China's homegrown mobile phone handset manufacturers will continue to see operating margins squeezed over the rest of this year as there is no sign that intense competition will abate soon.

The market would get chillier as new competitors crowd in following the recent introduction of a standardized licensing policy for the industry, said Ann Liang, chief analyst for mobile terminals research in Asia-Pacific at market researchers Gartner Inc.

"The new policy will allow new vendors into the market, which will bring more volatility and intensifying pressure for consolidation," said Liang.

Last year, Chinese consumers bought around 68 million handsets, according to Gartner's data. Nokia was the leading vendor with around 20 percent market share, followed by Motorola Inc. with 12 percent.

Ningbo Bird Co. and TCL Corp., the fourth and fifth-largest vendors with 8.6 percent and 7.2 percent market shares, respectively, were the two leading domestic vendors.

Domestic handset makers saw their operating margins decline last year as the industry was marred by overcapacity and competition with foreign brand names like Motorola, Nokia and Samsung Electronics Co., which brought to the market quality high-tech models.

Meanwhile, China's top economic planning agency has issued new rules aimed at standardizing the process of approving investment in the production of mobile phones and wireless telecommunication systems.

As the industry grappled with eroding margins, Liang believed that an increasing number of Chinese handset makers would look to other emerging markets to digest their inventories and capacity.

By 2006, Liang expected only around 25 to 30 of the 37 current handset manufacturers would still be around.

(Shenzhen Daily April 27, 2005)