Abstract

After a series of ups and downs Xinwei's SCDMA operations are developing, thanks to the low cost of the technology, huge domestic market demand, and the support of the Chinese government. But the company still faces several challenges:

The development of Xinwei's SCDMA operations is excessively reliant on the rural communications construction project, which will be completed by the end of 2007, and after which demand SCDMA products will decline. It is vital that Xinwei begin to develop new markets to ensure continued growth, such as the emerging markets of South Asia, Southeast Asia, Latin America, and Africa, where the market characteristics are similar to those of China.

SCDMA primarily serves as a replacement for PAS technology in urban regions. Although Xinwei has adopted a low-price strategy to eat away at PAS market share, the company is faced with the same problem as PAS vendors since telecoms are conservative about developing SCDMA services before the issuing of 3G licenses. Of the four major players -China Mobile, China Unicom, China Telecocm, and China Netcom -if China Netcom, the weakest of the four, does not receive 3G licenses, then Xinwei will benefit greatly. If China Netcom does receive licenses, Xinwei may lose the support of its largest customer and thus suffer. Given that the 2Mbps transmission speeds of Xinwei's McWill products are still slower than HSDPA or WiMAX, and that they lack support of large telecoms, Xinwei has to cultivate new niche markets for its McWill systems.

Appendix

List of Companies