NASDAQ-listed China TechFaith Wireless Communication Technology Ltd yesterday said it expected a shift to the ODM (original design manufacturer) model would help turn around its loss-making operations.

"We are expecting increasing ODM activities in China," said Dong Defu, chairman and CEO of TechFaith, the largest mobile phone design company in China.

"China will soon become a global ODM center with an increasing number of global handset makers transferring their design activities here."

Under the ODM model, companies design and manufacture goods that other companies sell under their own brand names.

TechFaith has been focusing on providing ready-to-build phone designs to handset manufacturers and has not been involved in manufacturing so far.

It has just posted a quarterly net loss of US$3.4 million and last week announced that it is cutting its workforce by 400, which could lower its operating expenses by at least US$2 million per quarter.

A switch to the ODM mode would help cushion the stiff competition in the cellphone design market, said Dong. "Overseas operators' demand for ODM service is strong," he told China Daily.

A number of global telephone operators including Vodafone and Hutchison Whampoa are turning to mainland companies for designing and manufacturing cellphones.

Top Chinese telecom equipment makers Huawei Technologies and ZTE Corp have provided phones to Vodafone that are sold in Europe.

In January, TechFaith won orders from Hutchison CAT Wireless Multimedia Ltd in Thailand, Asia Pacific Telecom Group in Taiwan Province and Sferia SA in Poland.

In recent months, the mobile phone design cycle has shortened from 10 months to 3.5 months on average, which could help TechFaith cut costs and regain competitiveness, according to Dong.

The market for China's independent handset design houses saw a peak in 2002, when TechFaith was founded. The average profit margin of the industry was then as high as 300 percent as manufacturers placed big orders for ready-to-build designs to launch as many new handset models as possible.

In March, TechFaith announced it would form a joint venture with a "leading one-stop component provider for handset manufacturers" to boost its ODM business.

Some industry observers speculated the partner is Shenzhen-based BYD Co Ltd, which produces cars and electronics components including batteries.

(China Daily June 1, 2007)