ad info


Asiaweek TIMEASIA.com CNN.com
 > technology
 home
 intelligence
 web features
 magazine archive
 technology
 newsmap
 customer service
 subscribe
 TIMEASIA.COM
 CNN.COM
  east asia
  southeast asia
  south asia
  central asia
  australasia
 BUSINESS
 SPORTS
 SHOWBIZ
 ASIA WEATHER
 ASIA TRAVEL

Other News
TIME.com
TIME Europe
FORTUNE.com
FORTUNE China
MONEY.com
Asiaweek Services
Contact Asiaweek
About Asiaweek
Media Kit
Get up to 3 months of Asiaweek free when you subscribe online!


AUGUST 4 , 2000 VOL. 26 NO. 30 | SEARCH ASIAWEEK

Cyborgs and Biochips
China's local phone makers get no respect
By MARIA CHENG and DAVID HSIEH Beijing

ALSO:
A Question of Quality: Science imitates nature for better computers


When Mao Zedong exhorted the masses to resolutely support China's national industries, he obviously didn't have mobile phones in mind. Today's average Chinese citizen takes a much more pragmatic view of homegrown products -- they are buying foreign handsets in record numbers. "I don't trust domestic brands," says Tan Wen, a Beijing clerk. "They haven't been on the market for long, and I don't trust the quality."

Was that the Great Helmsman twitching in his transparent sarcophagus? Tan could well be speaking for an entire generation of cellphone users in China. The world's three dominant cellphone makers, Nokia, Ericsson and Motorola, account for upwards of 85% of China's handset market. The remainder is being fought over by other foreigners like Samsung, Sony and Siemens, and about 11 domestic Chinese companies. When the year began, the domestic producers were estimated to have a minuscule 3% of the market, although it may have doubled since then.

Local companies are missing a huge opportunity. U.S. brokerage Lehman Brothers says China can expect average annual growth of 44% in cellular subscriber numbers over the next four years, from 43 million at the end of last year to 183 million by the start of 2004 (see table below). The challenge for China's domestic manufacturers is clear: Capture a substantial piece of the market for new phones that will accompany that astonishing growth.

None of the domestic companies has yet hit on a surefire strategy for accomplishing such growth, but it isn't for lack of trying. Some manufacturers have emphasized after-sales service. This approach, however, does little to bolster the confidence of consumers already skeptical about the reliability of domestic phones. Listen to Bai Yan, who works for a pharmaceutical concern in Beijing: "When I buy a mobile phone, I'm not looking for after-sales service. I want a quality phone that will last. There is peace of mind in buying a well-known brand." Yang Dacheng, professor of telecommunications engineering at the Beijing University of Posts and Telecommunications, is more succinct: "The more domestic players tout their repair network, the more people stay away."

Another strategy has been to advertise heavily, often using Chinese celebrities. One leading domestic producer, Kejian, will spend more than $4 million for a prime-time advertising slot on China Central Television this year. Ningbo Bird has featured Taiwanese pop star Coco Lee in its television and print advertising blitz. Bird sees no alternative to advertising aggressively. "We've entered a period where we have to go this route," says Sui Bo, general manager of the company's sales division. "We must prop up our brand name." Without a strong advertising campaign, he predicts, "we would die in a vicious cycle of low profile and low sales."

Kejian also focuses on second-tier Chinese cities such as Wuhan, Chengdu and Shijiazhuang, leaving the biggest markets Beijing, Shanghai and Guangzhou to the global leaders. That's a sound strategy for domestic companies, says the Finnish mobile phone manufacturer Nokia. But Yang suggests this and other approaches do not address the core problem: lack of technological sophistication in China. "We are forever behind [the foreign manufacturers]," says the Beijing academic. "Haier and Bird are merely [foreign component] processing plants. They haven't grasped the technology. They've adopted a brand-name strategy devoid of their own technology." Eastcom, which claims to be China's largest domestic mobile-phone manufacturer, is responding to the criticism by teaming with Motorola. Eastcom produces fully half of Motorola cellphones sold in China. "A relationship between competitors will work as long as you have a win-win situation where both partners will benefit," says Eastcom CEO Shi Jixing. "We can help Motorola introduce their products in China on a massive scale. Motorola wants to bring elements of their [research and development] to Asia. We learn a lot from them."

Gong Zhengjun, deputy general manager of mobile operations at Zhongxing Communications in Beijing, says his company realizes that focusing on advertising is only a temporary fix. "We must rely on a solid technological base to promote R&D, production, sales and service." This may be a bit too late, with demand for mobile phones exploding and China's entry into the World Trade Organization (WTO) around the corner. Foreigners already control so much of the handset market that WTO entry isn't likely to cause new losses to China's domestic manufacturers. They are already floundering in the deep end of global competition. Quick, someone call the lifeguard -- and a swimming coach.

With reporting by Fons Tuinstra/Shanghai

Write to Asiaweek at mail@web.asiaweek.com

Asiaweek Technology Home | Asiaweek.com Home

AsiaNow


Quick Scroll: More stories from Asiaweek, TIME and CNN

   LATEST HEADLINES:

WASHINGTON
U.S. secretary of state says China should be 'tolerant'

MANILA
Philippine government denies Estrada's claim to presidency

ALLAHABAD
Faith, madness, magic mix at sacred Hindu festival

COLOMBO
Land mine explosion kills 11 Sri Lankan soldiers

TOKYO
Japan claims StarLink found in U.S. corn sample

BANGKOK
Thai party announces first coalition partner



TIME:

COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state



ASIAWEEK:

COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness


Launch CNN's Desktop Ticker and get the latest news, delivered right on your desktop!

Today on CNN
 Search
  ASIAWEEK'S LATEST
Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?


  TECHNOLOGY
THIS WEEK
Phones: Why China's local handset makers get no respect

Biochips: Computer scientists borrow from mother nature

Cutting Edge: Apple's New Crop

ALSO IN ASIAWEEK

ASIAWEEK.com
Vol. 2 No. 4


Cover Story: Wang Zhidong holds pole position in the race to create a Chinese super-portal

Hip Trips: The Web adds some extra adventure to finding a really frightening vacation package

Pulse: The fairest of the cyberbabes, and putting yourself in the game

Net Gains: Picking the winners and losers -- mostly losers -- of Asia's dotcom IPO wave

B2B: Asia's struggling e-commerce sites make asps of themselves. Why buy when you can rent?

Politics.com: Old guard against new technology in Japan's first net election

Toolbox: How to blow $3,000 on the meanest, keenest game machine around

Wired Exec: Noda Seiko wins at online mahjong when she isn't setting policy in the Japanese Diet

Asiaweek Technology Home

Asiaweek/CNN Internet Index: Track our Asian high-tech stocks

Back to the top   © 2000 Asiaweek. All Rights Reserved.
Terms under which this service is provided to you.
Read our privacy guidelines.