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Telecommunications equipment industry

Foreign Firms Regain Ground in China's Mobile Phone Market

Strategic Insights

— 2 min read

Chinese domestic producers had briefly topped the charts in 2003, achieving a majority share of the domestic market at the expense of foreign players. However, global giants have since made a comeback, recapturing more than 50% of the market after a year of intense competition. This development serves as a warning sign for Chinese policymakers, who fear that foreign companies will exploit new access under World Trade Organisation rules to outcompete local firms in other fast-growing sectors.

Key Takeaways:

  • Last year, foreign majors regained more than 50% of the mobile phone market in China after a year of intense competition, surpassing domestic producers.
  • Handset inventory levels exceed 40 million units, equivalent to 40 billion yuan in capital, with the Ministry of Information Industry forecasting oversupply for years to come.
  • Many local producers are likely to shut down this year, with aggregate domestic sales last year totaling 63 million sets, of which about 20% were replacements for existing models.
  • Foreign brands such as Nokia, Motorola, and Samsung have adjusted their global strategies to include China, using large-scale, low-cost production, heavy investment in local R&D, national distribution networks, and heavy advertising.
  • Market share shifted in favor of foreign brands in 2004, with Nokia's sales in China worth Euro2 billion ($20.27 billion) and exports from its mainland factories reaching Euro1.7 billion.
  • By the end of 2003, Nokia's investment in China had reached Euro1.7 billion, giving it strong lobbying power in Beijing.
  • China is now the world's biggest manufacturer and exporter of mobile handsets, accounting for more than one-third of global production, with 230 million units produced last year, of which 140 million were exported.

Statistics:

  • Handset inventory levels in China: 40 million units
  • Capital equivalent: 40 billion yuan
  • Overproduction forecast by Ministry of Information Industry: years to come
  • Aggregate domestic sales last year: 63 million sets
  • Replacement sales: 20% of aggregate domestic sales
  • Nokia sales in China: Euro2 billion ($20.27 billion)
  • Nokia exports from mainland factories: Euro1.7 billion
  • Nokia investment in China: Euro1.7 billion
  • Global production of mobile handsets by China: 230 million units
  • Number of units exported by China: 140 million
  • Global market share of Chinese companies: 2% (Ningbo Bird's global market share)
  • World's largest exporter of mobile handsets: Nokia, exporting Euro1.7 billion

Sources:

  • [Article author]: Mark O'Neill
  • [Newspaper]: The China Post
  • [Publication date]: Not specified
  • [Date of events]: 2001, 2002, 2003, 2004
  • [Statistics and data]: Various industry reports and estimates, including IC Insights.

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