Research Reports
The Chinese Mobile Phone Industry, 1Q 2003 and Beyond
May 30, 2003 / Sean Kao
17 Page, Statistics Report
US$850 (Single User License)

Abstract

Driven by climbing shipments from local Chinese makers, the Chinese mobile phone industry saw 95.7% year-on-year growth in the first quarter of 2003 to reach 39.3 million units. The first quarter also witnessed a couple of firsts: Chinese makers accounted for over 30% of Chinese mobile phone industry output, and TCL and Bird experienced higher shipments than Siemens, gaining third and fourth place rankings respectively.   However, overaggressive sales forecasts brought about piled up inventories of roughly 20 million handsets slated for the Chinese market. As the spread of SARS further curtails demand in the Chinese mobile phone market, it is anticipated that Chinese mobile phone industry shipments in the second quarter of 2003 will drop by over 30% compared to the first quarter.
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With Chinese makers ramping up output in the first quarter of 2003, Chinese mobile phone industry shipment volume far surpassed anticipated levels. However, muted growth in Chinese market demand, swollen inventories of over 3.5 million CDMA handsets and over 20 million GSM phones, as well as the impact from SARS, present a host of challenges for the Chinese mobile phone industry in the second quarter of 2003. After SARS is brought under some level of control, the likelihood of consumer demand seeing a speedy recovery and the effectiveness of Chinese makers' low-priced strategies remain key variables. 

A determined push by Chinese makers to lower prices to boost market share will impact profit as well as drive demand for lower costs. It is hence expected that the competitive crux will gradually shift from a focus on marketing and sales to procurement scale, manufacturing capabilities, and design expertise. Players that currently maintain a low production scale will need to quickly roll out popular models and speedily gain Chinese consumer acceptance; otherwise, such players will need to consider how to leverage the remaining value of their production or sales licenses.  

Additionally, at the present time clamshell handsets with polyphonic rings, color displays, and camera modules are already flooding the market. As such phones become increasingly commonplace, the Chinese mobile phone industry could rapidly advance toward game software competition as gaming becomes more popular.  

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