Chinese mobile communications manufacturers are expanding rapidly into international markets, a move driven by intense competition at home.
"Competition in China is brutal, so manufacturers are looking for higher margins overseas," says William Bao Bean, a research analyst with Deutsche Bank in Hong Kong.
As a result, foreign sales are rising rapidly at China's largest telecoms equipment manufacturers, Huawei and ZTE. For example, overseas business already accounts for over 30 percent of ZTE sales (predicted to total US$2.25 billion this year). ZTE opened 14 new international offices in the third quarter alone - and is hoping to increase foreign sales to 50 percent of the total during the next couple of years.
China's manufacturers are breaking into new markets, particularly in developing countries, by offering a competitively-priced bundle of back-end equipment, such as base stations, together with handsets, Bean says. Some local service providers repackage the handsets and sell them under their own brand. Chinese companies' home experience plays to their advantage in other developing nations.
The Chinese strategy is somewhat different from that employed by their better known competitors, like Nokia, which are less likely to bundle products. The established manufacturers make comparatively greater margins on handsets, which they sell direct to end users under their own brand.
A more low-key handset sales strategy suits the Chinese telecoms equipment makers because they lack experience in international sales, marketing and service. There are signs that they might be interested in buying that expertise: Huawei and ZTE, were reported as possible buyers of ailing UK telecoms manufacturer, Marconi this month (Marconi went instead to Ericsson earlier this week).
While competition at home has forced several smaller Chinese manufacturers out of the market recently, the survivors have cut their teeth on the world's largest national market and continue to generate considerable revenue in China. A Chinese government report said that over 377 million Chinese (about 30 percent of the population), owned mobile phones at the end of September. This is an increase of some 13 percent, or over 40 million, since January. If sales continue at this rate, China will account for roughly eight percent of worldwide mobile phone sales this year.
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