News February 13, 00:32 Eastern Time
Feb. 12, 1999 (Electronic Engineering Times - CMP via COMTEX) -- Beijing - Joint ventures and government policies designed to spur competition and investment have boosted prospects for mobile-phone and chip-set makers here. Indeed, Chinese investment in Global System for Mobile communications (GSM) is so brisk that the government has moved to license newcomers to the bustling market.
Mobile services now exceed fixed-line service in China, so network operators see it as an important revenue generator.
In fact, mobile phones have become one of the most important sectors of the Chinese telecom industry, analysts said. Cellular-phone use grew by more than 11.3 million, to nearly 25 million users, in 1998, according to the Ministry of Information Industry (MII) statistics. Most new subscribers used GSM handsets, the ministry said.
The growth of local wireless networks is likely to make China an important market for DSP and mixed-signal ICs. Competition among chip and product designers like Texas Instruments, Analog Devices, Lucent Technologies and Siemens is already heating up, observers said.
Analysts said the average demand for wireless appliances over the next two years could include 17 million GSM switches, 900,000 basestations and 15 million handsets.
"The telecom network of China, particularly GSM mobile networks, has been growing very fast in past years," said Xie Linzhen, vice director of MII's Department of Electronic and IT Product Management. The "Chinese mobile network is the third largest in the world, and the Chinese GSM network owns one-fourth of the global users."
Xie predicted annual growth for GSM will be as high as 13 million users in the next five years, pushing China ahead of Japan as the second-largest market behind the United States.
Private analysts forecast even greater GSM usage, predicting there will be as many as 50 million customers by 2000, and more than 200 million by 2010.
The GSM market boom has attracted so many investors the government had to step in last month. MII decreed that as of Jan. 21, all new GSM projects would require its approval. The ministry will then take the request to the State Planning and Developing Committee for further review. "We hope this new policy will let Chinese and foreign firms make money from the mobile industry by avoiding overinvestment," said Xie, the MII vice director.
Another goal was to boost the competitive chances of Chinese companies. Besides assembly, many local companies and research institutions began evaluating GSM technology several years ago. The first Chinese GSM switch, basestation and handsets appeared late last year.
China's mobile-communications market began skyrocketing after China Telecom, which held a virtual monopoly until 1994, launched cellular-phone service in Canton, Shanghai and Beijing. That network was based on an analog 900-MHz system, with Motorola's expensive TACS handsets initially dominating.
To break China Telecom's monopoly, the State Council of China issued a second telecom license in 1994 to China Unicom, a joint venture among several ministries and state-owned firms. China Unicom opted for the European GSM standard in 1995, quickly grabbing customers from its rival.
China Telecom responded by launching its own, larger GSM network across China. As competition and technology development grew, prices dropped, service improved and more subscribers signed up.
Before this year, overseas vendors like Ericsson, Motorola and Nokia controlled 80 percent of the handset market, with the remainder split among Philips, Sony, NEC, Alcatel, Siemens, Nortel, Mitsubishi and others.
Together, these firms have 13 manufacturing plants to make mobile-phone equipment for China. MII estimated these plants could produce 8 million handsets annually.
Local plants have become increasingly important to overseas companies as the government cracks down on smuggling and foreign-currency rules. Such measures, along with new mobile telecommunications policies, have raised the value of manufacturing plants run by joint ventures or as wholly owned subsidiaries.
Shenzhen Huawei Technology Co. Ltd. has emerged as one of the largest telecom equipment suppliers in China. Huawei launched its GSM efforts in 1997, completing trial production by the end of 1998. It invested about $25 million in a production line in Shenzhen, outside Hong Kong, and expects to produce 4 million GSM switches and 50,000 carrier-band basestations there. Revenue for these components is expected to reach $1.25 billion.
Elsewhere, Datang Telecom (Beijing) and Guangzhou JinPeng Group, near Shenzhen, formed a strategic alliance with Motorola Inc. on GSM and next-generation mobile systems. Datang and Motorola have cooperated on research and other areas for several years. Late last month, JinPeng and Motorola set up a joint venture called JinPeng Mobile Telecom System Co. Ltd. JinPeng is contributing its mobile switch technology and intellectual-property rights, while Motorola has invested $29 million. The partners will develop and produce GSM and next-generation equipment.
Another Motorola partner, Eastcom Co. Ltd. (Hangzhou), has also invested in a U.S. joint venture based in Irvine, Calif., to develop GSM handsets based on a Lucent Technologies chip set. Fan Liming, chief engineer for Eastcom's GSM project, said the company would produce about 500,000 handsets this year and 700,000 in 2000.
Shenzhen, the boom town across the border from Hong Kong, is quickly becoming the hub of GSM development in China. Shenzhen HB Electronics Ltd., one of the largest cordless-phone makers in Asia, has invested heavily in GSM technology and produces thousands of handsets for the European market each year.
Another local company, China Kejian Co. Ltd., launched its GSM handset in December. It cooperated with IBM subsidiary Commquest to develop its handset, which it expects to produce at the rate of 50,000 a month.
These and other GSM equipment makers boost government hopes that domestic production will eventually break the grip of overseas manufacturers.
Emerging third-generation (3G) wireless phones could threaten the spread of GSM technology in China, but larger coverage areas and technical progress are expected to extend GSM's life cycle here. Nevertheless, four narrowband-CDMA (code division multiple access) trial systems are operating in Beijing, Shanghai, Guangzhou and Xian. Many observers view the trials as the beginning of a 3G market here.
Industry executives predict China's transition to 3G could be difficult. As CDMA tests continue, companies fear that patent holder Qualcomm Inc. (San Diego) will charge high royalties to license the technology. "All CDMA business [is] delayed in China," said Fan of Eastcom
|
