The Ministry of Information Industry (MII) reiterated Monday that it is not planning to issue new licenses for mobile phone manufacturing this year, refuting the rumor that new policies on licensing will be unveiled soon.

"There will be no new policies towards the issue," said MII spokesman Wang Lijian.

Regulations related to mobile phone manufacturing licenses will continue to be based on the regulation issued on December 31, 1998, he said.

The regulations are previously up for revision this year. As a result, new policies are expected, analysts say, as China has become the largest mobile handset market worldwide.

According to the current regulation, the MII stopped issuing new mobile handset manufacturing licenses to foreign handset firms as of 1999.

Besides restrictions on the import of foreign mobile telecommunication products, the regulation also requires that 60 percent of mobile phones produced by foreign firms in China be exported.

Only by meeting these requirements can foreign joint ventures obtain quotas to import related products and components.

The spokesman's remarks echo those of Wang Bingke, deputy director of the Economic System Reform and Economic Operation Department under the MII.

"We are not considering any new licenses this year," Wang said last month at a conference in Beijing.

Figures from the MII showed that by the end of last month, it had granted 29 GSM mobile phone manufacturing licenses and 20 CDMA licenses to 37 manufacturers.

Sources said 12 manufacturers have applied for new licenses so far this year.

"We don't see the need to issue new licenses to more manufacturers at this point," Wang said.

Official figures showed that the total output of handsets in China reached 186 million units last year.

Attracted by the lucrative market, both domestic and foreign handset makers are enhancing their investment and promotions in the market.

It has become common practice for handset manufacturers who are refused licenses to produce handsets by seeking joint ventures with licensed firms.

Other ways of participating include becoming a shareholder in licensed companies.

Analysts have also pointed out that some of the licensed firms are making large profits through leasing their rights for production to firms without licenses.

As a result, there are almost 100 handset brands sold in the domestic market.

To standardize the market, some analysts say the MII is considering suspending some manufacturer's licenses.

"We encourage domestic handset makers to become stronger and more competitive through integration so as to compete with global players," Wang said.

Domestic handset makers witnessed dramatic development in the past five years.

MII figures indicate that domestic handset makers only took a minuscule 2 percent market share in 1999. However, the figure increased to about 55 percent last year, with several rising star handset makers such as TCL, Bird, Konka, Lenovo and Amoi.

By the end of the year, projections indicate that domestic handset makers will likely take more than 60 percent of the country's market share.

According to the MII's blueprint, the production of handsets this year is expected to be 170 million units this year.

"Given the huge population, the domestic market is far from saturation and in the coming years the handset market is expect to swell," Wang said.

MII figures also show that mobile phone density in the mainland is only at 20.9 percent, far below the level in other places such as Taiwan, Hong Kong and South Korea.

"Domestic handset makers should try to master key technologies and focus more on technology innovation," stressed Wang.

"The enhanced market share of domestic handsets doesn't mean we are competitive in the international market," he said.

Compared to international giants such as Nokia, Motorola and Samsung, many domestic handsets are less competitive in the international market.

Analysts say a lack of innovation in technology and design as well as limited exports has become major hurdles for domestic mobile phone makers to become stronger.

Also, many domestic mobile phone manufactures are producing handsets through original equipment manufacturing (OEM).

"Boosting the manufacturing of accessories for mobile phones is also a key issue to be addressed in the domestic market," Wang said.

He also believes that further exploring the overseas market is key to a continued high growth momentum.

(China Daily April 13, 2004)