The survival of Taiwanese mobile-phone contractors may hinge on the strength of their commercial ties with their Chinese counterparts, analysts said yesterday.
"If Taiwanese handset makers don't build strong ties with Chinese companies, they may miss out on this sizeable market within next the three to five years," said Feng Lin (
According to JP Morgan, handset demand in China is set to reach 88 million units this year, a 28 percent increase over last year. That number is forecast to reach 150 million units in 2004.
Another market watcher said that in order to manufacture and distribute handsets in China, regulations require foreign enterprises to enter joint ventures with local partners.
"In accordance with WTO agreements, that condition is set to end within the next five years ... The time frame is long enough for Chinese companies to get up to speed and become first-tier players," said Ann Liang (
In addition, Chinese-brand handsets are gaining acceptance in the domestic China market.
Chinese mobile-phone companies had an 8.8 percent market share in 2000, according to Gartner Dataquest.
They are expected to take a 12.4 percent share this year and 14.7 percent by 2005. The remaining 80 percent of the market is still controlled by international companies including Nokia Oyj, Motorola Inc, Siemens AG, Sony Ericsson and Samsung Electronics Corp.
Lin said that Taiwanese companies shouldn't only rely on orders from the US and Europe.
"They better not put all their eggs in one basket," he said.
Last year, some 70 percent of Taiwan-made handsets were shipped out to mobile-phone companies such as Motorola Inc and Sony Ericsson, while only about 15 percent went to Chinese companies such as TCL Mobile Communication Corp (TCL
Second-tier South Korean handset makers such as Sewon Co and Pantech Corp will soon become major competitors for the Taiwanese phone makers in China.
"Rather than focusing on gaining orders from Western companies, the Koreans have already put more emphasis on building relationships with Chinese companies," Lin said.
In the first half of this year, Korean manufacturers shipped more than 5 million handsets to China, surpassing Taiwan's 4 million units.
"If Taiwanese contract makers can't catch up, the Koreans may soon dominate that market," Lin said.
South Korean companies already have the edge in handset design, Liang said.
"The Koreans have successfully boosted their sales in the Asia-Pacific area by designing color, double-screen and folding-style mobile phones that are rapidly gaining in popularity," she said.
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