China's handset makers to expand overseas
Chinese low-cost handset makers look overseas to rejuvenate their business and intending to follow the likes of Haier or the Lenova Group, formerly known as Legend Group.
Their challenges are tremendous:
- A saturating handset market at home where the average income of the next subscriber group has fallen to a monthly US$72.50, down from US$242 currently - okay, you talk about 100 million subscribers, but the shortfall is huge
- Satisfaction ratings with their products is low. A recent survey credited nearly three-quarters of complaints about handsets in China to domestic companies, which hold less than half the market, and mostly in low-end, simple phones
- They probably don't have the network that is needed to distribute their products overseas
- Intense competitive pressure forces down margins
- The domestic market growth slows down dramatically, while the replacement of handsets becomes a dominant feature. A report by Deutsche Bank estimated that replacement handsets in China accounted for 37 percent of demand in 2002 and 51 percent in 2003. By next year, the figure will be 66 percent.
Exports are taking off already, after the providers have captured ground domestically: Now, though, Chinese suppliers have gained some serious market share domestically, at around 40 percent by units or roughly 30 percent by revenue, according to Deutsche Bank. More recently, they have also increased exports. Bird, for one, sent out 600,000 mobile phones to foreign markets in the first quarter, followed by TCL's 280,000.
Will the growth continue? Sure it will and the article provides some god reasons:
"David Hind, general manager of Qualcomm China and a veteran of China's local industry, says yes. He believes China will, within five years, place a company among the top-five handset makers. To doubters, Hind points out that few thought Samsung would ever be a top brand supplier — before, that is, the South Korean company became one.
"With the cost of manufacturing as low as it is today in China, using the value chain, what will the percentage of Chinese-made handsets grow to by 2005 or 2006?" Hind said. "I tell you it will be a staggering number — easily more than 50 percent, maybe 75 percent — just because of the margin that carriers are driving in terminal manufacturing." That contrasts with estimates from market watcher iSuppli Corp., which believes China will account for 34 percent of global production by 2008, or some 231 million phones. Last year, China made 30 percent of the world's phones.
As carriers take a more proactive role in determining specifications, as a European group recently did, Hind believes the move to China will accelerate, since doing so can save a buck on every handset. "If I'm going to buy 50 million handsets, that's $50 million to my bottom line. And at the end of the day, that's what it comes down to," said Hind. "These people have already paid billions for 3G licenses, so they have got to get financial help and the only way they are going to get it is to take advantage of the value chain."
So expect more actions - we are crious about reactions from Nokia and how Samsung and Sony Ericsson will react.
Their challenges are tremendous:
- A saturating handset market at home where the average income of the next subscriber group has fallen to a monthly US$72.50, down from US$242 currently - okay, you talk about 100 million subscribers, but the shortfall is huge
- Satisfaction ratings with their products is low. A recent survey credited nearly three-quarters of complaints about handsets in China to domestic companies, which hold less than half the market, and mostly in low-end, simple phones
- They probably don't have the network that is needed to distribute their products overseas
- Intense competitive pressure forces down margins
- The domestic market growth slows down dramatically, while the replacement of handsets becomes a dominant feature. A report by Deutsche Bank estimated that replacement handsets in China accounted for 37 percent of demand in 2002 and 51 percent in 2003. By next year, the figure will be 66 percent.
Exports are taking off already, after the providers have captured ground domestically: Now, though, Chinese suppliers have gained some serious market share domestically, at around 40 percent by units or roughly 30 percent by revenue, according to Deutsche Bank. More recently, they have also increased exports. Bird, for one, sent out 600,000 mobile phones to foreign markets in the first quarter, followed by TCL's 280,000.
Will the growth continue? Sure it will and the article provides some god reasons:
"David Hind, general manager of Qualcomm China and a veteran of China's local industry, says yes. He believes China will, within five years, place a company among the top-five handset makers. To doubters, Hind points out that few thought Samsung would ever be a top brand supplier — before, that is, the South Korean company became one.
"With the cost of manufacturing as low as it is today in China, using the value chain, what will the percentage of Chinese-made handsets grow to by 2005 or 2006?" Hind said. "I tell you it will be a staggering number — easily more than 50 percent, maybe 75 percent — just because of the margin that carriers are driving in terminal manufacturing." That contrasts with estimates from market watcher iSuppli Corp., which believes China will account for 34 percent of global production by 2008, or some 231 million phones. Last year, China made 30 percent of the world's phones.
As carriers take a more proactive role in determining specifications, as a European group recently did, Hind believes the move to China will accelerate, since doing so can save a buck on every handset. "If I'm going to buy 50 million handsets, that's $50 million to my bottom line. And at the end of the day, that's what it comes down to," said Hind. "These people have already paid billions for 3G licenses, so they have got to get financial help and the only way they are going to get it is to take advantage of the value chain."
So expect more actions - we are crious about reactions from Nokia and how Samsung and Sony Ericsson will react.
posted by Andreas @ 1:43 pm
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