Chinese companies shipped 165 million mobile handsets during the first half of 2009, up 19 percent from the same period in 2008, according to iSuppli Corp.
iSuppli forecasts that Chinese companies will ship 363 million handset units in 2009, representing annual growth of 20 percent from 2008.
The primary reason is the significant increase in export shipments. In comparison, domestic handset shipments from Chinese companies increased by only 4 percent in the first half of 2009.
While the global handset market... because of the crisis, the handset markets in developing economies— including Asia, South America, and Africa—have not been greatly impacted. Not only is growth in new subscribers continuously contributing to the first-time buying market in the emerging regions, the sharply declining price of feature-rich phones has also stimulated demand for replacement handsets in these areas.
For example, China’s domestic handset market in the first quarter of 2009 grew by 9 percent compared to the same period in 2008 to reach 58 million units, due to governmental stimulus packages and holiday purchasing. iSuppli forecasts that domestic handset shipments will reach 240 million units in 2009, representing an 8.4 percent annual growth rate. The ongoing voice service fee reductions and declines in handset Average Selling Prices (ASPs) will ensure stable growth of China’s mobile subscribers over the next five years.
Lack of Performance
ZTE in the first half was the No.-1 Chinese-branded handset OEM in terms of unit shipments. The company shipped 16 million handset units during the first half of 2009 and is expected to ship 36 million units this year.
Huawei’s handset business was impacted by the declining CDMA handset market in India and Brazil. However, its data card business grew by 76 percent in the first half of 2009, compared to the same period in 2008.
Shipments from Chinese white-box handset suppliers increased dramatically. Besides the domestic market, these white-box handsets are mainly sold in developing countries. In these areas, many consumers love these low-priced, but high-end feature phones from China. Some white-box handset suppliers have even established their own sales channels in the country.
The IDH Situation
Independent Design Houses (IDHs) are the main source of handset system solutions for those white-box handset suppliers.
With hundreds of handset IDH firms in China at present, competition among them has intensified because of the lack of new features for handsets. In addition, these IDHs all use one platform from one company, making it difficult for them to differentiate products. Currently, a gross profit of one dollar per handsetet is very common for handset IDHs.
Chinese IDHs shipped more than 106 million handset units during the first half of the year. Shanghai-based Wingteck was the No.-1 IDH with 7.5 million unit shipments in the first half of 2009. Eidolon, founded by the former head of Bird’s R&D team, ranked second. Longcheer is the third largest handset IDH with more than 6 million unit handset shipments. iSuppli forecasts that shipments from Chinese handset IDHs will reach more than 220 million units in 2010.
MediaTek Corners the Market
At present, every Chinese company uses the handset solution provided by MediaTek, which shipped about 150 million baseband units to Chinese customers in the first half of 2009, according to iSuppli surveys. Total baseband shipments are expected to amount to more than 300 million units in China and 350 million units globally this year. It appears that this fabless company is the biggest winner when handset makers compete with each other by cutting prices. The pricing of the company’s basebands has yet to drop at all since the beginning of 2009.
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