New Zealand technology company Rakon has signed a deal with Huawei that targets a quadrupling of its sales to the Chinese manufacturer over the next five years.
The realization of that goal would bring Rakon’s sales to Huawei to $56 million by 2017.
Huawei has been working with Rakon for a number of years and plans to use the company’s frequency control products in its handsets, smart devices and infrastructure programs.
“This is a significant partnership for Huawei, with Rakon providing crucial electronic components,” said a spokesman for Huawei in a statement. “Huawei’s supply chain is truly global, with only the most impressive and competitive suppliers selected. Rakon’s success is testament to New Zealand’s ability to produce world-leading products and innovations.”
Rakon has been struggling to meet profit targets due partly to the strength of the New Zealand dollar against other currencies. For the financial year ending March 31, 2012, it reported a net loss of NZ$420,000 ($340,000) on revenues of NZ$178 million, compared with a profit of NZ$8.5 million on revenues of NZ$189 million in 2011.
News of the arrangement with Huawei sent Rakon’s share price up nearly 20% on the NZX-50.
A July 2011 decision to open manufacturing facilities in China is credited by Brent Robinson, Rakon’s managing director, for making the company a lot more competitive, given levels of growth in the Chinese economy.
He says the deal with Huawei proves the value of that decision. “The letter of intent recognizes the greater scale and breadth of our product range, validates our commitment to a strategy of globalization and our investment in operations in China.”
Robinson also pays tribute to the efforts of Tim Groser, New Zealand’s trade minister, and NZ Trade and Enterprise in helping to facilitate the deal, as well as the 2011 trade mission to China that Rakon describes as a “catalyst for the enhanced relationship with Huawei”.
“Rakon’s advanced technology tells a great story for New Zealand, and their commitment to China and the potential it offers is a good example of what a long-term approach can deliver,” said Peter Chrisp, chief executive of NZ Trade and Enterprise.