Abstract

Slow Pace of Evolution Represents a Latent Danger

China Mobile has begun to deploy TD-SCDMA networks on a large scale. However, the retarded development of the TD-SCDMA industry as a whole constitutes a serious obstacle to the promotion of TD-SCDMA mobile communications service. In particular, the uncertainty over the TD-SCDMA evolution roadmap -including delays in the formulation of technology and testing standards -has had a negative impact on product development and affected mobile operators' enthusiasm for TD-SCDMA network deployment and service development.

The CCSA (China Communications Standards Association) will not be completing the draft standard for TD-SCDMA R5 before the third quarter of 2007 at the earliest; it will then take another year or so to develop the necessary IC products and begin volume production. What this means is that the first TD-SCDMA R5 compliant mobile phones will not be appearing on the market before the second half of 2008 at the earliest. Given that China Mobile has undertaken to roll out 3G mobile communications service using TD-SCDMA technology in time for the Beijing Olympics in August 2008, the companies concerned are on a very tight schedule.

Shakeout of Handset Makers in China

Chinese companies dominate the TD-SCDMA industry value chain, and almost all of the recent TD-SCDMA equipment tenders have gone to Chinese suppliers. Besides Datang Mobile -which developed the TD-SCDMA standard and controls most of the key IP -other Chinese companies such as Spreadtrum, RDA, and ZTE are also expected to play a major role in the ongoing development of the TD-SCDMA industry. ZTE in particular has already established a leading position in the TD-SCDMA network equipment market and is widely expected to do the same in the TD-SCDMA handset market. The emergence of the TD-SCDMA segment will have a major impact on the competitive balance in the Chinese handset industry. 

Currently, international companies continue to play an important role in the Chinese handset industry as providers of technical support. However, as the Chinese handset makers grow larger and stronger, the importance of the international firms will decline. Foreign companies have already been marginalized in the network equipment segment of the mobile communications market, and a similar trend is now becoming apparent in the baseband and RF IC segments. Application services will be the key driver of growth for the mobile communications industry in the future, with application software development having a particularly important role to play. The industry will be watching keenly to see how Datang Mobile's Arena application service community develops.

Appendix

Research Scope

This study explores the development of the TD-SCDMA industry in China, focusing on the network equipment and terminal device supply chains.

List of Companies