Calnex’s international business.

Most of the equipment Calnex supplies is used to test 3G and 4G networks, but last year Calnex signed a landmark deal with China Mobile to supply test equipment for their 5G networks. Because large scale commercial deployment of 5G technology will not be realized until 2020, Calnex is now supporting China Mobile as it participates in the global 5G standards setting process.

“China was a follower for 3G networks and 4G networks, but it is a pioneer in 5G technology, so it is very exciting for us to work with China Mobile as it participates in 5G’s standards setting process,” said Anand Ram, vice president for sales and marketing of Calnex.

Ram said China’s leadership in 5G technology largely stems from the fact that Chinese firms have gained confidence through experience working within the 3G and 4G technology frameworks and are ready to tackle 5G technology.

This coincides with the slow process of international bodies like 3GPP (3rd Generation Partnership Project) to set 5G standards, so instead Chinese firms are taking the initiative to work on 5G standards themselves, Ram says.

Such 5G leadership fits well with Calnex’s strategy of selling testing equipment for networks at early stages of the technology development when scale is smaller, rather than at later stages when demand is more large scale, technology is more mature and costs are lower, Ram says.

Meanwhile, the Edinburgh-based travel booking search engine Skyscanner is fast expanding into China, particularly after it acquired the Shenzhen start-up Youbibi in 2014.

David Low, developer advocate of Skyscanner, said that it was China’s large travel market that attracted the firm to set up a Beijing office initially in 2012, but after going to China his team realized the business model had to be changed drastically.

Across Western markets, its search engine was traditionally divided up to the three functions of car search, hotel search and flights search, but Low’s team realized Chinese consumers wanted all services and offers in one package.

In addition, Skyscanner functioned in western markets as a third party search engine that re-directed users to the car, hotel and flight providers for payment processing, but in China consumers preferred to pay the search engine directly.

Hence Youbibi’s payment processing strengths became useful, as Skyscanner’s China search engine (branded in China as Tianxun) now takes payments on behalf of service providers. Youbibi’s existing connections with Chinese travel industry service providers also allowed Skyscanners to provide integrated domestic and international travel services.

Further expansion into China by Scottish high technology firms China is backed up by Scottish government support. Its investment agency, Scottish Enterprise, also established offices in Beijing, Shanghai, Shenzhen, Hong Kong and Taipei to help attract greater Chinese investments into Scotland.


Join the newsletter

Subscribe to get our latest content by email.

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit