Siemens AG, Nokia Oyj, Motorola Inc and Sony Ericsson Mobile Communications Ltd are among mobile-phone makers vying to gain market share in China, the world's biggest handset market, as growth slows elsewhere.
Siemens, the fourth-largest handset maker, aims to raise its share of the Chinese market to 10 percent from 4 percent. Nokia, the global market leader, wants to regain the top slot it lost to Motorola in the country last year. Sony Ericsson is targeting China to make up for lost market share in Europe and the US.
China "is a market nobody can ignore," said Gartner Inc analyst Ben Wood. "Growth there is spectacular."
PHOTO: REUTERS
In the past two years, China added on average two new mobile-phone subscribers every second, making it the fastest growing mobile market. Last year, it overtook the US as the world's No.1 cellular market, ending the year with 207 million handset users, more than the combined populations of Britain and Germany.
At this week's Cebit technology fair in Hannover, Germany, Siemens and rivals will be pressed by analysts to explain how they plan to build market share in China. Nokia, for instance, may introduce a follow-up handset for its 2100 phone, aimed at developing markets such as China, India and Russia, analysts said.
Handset sales in China will probably increase 14.5 percent a year through 2005, BNP Paribas Peregrine forecasts. Less than a sixth of China's 1.3 billion people own a mobile phone, compared with seven out of 10 Europeans and half of the US population.
Global mobile-phone sales rose 6 percent last year after falling for the first time ever in 2001, according to Gartner Inc.
Domestic handset makers' share of the market rose to 24 percent at the end of this year from 14 percent a year earlier, according to the Chinese government.
TCL Mobile Communication Co, Ningbo Bird Co and other local rivals are lifting sales by selling cheaper phones assembled from ready-made parts purchased abroad, analysts said. Some have also benefited from existing sales channels. TCL has more than 3,000 sales outlets throughout the country.
Bigger rivals have noticed. Timothy Chen, president of Motorola's China operations, last year called domestic rivals a "major threat." Nokia, Motorola and other foreign handset makers also have to adapt to local tastes, which differ from those in Europe and the US, executives and analysts said. The Chinese prefer hinged "clam-shell" phones, Sony Ericsson President Katsumi Ihara said.
They also want cheaper phones. The average Chinese worker earns in a year what it takes a US worker two and a half weeks to pull in.
"In China, the products required are quite different," Ihara said in a February interview. Therefore, Sony Ericsson will invest more in local research and development, he said.
A survey by Gartner found that Chinese handset stores carry more than 400 different products, Wood said. Siemens, which lost market share in China last year, is sponsoring the Chinese National Soccer League as the German company seeks to bolster its brand. Last year, it upgraded annual capacity at a Shanghai plant to 15 million phones from 11 million.
At the same time, Siemens is trying to steal a march on competitors by working with Chinese partners to develop a new mobile-phone system that, if chosen by the Chinese government, may threaten sales of Qualcomm Inc, Ericsson AB and other suppliers of equipment used for the current standards.
Siemens and Datang Mobile Communications Equipment Ltd, a company backed by the government, have spent more than two years developing the high-speed wireless technology, known as time-division synchronous code-division multiple access. The technology is now being tested in the city of Chongqing.
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