Chinese Home Appliance Makers Turning to Cell Phones

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Last updated at: (Beijing Time) Wednesday, June 05, 2002

Chinese Home Appliance Makers Turning to Cell Phones

Competition in the mobile phone manufacturing market will gear up this year with more giant home appliance vendors jumping into the game.

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Competition in the mobile phone manufacturing market will gear up this year with more giant home appliance vendors jumping into the game.

Competition in China's mobile phone market to become fiercer

Ningbo Aux, a big air-conditioner maker, announced last weekend that it would start to make mobile phones with an investment of 1 billion yuan (US$121 million).

Just a few days ago, Guangdong-based Skyworth, China's No 3 colour-TV maker, also said it would launch the Skyworth branded mobile handset in the latter half of the year.

About 10 to 20 per cent of its 1.5 billion yuan (US$181 million) cash in hand would be used for merger and acquisition activity in order to get a manufacturing licence, according to sources at Skyworth.

TCL, another Guangdong-based colour-TV maker, said it would invest another US$10 million into the mobile phone business which brought the company a profit of 300 million yuan (US$36 million) last year.

Many major home appliance makers -- including Konka, Haier, Hisense and Amoisonic -- have started mobile phone businesses.

With more huge appliance vendors taking part in the game, competition in China's mobile phone market will surely become fiercer, said Zeng Muhua, spokesman of Bird, the top domestic handset maker.

Bird ranks No 4 in China's mobile handset market after Nokia, Motorola and Siemens.

Mobile phones garner bigger profits and have richer potential

In comparison with home appliances, mobile phones garner bigger profits and have richer potential, Zeng said.

"The mobile phone is probably the most profitable electronic device on the mass market," he said.

After a series of price wars in the colour-TV and air-conditioner markets, turning to the cellular phone market is a normal choice for these tired home appliance makers.

Most of the home appliance vendors, including Konka, Hisense and Skyworth, lost money last year due to continuous price wars.

In comparison with the saturated home appliance market, the demand for mobile phones -- 60 million units last year -- is very attractive.

China is the world's biggest mobile phone market, with 167 million users as of the end of April.

The high demand for mobile phones keeps on going with new monthly customers surpassing 5 million in the first four months of this year.

Chinese government not likely to issue more licences

More mergers and acquisitions are expected soon, as the government is not likely to issue more mobile phone manufacturing licences.

The Ministry of Information Industry (MII) has issued 30 licences to global system for mobile communications (GSM) handset makers and 19 licences to code division multiple access (CDMA) mobile phone makers.

Because the number is far more than enough, the MII will encourage mergers and acquisitions among the companies to form big and powerful players, said an official at MII's Department of Electronic and IT Products, who preferred to be unnamed.

Huang Hongsheng, chairman of Skyworth, also said the company is in discussions with several licensees for potential co-operation.

Huang said he would change his Nokia mobile phone to a Skyworth handset before the end of the year.

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