Cisco to set up R&D lab in Shanghai

Cisco Systems Inc. plans to open a research and development (R&D) centre in Shanghai that will focus on developing Voice over Internet Protocol (VoIP) technology, the company’s chief executive officer (CEO) said Thursday.

The R&D centre, the first to be established by Cisco in China, will involve an initial investment of around US$32 million and is the first in a series of planned steps to ramp up the company’s R&D activities in the country, said John Chambers, CEO and president of Cisco, speaking at a press conference in Beijing.

Cisco is also on the hunt for investments in China, Chambers said. “We do a lot of investments in startups and we do a lot of acquisitions of startups,” he said, noting that the company has already invested in six Chinese companies.

The Shanghai R&D centre is expected to open before the end of April 2005, Cisco said in a statement, adding that the company’s initial investment in the centre will be spread over the next five years. Cisco will hire 100 researchers over the next 18 months to staff the centre, it said.

The centre will initially focus on VOIP technology, but the scope of the work being done there will expand over time, Chambers said. “Make no mistake about it, we will do this one step at a time,” he said.

Explaining Cisco’s decision to set up an R&D centre in Shanghai, Chambers cited the aggressive rollout of VoIP services by Chinese telecommunications companies, strong Chinese government support and a good education system. “You all have some great universities and you’re turning out some really highly talented engineers,” he said.

The Shanghai R&D centre will also be used to help Cisco learn how to work more effectively with remote R&D centres, Chambers said, adding that this experience will also help the company to better assimilate acquired companies in the future.

“The success rate of my acquisitions goes down the further I get from San Jose,” Chambers said, referring to the site of Cisco’s corporate headquarters in California.

Cisco rival Juniper Networks Inc. last week announced plans to open an R&D centre in Beijing before the end of this year, its first such facility to be set up outside the U.S. The R&D centre will focus on the development of security and networking products for corporate customers, the company said.

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