Chinese competition hits mobile profits

China's telecoms equipment makers have been eroding profit margins elsewhere

Strong competition from Chinese firms is eating into profit margins at mobile infrastructure manufacturers worldwide, according to analyst reports.

Along with a global slowdown in the rate of mobile network expansion, the growing competition could threaten jobs at established telecoms vendors.

Fierce competition in the market for base stations and other infrastructure from China's two largest telecoms equipment makers, Huawei and ZTE, has been eroding profit margins and market shares, say analysts at IMS Research.

"The market has been growing at 10 per cent or more each year, so this was not a problem. But this is going to change with the new market conditions," said Matia Grossi, lead infrastructure analyst at IMS Research.

"The recent announcements [by Nokia Siemens, Ericsson and Alcatel-Lucent] of thousands of voluntary [redundancies] in the following years is a clear signal of what is going on in the market."

Huawei and ZTE have often struggled to win market share in more mature telecoms markets, but have been more successful in emerging markets which are likely to see far more growth.

"There will be regions and countries where growth is set to continue at an incredible pace, such as India, Africa and Southeast Asia, but this is not going to compensate for the saturation in more mature markets," Grossi added.

"The number of base stations shipped each year has basically doubled. In the past three years, in countries where operators have already reached a good geographical coverage, they are now relying mostly on software upgrades to increase the capacity of their networks.

"They are relying on additional base stations or [transceivers] only if they have no other choice."