China, which had more mobile phone subscribers than the U.S. population, might fuel growth in the telecommunications industry as the country upgraded its networks, executives attending an industry conference said.

Heads of companies such as Qualcomm Inc., the world's second-largest maker of chips to run handsets, and Ericsson AB, the world's largest maker of wireless networks, cited China last week at the 3G World Congress and Exhibition 2004 in Hong Kong as a reason to be optimistic.

China, with more than 315 million mobile phone subscribers, is preparing to issue as many as four licenses for so-called third-generation (3G) mobile phone services, which will allow faster downloads of data to handsets. Foreign companies will be as eager as local mobile phone operators like China Mobile Communications Corp. to hear how China intends to build its next-generation network, executives such as Qualcomm chair-man Irwin Jacobs say.

"If one thinks about building four networks at one time across China, that's a huge capital investment,'' Qualcomm's Jacobs said last week at a press conference in Hong Kong.

Qualcomm and Texas Instruments Inc. are planning to make their first chips in China as early as next year, according to Jacobs and Doug Rasor, a vice president at Dallas-based Texas Instruments.

"You've got to make chips in China if you want to sell to the handset makers,'' said Winson Fong, who helps manage US$2.3 billion at SG Asset Management in Singapore. "China has the leverage of its market.''

For the first time, the US$1.1 trillion global wireless phone industry, with 1.3 billion subscribers, may this year surpass revenue from fixed-line services, according to the International Telecommunication Union, a Geneva-based industry organization.

Mobile phone subscribers worldwide might rise to two billion by 2006, two years earlier than expected, partly thanks to China, Ericsson chief executive Carl-Henric Svanberg said.

Third-generation systems are already allowing faster data services in places such as South Korea, where subscribers can download games and ring tones at speeds of up to 2.4 megabits per second using Qualcomm-licensed technology.

Phone operators such as NTT DoCoMo Inc. in Japan have introduced services using high-speed wireless connections to the Internet to bolster flagging voice revenue.

"There is no doubt that this part of the world is the most exciting in telecommunications today, both in terms of growth and quality,'' Svanberg said in a speech during the conference Nov. 16. "Confidence is back in the industry.''

When and how China is going to issue its third-generation licenses is the "million-dollar question,'' said Mats Granryd, president of Ericsson's Mobile Systems CDMA unit.

Chinese manufacturers of handsets and networking equipment may also gain from their home market growth.

Verizon Wireless and Sprint Corp., two of the three largest U.S. mobile phone operators, said last week they were in talks to buy handsets from Chinese producers and suggested China's influence in the industry was growing.

Sprint might pick its first Chinese handset supplier within three months, said Stephen Falk, vice president of global development at Sprint. Verizon was also in talks with Chinese equipment manufacturers including Huawei Technologies Co., China's biggest phone-equipment maker, said Gerard Flynn, a director at the New Jersey-based company.

"Chinese vendors will be increasingly competitive, and I think they will have an impact in driving down the cost,'' said Falk. As they learn to produce phones faster, "the Chinese manufacturers are going to be much more successful in all the ranges, not just the low-end.''

That U.S. operators were talking with the Chinese was not surprising, said Simon Leung, a senior vice president at Schaumburg, Illinois-based Motorola Inc., the world's second-largest handset maker after Nokia.

Chinese handset-makers "must be doing something right," Leung said.

Ningbo Bird Co., China's largest handset maker, and local rivals plan to boost exports as the country's consumers turn to phones with cameras and other features offered by foreign manufacturers, including Finland's Nokia Oyj and Motorola.

Last week's conference helped set the stage for some agreements for the Chinese manufacturers.
Amoi Electronics Co., a Chinese maker of mobile phones, said it began "serious'' talks last week to sell handsets to Reliance Info-comm Ltd., India's biggest mobile phone operator, said Ivan Xiao, a product manager at Fujian Province-based Amoi. Huawei secured a new contract from an African buyer last week, said Richard Lee, deputy director at the Shenzhen-based company. He declined to identify the company.

The local manufacturers may also have an advantage at home. Ningbo, which does not rank among the top five globally, is the fourth-largest handset vendor in China. Huizhou-based TCL Corp. is fifth, according to market researcher ISuppli Corp.

Handset vendors that do not rank among the top five "have a better chance than they have had ever before,'' said Douglas Li, chief executive of SmarTone Telecommunications Holdings Ltd., the mobile-phone unit of Hong Kong's largest real-estate developer.

(Shenzhen Daily November 22, 2004)