Home brands facing a tougher mobile phone market

Following high-profile growth last year, Chinese mobile phone brands have suffered this year from a continuous drop in market share.

In the peak period of 2003, China's domestic brands had taken over 55 percent of the country's mobile phone market. Since the beginning of this year, however, the percentage has dropped steaditly, reaching 48.7 percent in September, said Xie Linzhen, vice chair of China Association of Mobile Telecommunications.

Experts estimate that currently domestic brands' share may have fallen to as low as 41 percent of the domestic market, as many domestic brands face declining sales and profits, said Xie.

In the past few years, Chinese mobile phone makers swept the domestic market with advantages in sales channels, outer design and price. As foreign brands have learned how to localize in China's market, however, domestic brands showed more disadvantages in the competitive mobile phone market.

In the GSM market, Chinese home brands are easy to borrow or learn mature technology from foreign manufacturers. As the era forthird generation mobile phones is coming, home brands with weak research capabilities could face a hard period, said Motorola vice president Ray Yam.

Predictions have said after 2004, Chinese mobile phone makers with only manufacturing capabilities would be squeezed out of the market and those strong in technological research, brand and supply chains would be competitors against foreign brands.

"Actually, domestic brands are catching up with foreign brands in the past few years," said Ragon Han, vice general manger of marketing department with Konka Telecommunications Technology Co.,Ltd., who is optimistic about the future of Chinese mobile phone industry.

At the beginning of this year, Konka Group set up a research institute and invested 50 million yuan (six million US dollars) inresearch and development (R&D) in 2004. The figure is expected to double to 100 million yuan (12 million US dollars) in 2005 and the focus would be on third generation mobile telecommunications, said Ragon Han.

Though the figure is far from Motorola's annual investment in R&D which is four billion US dollars, it signals that Chinese mobile phone makers have mobilized to strive for technological competence.

According to IC Insight, Chinese mobile phone maker Bird has ranked the top eighth among the world mobile phone brands, whose exports rose by six times in the first three quarters this year.

But statistics with the China Customs show that home brands only account for 2.7 percent of China's total handsets exports and the rest are all home-made foreign brands.

According to China's commitments on its entry into the World Trade Organization, China would lift all customs tariffs on major electronic information products, including handsets, by January 1,2005. By then, China will have a more open market for mobile phones.

"Chinese mobile phone makers should quicken their step in developing new advantages of technological innovation, system innovation and management innovation to build core competence based on technology, quality and brand," said Deng Shoupeng, researcher with Development and Research Center of the State Council.

Source: Xinhua