Growing Number of Companies to Intensify Competition in the Chinese Mobile Phone Industry in 2008

The Chinese mobile phone industry is expected to reach a shipment volume of about 158.5 million units in the first quarter of 2008, up 14.9 percent year-on-year, according to the Taipei-based industry research institute Market Intelligence Center (MIC). For the second quarter, shipment volume is forecast to grow to 164.7 million units.

GSM models are still the mainstream products in the Chinese mobile phone industry. Driven by a holiday in China in October and the peak season in the worldwide market, GSM phone shipment volume reached 157.9 million units in the fourth quarter of 2007, with GSM share of total Chinese industry shipments growing to 88.6 percent.

CDMA shipment volume, on the other hand, declined sequentially in the fourth quarter of 2007. CDMA share of total shipments fell to 10.3 percent. MIC Industry Analyst Chia-Wei Chang pointed out that this was mainly due to sluggish domestic demand in China and a slowdown in exports. As for PAS products, shipment volume in the fourth quarter continued to decline further to 2.1 million units, representing a sequential decrease of 19.2 percent.

Catering to strong market demand in the peak season, combined production volume of international brands in China amounted to 95.8 million units in the fourth quarter of 2007, up 9.7 percent sequentially and 14.3 percent year-on-year. Their production volume for the full-year 2007 advanced 24.6 percent annually to 338 million units, and combined share of the Chinese industry's shipment volume reached 53.8 percent in the fourth quarter.

Chinese makers have encountered challenges from international brands, which have extended their deployment to China's rural areas with value-line product lines. In addition, in October 2007, China's State Council cancelled the approval mechanism for mobile phones managed by the country's National Development and Reform Commission. Chang expects that more small- and medium-sized mobile phone makers will foray into the production of mobile phones in the future, leading to more severe price competition in China. The growing number of players in the industry is also likely to further intensify the competitive pressure for Chinese own-brand makers.