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Fri, Jan 02, 2009 - Page 10 News List

Companies vie for market after China passes 3G service


China is launching a delayed introduction of third-generation (3G) mobile phone service, setting off a politically charged scramble by foreign and Chinese equipment makers for up to US$41 billion in orders.

Chinese sales could be crucial for suppliers such as Motorola Inc, Alcatel-Lucent SA and Nokia-Siemens Networks as global demand slumps. State media say the largest carrier, China Mobile Ltd (中國移動通信), expects to sign up 100 million 3G subscribers in three years — more than most nations’ entire mobile markets.

“The China market is one of the most important markets for Alcatel-Lucent,” company spokeswoman Alix Cavallari said in an e-mail.

On Wednesday, the Cabinet announced it had approved issuing 3G licenses.

But how much business global suppliers get depends in part on whether regulators try to boost China’s high-tech industry by ordering carriers to buy domestic products. Beijing has tried to use such restrictions to nurture other fields, prompting complaints by the US and other trading partners.

Foreigners are likely to get less than half of China’s 3G orders, said Duncan Clark, chairman of BDA China Ltd (博達克諮詢), a Beijing consulting firm.

“It’s basically an intensely political process,” Clark said.

The leading domestic suppliers are Huawei Technologies Ltd (華為科技) and ZTE Ltd (中興通信), ambitious, government-supported upstarts that already sell low-cost gear in Africa and Asia and are improving their technology.

The US and EU are closely watching the selection process and are pressing Beijing to abide by WTO promises to treat foreign and domestic companies equally.

Beijing delayed issuing 3G licenses while it developed its own 3G standard, called TD-SCDMA, to compete with two global systems.

Industry Minister Li Yizhong (李毅中) said last month Beijing would give “strong support” to TD-SCDMA.

Even though the carriers are state-owned, Chinese companies sometimes resist orders to take steps that hurt profits. It is unclear whether Chinese equipment is considered good enough to support complex 3G services that will form the core of their future business.

The homegrown standard has been assigned to China Mobile.

Global standards WCDMA and CDMA-2000, or EV-DO, went to two smaller rivals.

Nokia-Siemens Networks, which is owned by Nokia Corp and Siemens AG, makes equipment for both China’s TD-SCDMA and global standard WCDMA.

But if regulators direct TD-SCDMA orders to domestic suppliers, it will be left to compete for sales only to WCDMA user China Unicom Ltd (中國聯通), the smallest carrier.

“NSN has been supportive of the TD-SCDMA ecosystem for many years,” spokeswoman Maggie Tao said in a written response to questions. “We hope that our investment and support are recognized now and in future.”

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