Mobile phone makers will face a "shuffle" of market positions
after China announced two weeks ago that it would relax license
regulations for handset manufacturing.
Put simply speaking it means that a heap of new players, most of
them with unknown brands, will appear in the world's biggest cell
phone market.
China's State Council has abolished some 186 administrative
examination and approval items covering mobile communication
systems and terminals. The move indicates that the country will
formally cancel the mobile phone production license examination and
approval system, which started about a decade ago.
Chinese companies intending to manufacture phones had to have at
least 200 million yuan (US$26.31 million) in registered capital and
get approval from the National Development and Reform Commission
(NDRC). Then, if they wanted to sell phones in China, manufacturing
companies had to have their products quality tested and authorized
by the Ministry of Information Industry (MII).
Now with the altered regulations, the NDRC is not involved in
the process and handset makers can sell phones after passing the
MII test.
"The omission of the NDRC shows the government is willing to
establish a market-oriented industry environment," said Kevin Wang,
an analyst for the US-based research firm iSuppli.
China has licensed 90 firms to produce mobile phones with an
annual production capacity of 600 million units, 50 percent over
the combined domestic demand of 100 million units and export demand
of 300 million units, according to MII.
Long period
"The oversupply has existed for a long period and it's not
necessary for a government regulation," said United Securities Co
in a recent note.
Now is the time to let the market rule and see qualified new
players replace the market positions held by established companies
which depended heavily on the income from renting licenses to other
companies, according to United Securities.
The new players, largely unknown by established industry
players, have challenged and even surpassed leading domestic firms
like Ningbo Bird and TCL Communications.
"Tianyu is new star in the industry with its strong experience
in electronics retail industry," said Wang.
Tianyu, the Beijing-based handset vendor, is expected to sell 13
million mobile phone units in 2007, a 113.1-percent growth
year-on-year to become China's No. 3 OEM (original equipment
manufacturer) maker. Bird, which led the OEM market in 2006, is
expected to sell 12.5 million units this year and will come in at
No. 4 position behind Tianyu, according to iSuppli.
"Tianyu uses heavy promotional methods in smaller cities such as
offering high under-table commissions to traders. It is not the
traditional way to compete," said a Nokia China official.
The Nokia official admitted that Nokia's sales had been affected
by new brands like Tianyu in the second or third-tier markets.
ZTE and Huawei, which focused on telecom equipment market during
the handset license period, are expected to become the top two OEM
handset makers in China. ZTE is expected to sell 23 million phones
in 2007, a 215.1-percent growth year-on-year, according to
iSuppli.
Foreign-brands, which haven't established a foothold in China,
are also eager to penetrate the domestic market after the loosening
of the regulations.
Research In Motion (RIM), the developer of BlackBerry, will sell
its popular Email phones in China by the end of this year through
the distribution partner Alcatel Lucent, the companies announced
this week.
"BlackBerry will grab market share in the high-end market and
influence brands like Dopod, Nokia and Motorola," said Sandy Shen,
an analyst at US-based Gartner Inc.
Other foreign giants like Hewlett-Packard and Palm, also intend
to sell phones directly in China in future.
Fierce competition
Traditional market leaders, like Bird, TCL and Amoi, have
suffered from the fierce competition.
Bird posted a loss of 237.2 million yuan (US$31.18 million) in
the first half and Amoi reported a loss of 350 million yuan in the
first six months.
The "black phones" - handsets sold in the market without
government approval - are also expected to become legal under the
new regulations.
From January to June, 23.43 million "black phones" were sold in
China, compared with 71.47 million licensed handsets, according to
CCID Consulting, a research firm under MII.
Some of these phones will become legal but others, including
copies of famous brands and low quality models, will not as they
not want to take the MII quality test, according to Jiang Lifeng, a
CCID analyst.
The new policy will attract more players and boost related phone
design sectors and this trend will accelerate China's transition
from a manufacture base to a design center, according to Wang.
(Shanghai Daily October 26, 2007)
