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Emulex Subsidiary in China Taps into Regional Expansion

Emulex Corp. has launched its first subsidiary in China, as the Costa Mesa-based networking-equipment maker looks to build stronger relationships in the region.

Beijing-based Emulex Networking Technology Co. has 10 employees in sales and marketing positions to support product lines throughout China, as well as some technical engineers. The unit has a new branch office in Shanghai, where an existing work force had been. Emulex also has some workers in Shenzhen, China, and neighboring Taiwan.

Emulex seeks to bolster ties with regional operations of computer makers Dell, Hewlett-Packard and Lenovo, which all sent representatives to the Emulex launch celebration in Beijing. It also hopes to create new relationships with local manufacturers and strengthen some existing local bonds.

Emulex President Jeff Benck said some local manufacturers want the equipment maker to integrate products more directly into theirs. Emulex designs and makes networking equipment that connects storage, servers and data centers. Its products are embedded in a number of local manufacturers’ products from HP, Lenovo and others.

Manufacturing Ties

Emulex has strengthened ties with Chinese-based manufacturers, including diversified consumer-electronics maker Huawei Technologies Co., telecommunications-equipment maker ZTE Corp., and cloud-services provider Sugon, among others. It uses distributor Digital China and a large network of resellers to sell its products in the region, and relies on Asian contractors such as Singapore-based Flextronics International for manufacturing.

“We continue to see our business in China grow,” Benck said. “Their economy is growing faster than other parts of the world.”

The Asia-Pacific region, which three years ago represented 35% of Emulex’s annual revenue, now contributes 57%.

Emulex had $501.8 million in revenue in its most recent fiscal year, ended June 30, so some $286 million in sales were generated from Asian-Pacific operations.

Emulex first entered the China market about five years ago with a handful of sales employees; most lived in the U.S. and spoke no Chinese. The new unit has workers fluent in their native Mandarin or Taiwanese.

China’s growing economy has fueled an explosive expansion of digital content and a corresponding greater demand for server storage in all segments of the country’s public and private sectors. The expansion of China’s financial-services industry also prompted security improvements in the nation’s technology infrastructure, Benck said.

Market Demand

Emulex has seen strong demand in China for fibre-channel adapters, which connect storage equipment to servers to increase capacity, allow data back-up and improve data-access performance.

The region has yet to upgrade to 10-gigabit Ethernet connections, now prevalent in data centers elsewhere.

“We want to be there at the beginning,” Benck said.

Emulex has moved from a minor player in 10-gig products to join segment leaders Intel Corp., the Santa Clara-based chip king, and Irvine-based chipmaker Broadcom Corp. It also competes against perennial fibre-channel adapter leader Aliso Viejo-based QLogic Corp., which Emulex spun off in 1994.

Emulex’s Beijing office-opening ceremonies welcomed local suppliers, partners, customers and civic leaders.

Acknowledging Chinese business traditions, it held a “hua long dian jing” ceremony—in which dragon eyes were painted to solidify a pact—gave out gold chocolate coins to bring prosperity and customers offered good-luck scroll signings.

“They tend to be a very relationship-driven culture, and that’s another reason you have to be here,” said Benck, who attended the ceremonies last month. “It’s really important to get across the table and get the discussion going.”

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