China, the most populous nation, overtook the US as the biggest cellphone market, strengthening its allure for handset makers such as Motorola Inc and Nokia Oyj, who face flat sales in Europe and North America.
China had 120.6 million mobile phone users at the end of last month after subscribers surged by almost half this year, said Wang Lijian, a spokesman for the Ministry of Information Industry. That compares with 120.1 million users in the US, said industry trade group Cellular Telecommunications and Internet Association.
China's 1.3 billion people are playing catch-up with the developed world, in many instances leapfrogging fixed-line service. The number of subscribers increased by 35 million in the first seven months.
"It was inevitable with the rate of growth in China that this was going to happen sooner rather than later," Tim Storey, an analyst at Goldman Sachs Group Inc in Hong Kong, said of China's rise to the No. 1 spot.
With only one of every 10 Chinese using a mobile phone, the market is ripe for expansion. By the end of next year, the industry ministry is predicting another 80 million cellphones in use. By contrast, four in 10 Americans use mobile phones, and half of Europeans are wireless.
China's sparse penetration bodes well for Nokia, Motorola and Ericsson AB, who together accounted for three-quarters of the 52 million phone sets manufactured in China last year.
"This is good news for Motorola," said Gavin Wong, who manages China strategy for the second-largest mobile phone maker.
"If the market continues to grow, we can only benefit more." Last month Tom Masci, head of Motorola's mobile phone division in China, said the country's mobile market had "the best profit margins in the world."
Motorola is predicting global sales will increase only 5 percent this year, while Nokia, the world's largest handset maker, sees "modest growth." With prospects in the US and Europe lagging, other companies are also expanding their China operations.
Siemens, Germany's largest electronics company, yesterday said it was awarded US$196 million in contracts to expand mobile networks in China. In terms of handset production, the company is spending US$60 million to boost capacity at its Shanghai factory 40 percent to 14 million handsets by the end of 2002. The company expects to sell 5 million mobile phones in China this year, up from 1.9 million in 2000.
China's cellphone market is strength in numbers if not in revenue. China Mobile Ltd, the country's largest cellphone operator, is expected to surpass world leader Vodafone Plc in subscribers next year. However, its 2000 sales were almost two thirds smaller than Vodafone's, reflecting what the market will bear in a country with an average income one 20th that of Europe.
China Mobile's revenue per user probably averaged US$19.80 a month in the first half of this year, according to Edison Lee, a telecom analyst at CLSA Emerging Markets. Vodafone averaged US$33.20 per user a month in the UK.
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