China's handset manufacturing industry is anticipating a new boom as regulators will soon loosen control over handset manufacturing licences.

"We are working on new handset manufacturing authorization policies in line with the requirement of the State Council," said Wang Lijian, spokesman of the Ministry of the Information Industry (MII), the country's telecoms watchdog.

Currently, handset manufacturers must turn to the MII to seek approval for a handset manufacturing licence.

Under the new policy, handset manufacturers will be awarded licences via government authorization by both the National Development and Reform Commission (NDRC) and the MII.

Application for a licence is simplified by only submitting an application report.

"There is not a set timetable for the release of new regulations on authorization," Wang told China Daily in a telephone interview.

Sources close to the NDRC said the regulation is likely to be made public later this year or early next year.

Nevertheless, it does not mean firms who wish to deal in handset manufacturing business may all apply for licences, according to Wang Bingke, deputy director-general of the Reform and Economic Operation Department under the MII.

"There are certain requirements for the application. Speculators who have no funds or related technologies will be fended off the scenario," he was quoted as saying by the Beijing Morning Post.

Meanwhile, the ministry will undertake qualification authorization for those firms who have already obtained licences.

Those who fail to meet the qualifications may have their licences suspended, he said.

Analysts believe the new regulation will be a strategic adjustment for the regulators to focus more on market demand.

By doing so, the MII is likely to focus its supervision on the performance of the handset manufacturing firms instead of just valuing a firm's qualification for obtaining a licence.

A high ranking official with the MII, who declined to be named, told China Daily in a previous interview the ministry is working intensively to try to hammer out a proper adjustment to the licensing system in line with the market before the end of the year.

"We are modifying some parts of the regulation as they go against World Trade Organization rules and are no longer getting along well with the market situations," he said.

MII figures show by the end of last month, it has granted 29 GSM mobile phone manufacturing licences and 20 CDMA (code division multiple access) licences to 37 manufacturers.

Figures show by the end of October, China had signed up 325 million mobile subscribers.

Attracted by the lucrative market, both domestic and foreign handset makers are enhancing their investment and promotions in the market.

Sources said so far there are about 20 manufacturers applying for new licences.

In another development, the MII was put under fire in October as Aux Group, an electrical appliance giant who also produces mobile phones, sued the ministry for allegedly violating the Administrative Licensing Law.

The company failed to bid for a mobile phone manufacturing licence in the past two years.

Without the licence, the company is not allowed to sell mobile phones under its own brand.

According to Aux Group, it must pay 30 to 100 yuan (US$3.63 to US$12.09) for each mobile phone it produces for borrowing the licence.

"We are waiting for detailed regulations for the authorization," said Li Xiaolong, director of Aux Group's Mobile Marketing.

Sources close to the company said Aux Group won't make any further moves before the advent of the new regulation.

Lu Tingjie, president of the Economics and Management School at Beijing University of Posts and Telecommunications, told China Daily the lifting of restrictions on handset manufacturing licences is laudable as the market is becoming more and more open.

As a result, mobile subscribers may have more choices for low priced handsets and differentiated services to meet their demands, he said.

However, Xie Linzhen, deputy chairman of the China Mobile Telecommunications Federation, believes the lift of related restrictions should be conducted step by step as the market is already full of fierce competition.

(China Daily December 9, 2004)