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Saturday, June 02, 2001, updated at 10:11(GMT+8)

Phone Firms Team up to 'Fight' with Foreign Brands

Seventeen of China's domestic mobile phone manufacturers Friday joined hands to compete more effectively with foreign brands.

With more than 100 million mobile phone users, China has become the world's second biggest mobile telecom market. Yet domestic mobile phone firms have less than 10 per cent of the market share.

International brands Nokia, Motorola, Siemens and Ericsson have become the biggest winners in China -- each of them controls a bigger market share than all Chinese firms put together.

"To compete with international companies, individual Chinese firms can hardly win,'' said Gui Shiyong, chairman of the major sponsor of the alliance, China Mobile Communications Association (CMCA).

Getting domestic companies together could sharpen the competitive edge of the industry as a whole, he said.

The alliance includes major domestic mobile phone manufacturers such as Bird, Datang, Eastcom, Haier, Konka, Kejian, Legend, Soutec, Capitel, Xoceco, Amoisonic, Panda, ZTE and Capitel.

They can work together in technology research and development, supply chains and distribution networks, according to a statement from the alliance.

These moves will help to reduce costs, upgrade technology and attract more customers for the home brands, Gui said.

After joining together, domestic mobile phone firms are expected to control over 50 per cent of the domestic market with an annual growth rate exceeding 10 per cent, according to Shi Jixing, chairman of the alliance who also chairs Eastcom.

Domestic mobile phone firms should change their images as their products are seen as cheap and of poor quality, said Shi.

Although still minor compared to international firms, domestic companies have advantages as they have a better understanding of the home market, low equipment costs and convenient after-sale services.

Mobile phone users in China are expected to exceed 350 million within five years with annual handset demand surpassing 150 million. This includes both old users buying new phones and also first-time buyers, according to Shi.

After several years, some internationally famous brands are likely to emerge from the group via mergers and acquisitions.

Some companies should focus on research and development, others on distribution and others on manufacturing, Shi said.

The mobile telecom sector will continue to keep a high growth rate in China over the coming five years -- the mobile phone penetration rate in the country is only 8 per cent now.

More than 15 million people bought their first ever mobile phones in the first quarter of this year. With most of the users living in the wealthy eastern cities where foreign brands have spent a lot on advertising, small cities, rural and western areas should be the major market for domestic firms at the moment, according to Sui Bo, president of Ningbo Bird Co, the top domestic mobile phone maker.

The first home-made mobile phone made its debut in China three years ago. Although having a much shorter history compared to foreign brands, the quality of domestic phones is not any worse, said Sui.

The alliance will strength marketing power, distribution networks and design techniques where the members are weak compared to foreign companies

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Seventeen of China's domestic mobile phone manufacturers Friday joined hands to compete more effectively with foreign brands.

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