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PROFILE - CHINA'S CELL PHONE INDUSTRY (MARCH 2009)
BEIJING, Mar 10, 2009 (AsiaPulse via COMTEX) --
The following is a profile of
China's cell phone industry in 2008.
EXPANSION OF INDUSTRY SCALE:
China gained 93.924 million mobile phone users in 2008,
boosting the total to 641 million. The nation's cellular
teledensity rate, which means the number of handsets per 100
people, hit 47.3 units, up 6.2 units year on year.
The industry's cell phone output grew by two per cent to 560
million units.
According to IDC, an industrial consulting firm, the output
of handsets around the world increased by 3.5 per cent on year
to hit 1.18 billion units, with China's production accounting
for 47.5 per cent, about the same as 2007.
China's cell phone output growth in 2008 showed a trend of
slowdown. Output surged 14.3 per cent in the first two months,
but the growth rate declined to 7.9 per cent in the third
quarter. The annual growth was merely two per cent, down 10
percentage points from the beginning of the year.
Negative growth appeared starting from the third quarter.
The handset output slid by 2.6 per cent in October, and dropped
38 per cent in November, recording a historical low.
EXPORT GROWTH UP SLIGHTLY:
According to the statistics released by the General
Administration of Customs, China exported 533 million units of
handsets valued at US$38.54 billion in 2008, up 10.4 per cent
and 8.27 per cent year on year, respectively.
In the meantime, 17.719 million cell phones valued at
US$1.721 billion were imported, with the volume up 5.3 per cent
but the value decreasing 3.85 per cent from the previous
year.
The export growth generally showed a downturn tendency over
the past year. The monthly average growth rate exceeded 10 per
cent in January-October, and dropped by 11 per cent and 22 per
cent in November and December, respectively.
China's cell phone product export mainly depends on
foreign-funded enterprises, accounting for 83 per cent of the
total. The export volume of products manufactured by
multinational firms, namely Nokia, Motorola, Sony-Ericsson and
Samsung stand at 71.5 per cent.
Manufacturers of domestic brands exported 64 million mobile
phones, accounting for 17 per cent of the total. Included were
two firms with export volume of 10 million units and one
company with export volume of 5 million units.
ECONOMIC EFFICIENCY DOWN:
As impacts triggered by the financial crisis appeared
gradually, the global economy showed a downturn trend, market
demand growth slowed down, and the growth of the cell phone
industry decreased monthly starting from the beginning of 2008.
Many enterprises' reported negative growth.
China's mobile communication and terminal equipment industry
achieved profits of 1.98 billion yuan (US$289.48 million) in
January-February last year, down 10 per cent from a year
earlier. By the end of November, the industry gained profits of
14.57 billion yuan, dropping 11.8 per cent in comparison with
the same period of 2007. The industrial profits dived more than
50 per cent in September-November.
MARKET STRUCTURE ADJUSTMENT IN FULL SWING:
Output and sales volume of GSM cell phones produced by
China's 100 important handset manufacturers in 2008 dropped by
17.1 per cent and 15.4 per cent from the previous year,
respectively, with the proportions accounting for 74.7 per cent
and 75.4 per cent of the industry's total, down 6.7 percentage
points and 6.5 percentage points.
The reshuffle of China's telecom operators had an impact on
the output and sales of CDMA handsets, led to increases of 15.4
per cent and 15.2 per cent on year, respectively, accounting
for 13.5 and 13.4 per cent of the total.
Output and sale of 3G mobile phones surged. With the
initiation of TD-SCDMA trial commercial use in April 2008 as
well as increased international market demand, output and sale
of 3G handsets grew rapidly with the output and sales volume
last year hitting 65.79 million units and 66.37 million units,
respectively, hiking 87.5 per cent and 90 per cent on year.
PROBLEMS:
The impacts of the global financial crisis have started to
emerge. The growth of China's cell phone market was affected by
the global financial crisis in 2008 with drops starting from
the third quarter.
During the forth quarter, the global handset output showed
negative growth with a decrease of 12.6 per cent, and major
enterprises' orders down over 10 per cent on average.
KNOCKOFF HANDSETS BEGAN TO INFLUENCE THE INDUSTRY:
Currently, knockoff handset manufacturing has formed a
complete industry chain, and gradually becomes a main force in
the development of China's mobile phone industry.
Statistics show that the number and export volume of
knockoff handsets both took up over 10 per cent of the
industrial total.
Since knockoff handsets don't go through access
ratification, boast obvious advantages on the timing of market
debut and costs, and have comparatively fresh appearances and
functions, their existence caused great impact on the export
and rural market share of regular manufacturers.
Some knockoff handsets have imitated new products of regular
cell phone enterprises and violated the intellectual property
of the latter.
Besides, the quality of knockoff handset producers varies
greatly, many of their products are sold on the market without
strict examination or maintenance support, thus leading to
increasing problems on product quality and services. The
knockoff handsets received the most complaints over the past
years.
CHANNEL COMPETITION INTENSIFIED:
Under the gloomy macro-environment, foreign manufacturers
intensified their exploration for channels to answer challenges
from knockoff handset producers, while some domestic
enterprises reformed the model of channels, transforming former
subsidiaries to regional marketing centers, and adopted the
regional agent model instead of branches' direct supply so as
to cut sales costs. A new round of channel integration
started.
Besides, sales models will see huge changes with the coming
into existence of the 3G era. China's telecom giants, China
Mobile Communications Corp. (CMCC) and China United
Telecommunications Corp. (Unicom Group) (SSE:600050,
SEHK:0762), will participate in the field of cell phone selling
to promote new business, and reinforce their status in the
industry chain.
Issuance of 3G licenses induced great pressures on regrouped
Chinese telecom operators for developing new subscribers.
Providing subsidies for purchasing terminals or providing free
handsets for attracting new users will be feasible. Carriers'
large-scale procurement and bundling sale played an
increasingly important role on mobile phone sales channel.
OUTLOOK:
The development of the global economy remains sluggish at
present, the international financial markets remain turbulent,
prices of raw materials and energy see drastic fluctuations,
international trade barriers emerge continuously, and the
export environment is worsening.
Industrial research firms, namely IDC and iSuppli, expect
the global output of handsets to decline by 2-5 per cent this
year. Since China's cell phone output stands at more than 60
per cent of the total in the world, foreign demand drop will
bring plenty of impacts on the industry.
DOMESTIC MOBILE PHONE MANUFACTURERS CONFRONT MORE
DIFFICULTY:
Overseas mobile phone producers intensified investments in
low-end handsets and China's rural markets over the past years
alongside solidifying the high-end cell phone market.
In comparison, the business scale of Chinese enterprises is
comparatively smaller. They lack core technologies and the
industry chain is incomplete. Therefore, it is difficult for
them to compete with foreign rivals on costs, brands and sales.
On the low-end competition with knockoff handset manufacturers
is intensive.
3G DEVELOPMENT PROMOTES INVESTMENT AND DOMESTIC MARKET
EXPANSION:
China's telecom industry recorded fixed asset investments of
295.4 billion yuan in 2008, up more than 50 billion yuan year
on year.
Statistics show that Chinese carriers will invest 400
billion yuan in 3G network development over the coming three
years. Included will be 170 billion yuan this year.
CMCC plans to build 60,000 new TD-SCDMA base stations with
the business covering 70 per cent of China's prefecture-level
cities.
China Telecommunications Corp. takes over the CDMA network
and business from Unicom Group and engages in CDMA 1X network
expansion and optimization.
Unicom Group focuses on 2G network upgrade and reform to
make it capable of offering both 2G and 3G services.
China's 3G user number is expected to surge during the
second half of 2009, which will drive up the sales volume of 3G
handsets.
China's handsets output this year is expected to stay the
same as in 2008.
(Source: Ministry of Industry and Information Technology)
(XIC)
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