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April 26 2006

CHINA'S mobile phone makers will fall even farther behind their foreign rivals this year after losing nearly 5 percentage points in 2005 as the overseas firms launched new models in the entry-level handset sector, according to industry analysts.

Domestic phone manufacturers made only 29.77 percent of the handsets sold in China last year, the first time the figure fell below 30 percent line in the past three years, the Beijing-based IT consulting firm Analysys International said in a report yesterday.

Market share will continue to drop this year as well, said Lin Juan of Analysys, without providing a forecast figure.

Home-grown firms, including Ningbo Bird and TCL, appear to be caught in a vicious cycle: They are losing money and as a result can't invest in research and new products, according to Lin.

CCID Consulting, a research firm under the Ministry of Information Industry, also reported a 5 percentage point drop in market share last year for domestic suppliers. But it calculated the decline from 46 percent to 41 percent. Different research firms often use different data collection methods.

At the end of February, the latest period for which figures are available, domestic manufacturers' market share fell to 39 percent, CCID said.

One of the keys to the competitive losses has been expansion by overseas companies into lower-price models, a sector that Chinese firms used to dominate.

Nokia, Motorola and Sony Ericsson all launched entry-level products recently in China to capture sales among first-time phone users.