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China Mobile Phone Industry Chain Report, 2005

Published: Sep/2005

Hard Copy  USD $ 2,600
Pages: 535 Electronic(PDF)  USD $ 2,800
Report Code: Enterprisewide  USD $ 4,200
 

Great changes took place in China mobile phone industry chain in 2005, which could be attributed to the following two respects: first was that China mobile phone manufacturers generally suffered a loss, and second was the changes of the hardware configurations and functions. The sharply decreasing Market shares, the overall loss of the industry and excessive stocks caused a drop in demand for upstream products, and added China manufacturers concerns about the upstream costs.

Among those upstream manufacturers who take China mobile phone manufacturers as the main clients, design houses are most prominent. Domestic design houses got a rapid progress in 2004 after occupied a large share in mobile phone market in 2003, and beat their Korean rivals completely. The effect mobile phone manufacturers had on upstream design houses had generally a delay of 6-month. 80% orders of these design houses came from China mobile phone manufacturers, while orders from foreign manufacturers were limited to low level handsets. Facing the forthcoming cold season, design houses try one by one to go public to solve the possible problem of fund shortage. Meanwhile the design of 3G phones requires a big sum of money, so to set up a very good financing channel is fatal for the long-term development of design houses. Most design houses were sponsored by the returned overseas Chinese; it is a trend urged by various factors to go public. Those unable to do so started to go bankrupt or to be merged and acquired.
  
Handset display entered the TFT-LCD era in 2005, putting an end to the STN-LCD, whose main clients were Chinese, but ever since 2005 STN-LCD are out of the game. According to public sources, even small-sized TFT-LCD Panel manufacturers are unavailable in China, and very few module manufacturers. Among these module makers, Truly Semiconductors occupies the dominant place. Truly Semiconductors has the largest productive capacity of TFT-LCD module with a complete product line of LCD that can provide homochromy and color STN-LCD and OLED simultaneously. Without TFT-LCD panel product line, Truly Semiconductors' profit is likely to be extracted. But Truly Semiconductors qualifies for being proud compared with other manufacturers. 
  
More business opportunities were brought along with motive of seeking a lower cost, for example, baseband IC was originally dominated by TI, Agere, Philips and Freescale. Being long time ignored by those super powers and extremely discontent with their price, China's handset manufacturers reacted immediately as soon as another option showed up. Media Tek Inc., the top IC Company in Taiwan, was the very substitution supplier. Media Tek Inc. soon occupied mainland market by its low-cost baseband IC, and most of China's handset manufacturers including ASUS and BenQ turned to it. The average monthly shipment of handset baseband IC reached 2 million units, accounting for more than 60% in China market, which was a bitter experience for TI. In H1 2005 the gross profit margin of Media Tek reached 55% and EBIT hit TWD 7.1 billion.
  
Most of the upstream manufacturers were not influenced by the poor performance of domestic mobile phone manufacturers, especially for the Taiwan providers of PCB, passive component, camera phone module and ODM, some even appeared a good prosperity. Currently, the China mobile phone industry is still developing healthily and growth rate is never slowed down.
  
As for ODM companies, most of Taiwan ODM companies including Compal, Arima, BenQ and Quanta are unwilling to take orders from mainland handset manufacturers nowadays, though once these four accepted orders from mainland handset manufacturers. Since 2005, mainland manufacturers seldom give orders to these ODM companies in order to control production cost, and these ODM companies are unwilling to take their orders because of small profit. Arima's main clients include NEC and Sony Ericsson; Compal has Motorola, while Quanta, Panasonic. After losing orders from Motorola, BenQ's handset operations shrank heavily, but great potential was put in after the acquisition of Siemens. It was estimated the shipment of mobile phones from Compal would exceed 30 million, and its Nanjing factory would be the No. 1 handset production base in the world.
  
In H12005, most of China mobile phone manufacturers reported poor performance. Meanwhile, some realized technology strength should be improved, and strived to gain a brand new pattern instead of OEM in virtue of design houses. History tells us any increase of market share of China mobile phone manufacturers accompany with significant advancement of technologies.
  
The emergency handling ability determines a company¨s existence. Those who can't adapt to the changes of industry and market are bound to die out. Based on the Mobile Phone Industry Chain 2004, more lately info is added in Mobile Phone Industry Chain in China 2005.



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