Kodak plans to invest
$1 billion in China

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Eastman Kodak Co. today announced agreements to undertake a $1 billion expansion in China.
Under the agreement, Kodak will invest more than $1 billion in China over the next several years. The investment will upgrade technology, improve manufacturing capacity, and expand distribution and marketing capabilities to build and support a strong domestic Chinese imaging business.
Kodak also plans to form two joint-venture companies there with Chinese companies as minority partners.
“This is an historic moment for Kodak and its customers in China,” said George Fisher, chairman and CEO. “China’s leaders will work with Kodak to bring their photo industry to world-class standards.”
Fisher predicts China ultimately will become the world’s largest photographic market, surpassing the United States and Japan.
Last week, Fisher pledged Kodak’s continued commitment to investing in emerging markets. The China market grew 17 percent in 1997.
Kodak becomes the first foreign company to work with Chinese authorities to build a large industry through cooperation with China’s existing state-owned enterprises, company officials said. The photographic industry, like most industries in China, has been run by state-owned firms.
“China is one of the fastest-growing markets for photography, and its double-digit growth will assure that it moves from the No. 3 rank to No. 1 or No. 2,” Fisher said.
Kodak research shows strong, pent-up demand in the Chinese market for conventional photography. It also has identified high demand for advanced imaging technology for commercial, medical and government applications.
“The investments will increase Kodak revenues, market shares and earnings over time,” Fisher said.
Kodak will own 80 percent of the Kodak (China) Co. Ltd. joint venture and 70 percent of Kodak (Wuxi) Co. Ltd.
David Swift, chairman and president of Kodak’s Greater China Region, will serve as chairman of both new companies.
Kodak, as the controlling shareholder, will lead the management and operation of the companies, as they manufacture, market, distribute, sell and support Kodak-branded products throughout China.
The two Chinese companies owning shares in Kodak (China) Co. Ltd. are: Shantou Era Photo Materials, a color film and paper-sensitizing plant in Guangdong province; and Xiamen Fuda Photographic Materials, a color film and paper-sensitizing plant in Fujian province.
Wuxi Aermei Film and Chemical Corp., a black-and-white film manufacturing plant producing medical and industrial X-ray films in Jiangsu province, owns 30 percent of Kodak (Wuxi) Co. Ltd.
The three Chinese companies will transfer their primary assets to the joint-venture companies. Kodak officials described the three as leaders among domestic film manufacturers in China.
“Kodak is committed to working with our Chinese partners,” Fisher said. “We believe this agreement is good for Kodak.”
The most important aspect of the agreement is Kodak’s efforts have been strongly supported by the Chinese government, he added.
Swift said Kodak plans to use the manufacturing capacity to serve the growing needs of China and parts of Asia.
“Kodak will invest to create world-class manufacturing capability,” he said. “Kodak will manufacture products in China equivalent in quality to those made in any Kodak plant.”
Initially, the two companies will employ more than 2,000 people and complement Kodak’s existing market support staff of some 600 people in China.
“Additional sales, marketing and manufacturing people will be needed as the business grows,” he said.
Kodak officials said the $1 billion investment in China far exceeds previous investments there, but the company declined to disclose the amount invested previously.
Fewer than one out of 10 households in China owns a camera and each camera shoots just four rolls of film a year, officials noted.
By comparison, each household in developing countries such as Italy, Mexico and Brazil uses nearly five times as many rolls of film annually.
The new agreements affect solely the production and sale of sensitized photographic materials. Kodak already has two facilities in China that produce 35mm cameras, electronics components and photo-processing equipment.
A joint-venture company manufactures glass optics, and Kodak recently created a software development center in Shanghai.
“In 1994 Kodak extended its hand to China,” Swift said. “We have now confirmed our common commitment. Kodak is honored to participate in building the imaging industry in China for the next century.”