Bloomberg News

Sitronics Plans China Venture, Factory With ZTE

April 09, 2008

OAO Sitronics, Russian billionaire Vladimir Yevtushenkov's technology company, plans to build a factory in China with ZTE Corp. (763) to cut production costs and profit from the world's most populous market.

Sitronics plans to reach an accord with ZTE, China's second-biggest maker of telephone equipment, by the end of May, Chief Executive Officer Sergey Aslanyan told reporters today. The factory will be 200,000 square meters (2.15 million square feet) in size and take nine months to build, Aslanyan said, declining to say how much it will cost.

``Our main focus is to cut production cost,'' Aslanyan said in Moscow, where the company is based. ``We aim at 20 to 25 percent.''

Sitronics, which develops software and makes telecommunications equipment and consumer electronics, reported a net loss of $108 million for the third quarter last year on increasing costs and delayed projects. The company plans to reduce the size of its research and development units in the Czech Republic and Greece, Aslanyan said, declining to elaborate.

The China plant will make phones and communications equipment including for a wireless network that parent company AFK Sistema plans to build in India. Sitronics also plans to set up a research and development center in China, Aslanyan said.

Indian Network

Sistema, which controls Russia's largest mobile phone-phone operator, OAO Mobile TeleSystems, plans to invest $4 billion to $7 billion with partners to build a network in India. Sistema controls 51 percent in Shyam Telelink, an Indian mobile-phone company.

Back at home, Sitronics is waiting for the government decision to co-finance its new 58 billion-ruble ($2.5 billion) plant to make 0.045 micron to 0.065 micron chips in Zelenograd, near Moscow. The government may finance 46 percent of the project, Sitronics Vice President Alexander Lutsenko said at the same press conference.

The company is now selecting a technology partner for the new Russian plant, Lutsenko said. Sitronics is choosing from Intel Corp. (INTC:US), the world's largest computer-chipmaker, International Business Machines Corp. (IBM:US), the world's second- largest software maker, and STMicroelectronics NV (STM), Europe's largest semiconductor maker.

To contact the reporter on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net

To contact the editor responsible for this story: Lars Klemming at lklemming@bloomberg.net


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