According to the Beijing News, Haier (1169 HK) recently released its interim report which says the company suffered total loss of 397 million HK dollars during the first six months. Its handset business was hit by flood of smuggled mobile phones and witnessed decline of turnover, which was an important reason for the bad performance.

Haier's report shows that the company's turnover from January 1 to June 30 was 2.118 billion HK dollars, down by 22.9 percent year on year. It suffered a loss of 397 million HK dollars after deducting non-current account. Decline in its handset business - one of the two major businesses of Haier - was the major reason for the loss.

Its washing machine business, although not satisfactory either, still grew about 19 percent in turnover. Realized profits (22.4 million HK dollars), however, declined by half compared with the 55.8 million HK dollars in the same period of last year.

Expert analysis analyzed reasons for business decline of Chinese handset manufacturers in general. Handset manufacture has high requirements on scientific research capability, demands continued innovation and Chinese manufacturers such as Haier are not equipped for such capability;

In terms of design concept and capability Chinese manufacturers are no rivals of foreign manufacturers. Brand advantage really counts for handset business and domestic handsets are vulnerable to impact from foreign brand handsets. Effective management, cost control and scale, and good relationship with network operators are particularly important to the success of mobile producers. But Chinese handset manufacturers still have to make more efforts before they are able to deal with this full range of operation.

However, insiders from Haier insisted that, in addition to raw material price hike, domestic smuggled handsets and fierce vicious competition plaguing the domestic handset market are actually the main reasons for business decline of homemade handsets.

By People's Daily Online