"Five Golden Flowers" Gradually developed China-brand handsets
Enterprises in China reallocated the market share. When the reform of telecommunication enterprises in China matures, they constantly launch new handsets. Since the first China-brand handset, Kejian, was launched in October 1998, 20 companies such as Huaxia, Eastern Communications Co., Ltd. (also known as Eastcom), Konica, TCL, Xiaxin continuously launched their China-brand handsets in the market.
They find that mobile handsets are no different from other electronic products. So, localization is inevitable.
At the end of 1998, Eastcom is a self-developed company with its own intellectual property rights of EC528GSM handsets in Europe. EC528 GSM handset conforms to Phase II GSM standard (nearly 500 items meet the international standard), and put into operation in Hangzhou. This marked the end of the monopolization of foreign-brand handsets in China market. The test showed that EC528 handset has multi-functions, high performance, small size, large screen Chinese characters display, short message in Chinese, multi-folk music ring, Chinese keypad, Chinese input and Chinese phone book, etc. These functions fit in more with the needs of the Chinese.
In early 90s, Eastcom was capable of producing mobile handsets. It is the first partner with the U.S. Motorola in China. For many years, Eastcom produced the mobile handsets of Motorola and gained the lion's share in the market. Like other enterprises, this large state-own enterprise creates its own national-brand, which makes China-brand handsets compete with the foreign-brand handsets domestically and globally.
In March 1997, Eastcom in co-operation with the enterprises in China jointly developed the GSM mobile communications system. For more than one-year effort, M30-G mobile communications system in Guizhou conducted the field trial with the intellectual property rights in China, and achieved the international standard of the 90s.
In fact, when Eastcom determined to develop handsets on its own, most people did not encourage it. They find that Motorola is a highly marketable new product. It was too risky for Eastcom to develop national-brand products in China. However, its determination did not turn down. It sent a research team to the U.S. and established the "Eastcom workshop". At the time, ITU announced the implementation of GSM second generation standard. In November 1998, European Management Organization terminated the FTA test for Phase I Standard. This means that mobile communications has a big marginal increase, relatively speaking, the test items will be added.
The researchers of "Eastcom workshop" in the U.S. made full use of the resources and facilities in the U.S. They carried out development and design of the software, and supported by the U.S. chip provider, Lucent Technologies. Eastcom tackled the difficulties and the EC528 digital handset is eventually awarded the certificate.
Like "Eastcom", facing the union of the famous international-band products, China-brand handsets should be supported by the state. Although the performance and price of self-development of China achieved the international level, technically and economically, there is still a great difference between China and overseas. Without the support of the government, it is difficult to develop the national mobile communications industry.
When Kejian, which is remarkable in various fields, launched its mobile handsets, it is against by others because they find it difficult to compete with Nokia and Motorola with advanced technology and huge capital. Compared with Nokia and Motorola, Kejian is small. A few years ago, Nokia was small but bought the technology from Motorola. Now, Nokia laid good foundations for its development of markets.
Entrepreneurs in China are optimistic about the handset market. In 2000, China-brand handsets take over to lead the market like VCD, computer and color television. These Chinese enterprises are experienced in exploring the local market, and understand the customers* needs. Most importantly, inexpensive products are becoming the wave of the future. Presently, apart from handsets, there is no foreign brand in the consumer electronics market.
As a direct backbone enterprise of Chinese Technology Institute, Kejian has the great strength of technology, it obtained the technology of GSM handsets and owned its intellectual property rights. In 1999, Kejian produced 500,000 handsets. Foreign brands like Nokia, Motorola and Ericsson are produced and sold in China. They are mostly sole proprietor or joint venture and realized the localization.
Market-oriented strategy for further development
At present, the national handset industry comes first. The development of handset is divided into 3 layers. First is to gain the knowledge of handset structure. Second is to obtain the software and handset design. Third is to gain the chip technology and the software design of the physical layer. Currently, Xiahua and Eastcom could achieve the first level. Other China-brand products are only the technology of OEM, or even SKD production. It is not beneficial for the nation industry to have such development. For the development of handset, China expects that nation enterprise proportionally increases its own project development with advanced technology, the cost of production can be lowered which in turn increases the competitiveness of national brands with foreign brands.
It seems that there is still a long way for the development of national handset industry in China. Experts find that whether the industry is successful depends on the technical standard, voice quality, price, model and after-sales service of the national-brand handset.
From the technical viewpoint, China-brand handsets could compete with the foreign brands that various standards and voice quality. Moreover, the technology of handsets in China is mature. In addition, China could reach the level same as overseas countries. The handset of Eastcom and Xiahua passed the test of FTA for the European Phase II Standard. At the beginning of 1999, Ministry of Information Industry conducted a test on frequency, rate, sensitivity, signaling for Xiahua, Eastcom and Kejian handsets. They resulted in high appraisal for voice quality and the Chinese menu. However, mature technology does not mean that they can successfully lodge in market. Mr. Wu summarized as the following points: firstly, huge capital was put but market was changing all the time. So, it was too risky. Secondly, whether handset survives in the market depends on the performance, models and price. He hoped that China has intellectual property rights and this is recognized by customers.
Compared with foreign competitors, China-brand handsets did not have the favorable condition. Since the scale is small in China (Xiahua expected the output was 200 million sets), it is difficult to reduce the production cost. The life cycle of a new model is only 10-12 weeks. New function and technology are continuously launched. For the China-brand handset, the appearance design is not ideal.
Moreover, beautiful appearance is an important development. In addition, customers* psychology is a key factor. Since the foreign-brand handsets have the advantage for over 10 years, famous brands like Motorola, Ericsson and Nokia are popular in China. Under the circumstances, government should not intervene the market, customers have the rights to choose their products. For the China-brand handsets, customers have to take a long time to build the confidence.
Maximizing potential for better future
Presently, 5 companies are developing the handset including Huawei, Zhongxing, Datang, Great Dragon and Jinpeng. They are called "Five Golden Flowers". Despite the production in China, chip is imported from abroad. Therefore, there is no difference between the function and imported handsets. However, the price is only half of the imported handsets.
Compared with the imported brands of products, it is concluded that China-brand handsets have the following advantages:
Firstly, many China-brand enterprises are involved in home appliances, e.g. Kejian engages in providing VCD, Xiahua, Konica, and TCL engages in providing color TV. They have a good sales channel from regions to cities.
Secondly, Chinese consumers concern the service. The service of foreign-made handsets is costly and time-consuming. Some China-brand enterprises apply their experience from home appliance to handsets. They established different branches to provide after-sales service. The success of the Chinese electrical appliance has outstanding after-sales service.
Thirdly, with the scale of the China-brand handsets, the price of handset decreases dramatically, the different prices of handsets may satisfy the needs of customers and develop the market.
For Chinese enterprises, chance cannot be missed. Mobile communications in China still has a long way to develop.
In 1998, the Prime Minister of the State Council, Zhu Rongji commented on the mobile communications industry in China. The Ministry of Information Industry submitted the document to the State Council. In January 1999, the office of the State Council published a document on "acceleration of the mobile communications development". Hopefully, the market share of handset can reach 1/4 in 2000.
It is foreseeable that with the support of government and implement of the technology, different brands of the China-brand handsets are launched at all times, and eventually will have breakthroughs.
Link telecomn.com
Feb 2000 Issue |
