Top Software, a Sichuan-based software maker, announced last week that it had entered the mobile phone making industry via controlling major shares in a joint-venture with mobile phone makers in Shenzhen. China has 28 mobile phone producing companies that manufacture more than 20 foreign and domestic branded mobile handsets.

Eleven of these 28 companies produce home branded mobile phones including TCL, Haier, Eastcom, Capitel, Konka, Bird, Kejian, Soutec, Amoisonic, Xoceco and CEC, while the other 17 are OEMs (original equipment manufacturers) of overseas groups including Nokia, Motorola, Ericsson and Siemens.

"Eleven domestic brands are already too many, the Ministry of Information Industry (MII) would be very strict on issuing new allowances," said an official with the Telecom Equipment Management Department of the MII.

The official, who preferred to be unnamed, said there would be many mergers and acquisitions happening among these 11 domestic branded mobile phone makers.

The combined market share of these firms, unfortunately, is not yet one-third of Nokia or Motorola, which control more than 30 per cent of China's mobile phone market respectively.

And most of them are money-losing companies and supported by rosy imaginations that they would turn back to black someday.

The competition in the mobile phone market is very fierce already which makes it very hard for newcomers and small firms to earn money, he said.

Domestic mobile phone makers should have their own patents in software and chips which cut 70-80 per cent of a phone's value. The MII will not issue any more licences for OEM, said the MII official.

His words were supported by Qu Weizhi, vice-minister of the MII, who predicts that there would be several domestic mobile phone makers going bankrupt before the end of the year.

With the economic downturn in the overseas market, most of the mobile phone makers have turned their marketing focus to China, which has already become the top mobile phone market in the world with more than 110 million users.

The competition in the domestic market would be fiercer in the latter half year, Qu said.

To reach the target of controlling 50 per cent shares of the domestic market in three years, all the home brands joined hands in June to work towards the goal together.

But the 11 brands would shrink by half via merger and acquisition, said Shi Jixing, chairman of the domestic mobile phone makers' forum, who is also president of Eastcom.

(China Daily 08/06/2001)