Abstract

China is well on the way to developing a comprehensive mobile phone industry supply chain that embraces IC component, optoelectronic component, application module, and structural component production. However, for certain types of key component where the technical barriers to entry are particularly high -such as TFT LCD and PCB -China will remain dependent on international suppliers for some time to come.

The Chinese semiconductor industry began to take off in 2002. In recent years China's market demand has been rising, and large numbers of talented individuals are returning to China from overseas to set up their own businesses. As a result, China has achieved impressive results in the development of the mobile phone IC industry, including baseband, RF, and application processor IC design and production.

As TD-SCDMA technology has come into commercial use in China, Chinese IC design houses have been able to take advantage of moving into this market segment ahead of leading international IC design companies. Given the large size of China's domestic market, TD-SCDMA ICs will offer significant growth opportunities for Chinese IC design firms.

In the optoelectronics and application module segments, Chinese manufacturers currently lack the core technologies and access to key materials and production equipment that they need to compete effectively against overseas suppliers. Those Chinese manufacturers operating in these market segments tend to be small, with limited financial resources and inadequate R&D capabilities, making it difficult for them to develop new products and technologies. In the LCD market, Chinese manufacturers have achieved some limited success using "cast-off" Japanese and Korean production technology. However, Chinese LCD makers are basically still playing catch-up, and there is a danger that their development will be slowed by intense price competition between Chinese manufacturers.

Some of the longer-established Chinese structural component makers have been able to transform themselves into one-stop shopping suppliers of a comprehensive range of mobile phone components, through vertical integration. BYD is one example of a company that has expanded into downstream assembly operations. As China develops into the world's leading center of mobile phone production, Chinese component makers are gradually building up the economies of scale they need to become a significant force in the industry. However, they will continue to face intense competitive pressure from Taiwanese and international mobile phone component manufacturers, such as Foxconn.

Appendix

List of Companies