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Handset makers' restrictions relaxed
By Chen Zhiming (China Daily)
Updated: 2004-07-15 08:40

Analysts have hailed the relaxation of controls on mobile phone manufacturing licenses as a further opening of the nation's telecom sector.

Lu Tingjie, the president of the Economics and Management School of Beijing University of Posts and Telecommunications, said that the "lifting of restrictions on handset manufacturing licences is a positive move to open the market."

Lu added that this will "bring more handset manufacturers into the market."

Sources close to the Ministry of Information Industry said yesterday mobile telecommunications production will no longer require the approval of the State Council, China's cabinet, according to regulations which took effect on July 1.

Analysts interpreted this move as meaning that investment in mobile handset manufacturing, a lucrative business, no longer needs to get the nod from the State Council.

But there was no immediate response to this from the ministry.

Prior to this latest development, rules governing the issuing of mobile phone manufacturing licences were based on regulations issued on December 31, 1998.

According to this regulation, the ministry stopped issuing new mobile handset manufacturing licences to foreign handset firms in 1999.

Besides restriction on the import of foreign mobile telecommunication products, the regulation also required that 60 per cent of mobile phones produced by foreign firms in China should be exported.

Foreign joint ventures can only obtain quotas to import related products and components by meeting these criteria.

"The abolition of the old regulation will give more freedom to handset makers and enable more firms to get involved in the business," Lu said.

"There will be some impact on the industry as there will be more players fighting for a market share in China," he said. "But I do not think the impact will be huge."

The major purpose of the old regulation was to restrict dumping by foreign handset makers in China.

Following years of development, China's handset manufacturing market is already fairly open.

Ministry figures showed it had granted 29 GSM mobile phone manufacturing licences and 20 CDMA licences to 37 manufacturers by the end of last month.

Ministry sources said that around 20 manufacturers are currently applying for new licences.

"The lifting of restrictions is good for mobile subscribers as they may have a greater choice of cheaper handsets and a wider range of services to meet their demand," Lu said.

Lu also maintained that domestic handset makers are now quite competitive compared with their foreign rivals.

Many domestic handset makers have registered great development over the past few years.

Ministry figures indicated that domestic handset makers took only a tiny 2 per cent market share in 1999. The figure increased to about 55 per cent last year, with several rising star handset makers such as TCL, Bird, Konka, Lenovo and Amoi.

Domestic handset makers are likely to take more than 60 per cent of the country's market share by the end of this year.

New technologies, compelling designs and multi-functionality are becoming the selling points for their products.

The reason for them to fight the foreign brands lies in the huge low-end market.

"There is a trend that the low-end mobile phones market will mainly be dominated by domestic handset makers," he said, adding foreign brand names usually tend to enter high-end market.

"Enhanced co-operation with telecom operators will also offer great opportunities for domestic handset makers," Lu said.

He believed that the lifting of the related restrictions on handset manufacturing is also part of the country's commitment to the World Trade Organization rules to gradually open the market.

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