49_Hong Lu

Founder, President, and CEO, UTStarcom
Alameda - CACA US

Making the Call

For telecom entrepreneurs, China is the holy grail: more than a billion customers just waiting for a dial tone. Taiwan-born Hong Lu is providing the technology and hardware for fixed-line wireless phone service. (That's a cordless phone that works up to 60 miles away by relaying off base stations in other users' homes.) On December 12, his company topped 20 million customers, a stunning 70% of the fixed-line wireless market.

From Hong's original entry:

Tell us what you do and the specific challenge you faced

Hong Lu, UTStarcom's CEO, was born and raised in Taiwan and came to the U.S. to attend the University of California at Berkeley to study civil engineering. Lu served as the night-shift manager of an ice-cream parlor in Oakland to pay for college expenses. Years later, Lu visited China on a business trip and noticed that it took dozens of attempts before successfully getting a dial tone when calling out on a land line. He was shocked to find out that this was a common problem among a majority of Chinese residents. It was at this moment that Lu determined that there was a great business opportunity in telecommunications in China. Lu launched UTStarcom in 1991 and has since been successfully deploying the company's products into China, a market of more than one billion residents where only a third have phone capabilities.

What was your moment of truth?

Lu understood that in order to succeed in China it would take more than just an interesting technology. Lu realized that the Asian culture and government would play a significant role in doing business and spent a large amount of time working with carriers in each country to understand these differences in order to develop strong customer relationships, as well as adapt the company's products to meet the requirements and needs of each country. In addition, culture played a large role in the adoption of UTStarcom's primary wireless technology, Personal Access System (PAS). PAS is a fixed-line wireless phone service that can be used at home as well as throughout the subscriber's community. Lu spent a lot of time researching the Chinese culture and learned that more than 50 percent of the population does not travel farther than 100 miles from their home in their lifetime. To make PAS a reality for Chinese citizens, UTStarcom started working with China Telecom in 1994. The company started activating the service and sold their first system in 1997 and gradually started shipping to several customers in 1998, a major turning point for UTStarcom.

What were the results?

As a result of several carrier wins, UTStarcom went IPO in March of 2000. As of 2003, UTStarcom has grossed $1.96B in revenue and has logged 16 consecutive quarters of profitability since their initial public offering. In China, the number of subscribers on UTStarcom's PAS networks reached 21 million at the end of Q4 and total PAS subscribers in China are expected to be approximately 35 million by the end of 2003. UTStarcom is number one in worldwide PAS market with more 60 percent market share in China.

What's your parting tip?

In addition to creating innovative technology, you must understand the significance of culture and government in realizing your customer's needs.

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