Motorola’s Zander: Future is in emerging markets

The future of the mobile communications industry lies in emerging high-growth markets, like China and India, and companies ignore the opportunities in these countries at their own peril, Motorola’s top executive said.

“It’s where the future is, not only for low-end handsets but for mobile communications,” said Ed Zander, Motorola’s chief executive officer, during an interview at the International Telecommunication Union (ITU) Telecom World 2006 conference and exhibition in Hong Kong.

“You’ve got to make the investments. It’s painful in terms of cost. … But three to five years from now you’re going to look back and say it was the right thing to do,” Zander said.

In recent years, Motorola has worked hard to build its presence in high-growth emerging markets, investing heavily in its operations in China, India, and elsewhere. As part of these efforts, the company was awarded two contracts by the GSM Association, an industry group comprised of operators around the world, for a low-cost GSM (Global System for Mobile Communications) handset designed for emerging markets .

“The press sometimes focuses on whether we can get a $20 or $10 handset, but it’s the next 4 billion people that are going to get connected and all of the communications that goes with it, the infrastructure,” Zander said.

The rapid pace of economic growth and the large populations in these countries means that vendors cannot afford to stay away if they want to remain competitive. “You have to be in these countries. That’s the bottom line. Do you want to be in business 10 years from now? Doing business in the U.S. is great. We love it. Doing business in Europe is nice. We love it. But China and these other countries is where the growth is,” Zander said.

Low-end products have helped Motorola build volume in emerging markets, but these countries also have sizable populations of affluent consumers, particularly in major cities such as Beijing and Mumbai. “If you’re not in the country you don’t get to sell this stuff,” he said.

Emerging markets are also an increasingly important source of research and development (R&D) for Motorola. “We have more than half our R&D outside the U.S. In China alone, we have 18 R&D centers and 3,000 engineers,” Zander said, noting that these investments are not driven by a desire to reduce R&D costs or outsource operations from the U.S.

“You go to India and the PhDs coming out of there are some of the best in the world, and China every year is graduating more and more students in engineering, math, and science,” Zander said. “We have to be where the smart people are.”