Bird's Eye View of Chinese CDMA Handsets
>> Why Is CDMA Unattractive to Chinese Handset Companies?
Nanfang Dushi
ChinaNex Forum
04/2003
chinanex.com
Xu Lihua, president of Bird, speaks out on two main reasons why most Chinese handset companies choose to focus on GSM/GPRS products, not CDMA handsets.
[In 2002 Bird produced 7.49 million handsets (7.22, GSM and .27 CDMA)
Business Model Less Profitable
First, different production scale make CDMA less attractive. Although CDMA handsets require fewer parts than GSM, small production scale causes insufficient parts supply and limited selection, that often lead to higher price for parts. In addition, Chinese manufacturers have to pay $1.5 million to Qualcomm for permission to produce CDMA handsets, and pay for each newer version of chipset/software. What's more, with every handset they make, they must pay 2.7% royalties to Qualcomm. Adding all up, production cost for CDMA handsets is far higher than that for GSM, losing advantage in performance-to-price ratio that Chinese brands used to enjoy over foreign products.
In comparison, GSM has gained a huge production scale worldwide with abundant supply of parts with moderate price and convenient channels. After several years of development, Chinese handset companies have acquired a fairly good foundation for GSM technology; less reliance on core technology means additional profit from production.
Little Sales Advantage
Second, different sales models suppress advantage of local companies. Last year, Unicom made a good decision to subsidize CDMA handsets to push sales, but the policy did not create a healthy industry value chain, but make handset companies rely only on Unicom's cash rebates. Most distributors of CDMA handsets were Unicom and a few national resellers. Now Unicom has withdrawn from the channel, while others are only interested in a handful of foreign brands like Motorola and Samsung, much less in Chinese brands.
In addition, sales teams at Chinese CDMA handset companies can hardly work their way out. On one hand, cost of production remains high with little room for price reduction; on the other, sales of CDMA handsets is closely hinged on Unicom policy which is unpredictable, making handset companies hesitate in taking initiative.
Low Profit for Label Swapping
A manager at another Chinese CDMA handset company feels most Chinese brands are essentially imports from South Korea but only switching to their own label. This business model has impeded competitiveness of Chinese CDMA handsets. At present, only TCL has developed its own CDMA model, but the product is not using mature technology and has a crude design, it has little comparison with products from South Korea.
Such label-swapping produces little profit because Chinese companies do not control production. Another concern is quality; all products must be returned to South Korea for repair, this is not only costly, but also time consuming. These factors force Chinese companies to avoid CDMA but concentrate on GSM.
Finally, CDMA has a short cycle of upgrades, which has further dragged Chinese companies, putting them in a disadvantage by chasing technology while their own strength cannot function such as form factor design and marketing/sales. This problem does not exist for GSM/GPRS handsets. <<
- Eric - |
