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By the end of July 2003, the total number of wireless users in China was close to 239.5 million. China’s wireless market expanded very rapidly in the early 1990’s, and then continued to grow, but at a gradually flatter rate. By 2001 it had entered a low-growth period, with less dramatic increases in revenues expected for major operators and service providers. Even so, double-digit growth in this market has continued, against a backdrop of 8 percent economic growth for China despite a worldwide recession.

Wireless technology is rapidly evolving. There are a number of sectors in this industry, include wireless paging, GSM (GPRS) and CDMA mobile telephony, SMS (MMS) messaging, and WLAN. Wireless paging, until just a couple of years ago, was a primary wireless service, but with very limited applications for end users. GSM (GPRS) and CDMA are much more mature wireless services with full mobile cellular applications for end users.

Sales prospects for product and service providers in China’s wireless market in the next couple of years will be driven mostly by continued expansion and upgrading of the existing system, and the development and implementation of a new generation of networks and services. Ambitious investment by China’s telecommunications companies always means enormous business opportunities for U.S. telecommunications service providers and equipment vendors.

Wireless Communications Equipment and Services

A. Market Overview

Wireless communications is really a convergence of computing and telecommunications technologies. Wireless communications takes subscribers a step beyond traditional telecommunications, allowing them to use the same services while on the move. Secure wireless access creates flexibility for users by allowing them continuous access to other mobile users, and continuous access to frequently used applications. The most common wireless devices, all of which can deliver a number of wireless applications, include cellular phones, pagers, laptop computers, and PDAs (personal digital assistants). Wireless services for these devices are constantly expanding. They typically include voice transmission, Internet browsing, multimedia messaging services (MMS), online entertainment, online financial transactions and other M-commerce (Mobile-commerce) services.

Among the various wireless devices in use today, the mobile or cellular phone is the most popular for wireless communications, as it allows subscribers to take advantage of most wireless services now available. China's wireless market expanded very rapidly in the early 1990's, and then continued to grow, but at a gradually flatter rate. By 2001 it had entered a low-growth period, with less dramatic increases in revenues expected for major operators and service providers. Even so, double-digit growth in this market has continued, against a backdrop of 8 percent economic growth for China despite a worldwide recession. China reached 100 million mobile phone subscribers in April 2001, and doubled this figure to 200 million in November 2002. By the end of July 2003, the total number of mobile phone subscribers in China was close to 239.5 million. The rate of penetration of mobile phones was 18.3 percent of the population. Analysts predict that China will have 350 million mobile telephone subscribers by the end of 2005, 500 million by 2008, and 600 million by 2010.

Table 1

Annual Increases in mobile telephone subscribers in China (July 1992-July 2003)






Increase (%)






























































(Source: Ministry of Information Industry)

Recent statistics indicate that the number of mobile phone subscribers is nearly equal to and will soon surpass the number of fixed-line subscribers. Both categories are growing, but mobile is growing faster than fixed-line.

Table 2

Fixed-line subscribers and mobile subscribers (January 2003- July 2003)
                     Total Mobile                Total Fixed-line
                     Subscribers                     Subscribers  
(in millions)
July 2003        239.459                            240.754
June 2003       234.472                            237.610
May 2003        230.056                            232.882
Apr. 2003        225.717                            229.039
Mar. 2003        221.491                           225.626
Feb. 2003        216.398                           221.492
Jan. 2003        212.439                            218.004
(Source: Ministry of Information Industry)

Wireless communications is by far the most profitable sub-sector in China, accounting for more than 46 percent of total telecommunications revenue, according to a report by Telecom Research Institute under the Ministry of Information Industries (MII).

Table 3

China telecommunications revenue (June 2003)

                                             Percent of total
Mobile                                             46.2
Fixed local                                      33.1
Long distance                                 14.9
Data communications                       5.4
Paging                                              0.4
Satellite                                            0.1
(Source: Ministry of Information Industry)

The China wireless market consists of four major players: China Mobile, China Unicom, China Telecom and China Netcom. China Mobile and China Unicom provide mobile services. PHS service is provided by China Telecom and China Netcom. WLAN service is provided by China Telecom, China Mobile, China Netcom and China Unicom. In addition, some other companies are preparing to enter the wireless market, including Railcom and SateCom. There are also a number of Internet service providers (ISPs) doing business indirectly with the wireless market.

In the mobile handset market, there were 37 handset manufacturers in China by the end of 2002. Of these, 29 companies were manufacturing only GSM, 6 were manufacturing only CDMA GSM, and 14 companies were manufacturing both. The total handset production exceeded 200 million by the end of 2002. Nokia, Motorola, Siemens and Ericsson were the four leading foreign companies, and they dominated the Chinese mobile handset market, with a combined market share of 80 percent in 2001 and 66 percent in 2002. Samsung, other Korean, and Japanese manufacturers held an 11.15 percent market share in 2002. Meanwhile Chinese domestic manufacturers have gradually seized market share. (Source: Ministry of Information Industry)

Table 4

Total production of handsets by the leading manufacturers in China (2001-2002)(%)
                           2000               2001                2002
Nokia                 30.19             32.77               27.85
Motorola            33.78             25.89               23.84
Siemens              7.30             11.68                 9.96
Ericsson              9.75               8.75                 4.72
Other foreign     12.60               8.56               11.08
Domestic             6.38             12.35               22.55
(Source: Ministry of Information Industry)

In the mobile network equipment market, Ericsson, Nokia and Motorola cover 83 percent of the market and Siemens, Alcatel and Nortel come next. These top six companies cover almost 97 percent of the market, leaving only 3 percent to the others. In April 2002, China Unicom's procurement for CDMA network equipment went to U.S. and European companies, including principally Lucent (27.4 percent), Motorola (25.7 percent), Nortel (16.8 percent), and Ericsson (15 percent), and two Asian companies, China's ZTE (8.6 percent) and Korea's Samsung Electronics (7.5 percent). This dominance of foreign over Chinese mobile equipment suppliers is expected to continue for awhile.

B. Industry Breakdown

Wireless technology is rapidly evolving. There are a number of sectors in this industry, include wireless paging, GSM (GPRS) and CDMA mobile telephony, SMS (MMS) messaging, and WLAN. Wireless paging, until just a couple of years ago, was a primary wireless service, but with very limited applications for end users.  GSM (GPRS) and CDMA are much more mature wireless services with full mobile cellular applications for end users.

1. Wireless Paging Services

Wireless paging services were first introduced in China in 1984. By the end of 2002 the total number of paging service subscribers was 18.721 million, with over 1,700 companies providing wireless paging services. Considering the geographical characteristics of China and its large population, paging services should maintain their market position, especially since demand for paging services has been increasing steadily in the mid-western provinces and in some rural areas where telephone penetration rates and income levels are very low. According to statistics, there were 49 million paging subscribers by the end of November 2000, making the Chinese paging market the largest in the world. However the number of subscribers in the wireless paging market has continuously declined and currently is less than half the number at its peak. China Unicom, a leader in the China paging market, provides such services as personal demand services and enterprise call centers. These services allow subscribers not only to access stock trading and other personalized business information, but also to exchange messages between the Internet and the wireless paging system. 

2. GSM

GSM (Global System for Mobile), as a 2G mobile technology, delivers high quality and secure mobile voice and data services with full roaming capabilities across the world. Statistics provided by the GSM Association indicate that there were 863.6 million GSM subscribers worldwide by the end of May 2003. China Mobile and China Unicom operate two GSM networks, respectively. Total GSM subscribers in China were 186.07 million by the end of May 2003. China Mobile's GSM network is the biggest network in the world. According to a report on tests of the GSM network's communications performance in July 2002, announced by China Mobile, the disruption rate for mobile phones under urban conditions of static averages only 0.33 percent, while the disruption rate in Europe under equal conditions is 1.2 percent. Meanwhile, tests of mobile phone in moving cars showed a disruption rate in the China network of just 0.97 percent, while in Europe, it was 1.6 percent.

GPRS (General Packet Radio Service), as a type of 2.5 G mobile technology, which can be easily upgraded to 3G, is a new non-voice value added service based on the GSM network. The most important advantage of GPRS is that it achieves a speed of up to 171.2 kilobits per second (kbps), and allows subscribers to establish instant connections whereby information can be sent or received immediately as the need arises and is always connected. China Mobile launched its GPRS service in 25 cities in May 2002. It has only 40,000 users so far. But China Mobile is expecting to deliver its GPRS service to all 31 capitals of the provinces and to the bigger cities soon.

Table 5

GPRS average charging scheme







Basic service charge (RMB/month)

No charge




Connection charge (RMB/KB)




No charge


 (Source: China Mobile Group)


CDMA (Code Division Multiple Access), a cellular technology originally known as IS-95, competes with GSM technology for dominance in the cellular world. There are now different variations, but the original CDMA is now known as CDMAOne. The first phase of CDMA2000 - variously called 1XRTT, 3G1X, or just plain 1X - is designed to double current voice capacity and support always-on data transmission speeds 10 times faster than typically available today on both the forward and reverse links. CDMA is characterized by high capacity and small cell radius, employing spread-spectrum technology and a special coding scheme. In 2002, 27 operators launched CDMA2000 networks, increasing the number of commercial systems to 37 on five continents. According to a report by the CDMA Development Group (CDG), there were nearly 174 million CDMA subscribers and 24 million CDMA2000 users worldwide by September 2003.

China Unicom started to upgrade its network from CDMA, or 2G (second-generation mobile telecommunications) to 2.5G, or CDMA 1X starting in the second quarter of 2002. CDMA 1X allows China Unicom to provide the subscribers with more value-added services such as video and photo e-mails, and high-speed wireless Internet access. China Unicom unveiled five brand new services based on the CDMA 1X network, including a multi-media e-mail service, broadband service, interactive communications based on WAP (wireless application protocol), BREW (Binary Runtime Environment for Wireless), Java technologies and GPSOne (Global Positioning System) services. The services of CDMA1x enable users to download a variety of software programs, including games and office tools, onto their mobile phone. By utilizing the satellite-based GPS, or Global Positioning System, CDMA 1X can offer mobile phone subscribers information about entertainment and other facilities near their location. The location-based service (LBS) has initially only been made available in Beijing, Shanghai and Guangzhou, but the download service is available nationwide. China Unicom has more than 11 million CDMA subscribers. Its ambitious goal of 20 million subscribers by the end of 2003 is a critical point for China Unicom if it is to survive on the CDMA venture.

Table 6

CDMA Wireless Internet Charging Scheme



Option 1

Option 2

Option 3

Basic monthly service charge (RMB/month)




Connection charge (RMB/KB)




Free of charge





(Source: China Unicom)

4. PHS

PHS (Personal Access Phone System), known as "Siaolingtong", is an MLL-based (Mobile Local Loop) personal wireless access system that uses the global PHS standard to offer a limited mobility solution to end-users. PHS offers consumers the convenience of a mobile phone, with the cost advantages of a fixed-line phone. PHS enables service providers to offer limited mobility phone services to communities of up to several hundred thousand subscribers.

PHS has been available in China for five years. Its lower service fee is drawing a huge percentage of potential GSM and CDMA subscribers away from mobile services to PHS. Its subscribers numbered 12 million at the end of 2002. China Telecom and China Netcom use PAS/PHS from a handful of equipment vendors such as UTStarcom, ZTE and Lucent Technologies.

Table 7

PHS subscribers







Number (millions)





Percent increase






(Source: CCIDNET)

By December 2002, PHS had covered more than 400 cities in China, including 70 percent of all provincial capitals. It is generally recognized that PHS has become another major player in China's wireless industry, as an extension of the fixed line system. However, because its status is ambiguous both technologically and from a policy standpoint, the market for PHS is concentrated in the mid- to low-tier cities in China. But it is also being marketed in major urban centers like Beijing, Shanghai, Guangzhou and Tianjin. The availability of PHS services is changing the boundaries of China's wireless market, as some analysts have pointed out. The following are some of the effects it has had on the market:

1.     It has broken to some extent China Unicom's and China
      Mobile's  strong grip on the mobile communications market.

2.     As a low cost communications service with a one-way charging scheme, it has met the needs of many users, especially low-tier users.

3.     It utilizes the unused capacity of the fixed line operators, thus allowing the best use of that resource, and creating a new source of revenue for fixed line operators who have faced falling average revenue per user (ARPU).

4.     The cost of PHS equipment has fallen by 30 to 40 percent through economies of scale achieved from its current growth. It takes only half as much time to launch a PHS network as a cellular network.

5.     PHS could also spur the release of new mobile licenses for other future wireless operators, such as China Telecom and China Netcom.

But it is clear that PHS has had its disadvantages:

1.     PHS functions best when base stations are installed every 200 to
      500 meters, to eliminate blind spots. However, the PHS system
      runs on a narrower bandwidth, which leads to frequent loss of
      signal due to signal instability.

2.     PHS runs on 1900-1920Mhz, which can be expected to conflict with the forthcoming next generation 3G.

3.     PHS is an out-of-date technology. Resources could be wasted should there be a need to upgrade.

4.     Once China Mobile and China Unicom implement a one way-charging scheme, PHS's unique cost advantage will be undermined.

5.     PHS cannot be adapted to add additional services, such as non-voice value added services.

6.     Because PHS is exempt from regulations on one way charging and on technologies adopted, it could come under fire for unfair competition with China Unicom and China Mobile.

7.     PHS cannot gain much more advantage in major metropolitan areas, especially since the cost to upgrade its network is too great to be worthwhile.

Table 8

PHS's Average Charging Scheme




Option 2

Basic service charge monthly (RMB/ month)



Connection charge (RMB/minute)




To sum up, while PHS is in decline in Japan, it has found a niche market in China through a unique combination of fixed line and wireless services. It may draw even more users in the future if Chinese operators are able to develop this market through clever utilization of existing and new technologies. Otherwise, it may turn out to have been a useful wireless solution for one segment of the China market for a limited period of time.

Table 9

Comparisons of PHS with GSM





Charge (per minute RMB)




One way

Two Way

Monthly cost (RMB/ month)



Call divert (RMB/month)



SMS (RMB/message)



Internet connection (RMB/hour)



Connection speed (kbps)




All sites

Only WAP sites

Value added service

All free

Average 10RMB


5. SMS and MMS

SMS (short message service) allows wireless subscribers to communicate by sending or receiving short segments of text. MMS (Multimedia Messaging Service) makes it possible for mobile users to send and receive multimedia messages. A multimedia message can, for example, be a photo or picture postcard annotated with text, and/or an audio clip, a synchronized playback of audio, text, or photo or, in the near future, a video emulating a free-running presentation, or a video clip. A multimedia message can also simply be a drawing combined with text.

SMS is a widely accepted form of wireless communication in China. In 2001, China's SMS revenues totaled $234 million. By year-end 2002, its revenues had tripled to roughly $750 million. By 2007, SMS revenues are expected to increase to $16 billion, generating greater revenues than all of Western Europe. As China Mobile and China Unicom struggle with declining average revenue per user (ARPU) in other wireless applications, SMS and MMS will gain momentum as a driver of revenues for these two mobile operators. U.S. companies looking to capitalize on this lucrative market should move quickly to provide equipment and content.

China Mobile was one of the earliest Chinese operators to enter the MMS market. In October 2002, the company launched its GPRS-based MMS service. SMS had already been established by China Mobile and China Unicom for more than two years, and was gaining in popularity. At the time of China Mobile's MMS service launch, Ericsson and Huawei won the tender for establishing platforms for China's first four major MMS service centers. Ericsson got the contracts for the Shanghai and Guangzhou centers, while Huawei got the Wuhan and Beijing contracts. These four centers will be China Mobile's backbone for the MMS service. At the end of 2002, China Mobile had over 50,000 MMS service users, most of them in specialized professions such as journalism and IT. China Mobile expects to increase subscriptions to over one million users by the end of 2003.

China Mobile's strategies for MMS are:

1.     To establish four service centers, so as to prevent overlap in resources while accelerating the pace of development;

2.     To promote the use of GRPS so as to raise the popularity of MMS;

3.     To expand promotion so as to gain more new clients for GPRS handsets;

4.     To promote the use of MMS to attract more users to the GPRS network, so as to prepare for a good user base for 3G.

China Unicom launched its MMS service in Guangzhou and Shenzhen in December 2002. Soon thereafter, it launched the service in Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou, completing the launch in the first half of 2003. China Unicom was expected to implement MMS in an additional nine cities in the second half of 2003. For content, China Unicom contracted with nearly 20 Internet Content Providers. Today, over 200,000 color pictures at a time, and over 1,000 types of ring tones can be downloaded from China Unicom's portal site. In addition, the company offers news, financial information, weather reports, and a diverse range of downloads and matching services. China Unicom has also established a division for MMS promotion, and it is forming a joint venture with SK Telecom of Korea to expand the service further.

The MMS industry benefits from the widespread popularity of its services. However it faces certain cost and pricing challenges:

1.     MMS-capable handset prices are around RMB 3,000-4,000 on
      average, which can be a major obstacle to subscribers to MMS

2.     The present cost for one MMS message is RMB 0.9, which is nine times higher than the cost of an SMS message.

3.     China Mobile claims that its GPRS network carries a 171.2 kbps connection speed. But the system can only bring up a speed of around 30 to 40 kbps. MMS can in fact be operated at favorable speeds, but only if a 2.5G-based GPRS or CDMA 1X infrastructure is in place. A 3G infrastructure would support even higher speeds.  MMS requires a speed of 384 kbit/s in order to run properly on GPRS, and the current CDMA, or 2G, system cannot fully support MMS.

According to the latest statistics, China has 239 million mobile users. Those users will send over 60 billion SMS messages this year, bringing in over RMB 6 billion in revenues to the operating companies.

Instant Messaging (IM) is a type of SMS, which combines wireless and Internet technologies. It allows the message to go from a PC to a PC, or from a PC to a handset, or from a handset to a handset. IM has grown rapidly in popularity around the world in just a few years. Some experts now believe that IM may be one of the most popular computer applications ever. OICQ (also simply called QQ) is one of the most popular and successful forms of IM among the Chinese Internet subscribers. It enables real time communication between PCs, mobile phones and pagers. It is derived from ICQ, which is one of the most popular forms of IM in the world. ICQ is an acronym that was originally used in Israel as an informal shorthand for "I seek you". OICQ supports Chinese language as well as English language instant messaging.

The scope of SMS offerings has broadened considerably to include, for example, e-mail and spam, as well as services that are not delivered over a mobile phone at all, but are ordered via SMS, such as movies and software. The SMS market is developing fast and allows the portals and consumers to take advantage of a cheap and convenient payment system. By making use of the mobile companies' billing platforms, consumers can simply pay for Internet purchases, big or small, by adding them to their monthly phone bills. From this point, consumers can use mobile operators' payment platforms for unrelated products. At least partly because of concerns over credit, this payment system has drawn the attention of financial watchdogs. In response, China Mobile (which currently manages about 90 percent of the portals for SMS traffic) recently announced a new guideline, which will prohibit the use of its Monternet billing platform for mobile-related content services. In addition, China Mobile also announced that it would stop collecting payments for SMS services offered by affiliates of the portals.


WLAN (Wireless Local Area Network) allows users to access the network without traditional cable or other material connections. It will be a potentially important wireless communication considering its broadband access, mobility and low cost. WLAN can be applied in many specific usages, such as the mobile office, use at trade shows, financial services, tourist services, the oil industry, medical care, and the working floor. WLAN technologies include LMDS (Local Multi-point Distribution System), MMDS (Multi-point Multi-Channel Distribution System), WLAN IEEE802.11b, IEEE802.11a, IEEE802.11g, HiperLAN, and Bluetooth.

WLAN was introduced to the China market in 2001. By the end of 2002 the total size of China's WLAN market was RMB 141 million with a growth rate of 182 percent. Demand for WLAN equipment in 2002, included AP (access point), accounting for 55.4 percent, NIC (Network Identification Card) accounting for 37.3 percent and bridge, accounting for 7.3 percent. The growth of China's WLAN market came from telecom operators' steps to expand the network, rather than the demands of the end users. According to a report by CCID, the total size of the WLAN market will grow to RMB 308 million by the end of 2003, RMB 500 million in 2004 and RMB 830 million in 2005.

China Telecom's introduction of WLAN service allows WLAN users to access the Internet at a distance of between 10 and 100 meters from an Access Point (AP). China Telecom combines the WLAN and ADSL services. Currently its WLAN service covers 21 cities in China.

Table 10

China Telecom's WLAN Average Charging Scheme for individual users only



Open usage

Close usage

512K basic service charge (RMB/month)



512K connection charge (RMB/minute)

0.1 (after 60 hours)


1M basic service charge (RMB/month)



1M connection charge (RMB/minute)

0.15(after 60 hours)



(Source: China Telecom)

China Mobile has invested RMB 1.8 billion to establish its WLAN service in 32 cities in China. It combines WLAN with GPRS. There are a total of 700 access points for its WLAN users to access the Internet.

Table 11

China Mobile's WLAN Average Charging Scheme



Option 1

Option 2

Option 3

Option 4

Basic service charge (RMB/month)





Connection charge (RMB/KB)






(Source: China Mobile)

China Netcom has started its WLAN service in the four major cities of Beijing, Shanghai, Guangzhou and Shenzhen.

Table 12

China Netcom's WLAN Average Charging Scheme for registering users



Option 1

Option 2

Option 3

Basic service charge (RMB/month)




Basic usage time




Roaming fee (RMB/minute)





 (Source: China Netcom)

China Unicom started its WLAN service late, compared with other telecom carriers. But it has been very aggressive in promoting its WLAN with CDMA1X.

Table 13

China Unicom's WLAN Average Charging Scheme



Option 1

Option 2

Option 3

Basic service charge (RMB/month)




Connection charge (RMB/KB)


0.01(after 50MB)



 (Source: China Unicom)

In the WLAN equipment market, Cisco, Nokia, Avaya, and BreezeCom are major suppliers and account for a large portion of the market.

The highlights in China's WLAN market are that:

1.     VPN (Virtual Private Network) will gradually take over as a main application for most enterprises to provide network security over WLAN.

2.     IEEE802.11a is expected to become a more popular radio frequency choice for WLAN access, since it uses 5GHz to avoid conflict with cordless phones, bluetooth, and microwave oven usage. It also has 54MB of capacity to support it.

3.     OFDM (orthogonal frequency division multiplexing) is expected to become a cornerstone technology for the next generation of high-speed wireless data products and services, and will be the core technology of WLAN systems.

7. 3G

In the late 1990s, the wireless providers began planning the next generation of wireless services that would integrate voice communications with advanced data capabilities such as corporate LAN access and wireless videoconferencing. This next generation of wireless services quickly became thought of as 3G services. In simple terms, third generation (3G) services combine high-speed mobile access with Internet Protocol (IP)-based services.

The Chinese Government is not expected to make a decision on 3G until 2004. It is clear that the Government will opt to give concrete technical support to domestically developed third generation (3G) mobile communication technologies, which are widely expected to be the next big thing in the mobile communications business. Datang Telecom is likely to be a potential 3G leader in China's wireless market, as the Chinese Government has allocated broader spectrum resources for TD-SCDMA (time division synchronous code division multiple access), a 3G technology developed by Datang, than for completing technologies developed by European and American companies. Datang is already looking like the 3G standard maker in China. Siemens, a major partner of Datang, will also reap profits from the users of TD-SCDMA technology. 

In addition to the China-based TD-SCDMA, there are two other 3G technologies: the European WCDMA (wideband CDMA), and U.S. firm Qualcomm's CDMA2000. The Chinese Government's spectrum allocation, which is very favorable to TD-SCDMA, will impact heavily on the business of licensing in the future. China will no longer pay billions of dollars in licensing fees to overseas core technology owners. Still, it is questionable whether TD-SCDMA can become China's basic 3G technology, since it is a younger technology with less of a track record in commercial networks. One of the major obstacles facing TD-SCDMA is that there are still no TD-SCDMA chips to support mobile phones. To speed up TD-SCDMA's commercialization, Datang Telecom has formed an alliance with seven other telecom vendors to produce sets of TD-SCDMA equipment. The seven other members of the alliance include Soutec, Huali, Huawei, Legend, ZTE, China Electronics Corp., and China Putian, companies that are representing chipmakers, mobile phone vendors, and network equipment makers.

C. Competition

It seems that the Chinese handset industry has undergone a major revolution, with vastly expanded production volume. Even so, most Chinese manufacturers show low productivity: only eight manufacturers are capable of turning out one million units per month. In 2002, 131.6 million handsets were manufactured in China, of which 7.49 million units were produced by domestic manufacturers. The domestic share of the China handset market has grown from 13.8 percent in 2000, to 24.07 percent in 2001, and 39.07 percent in 2002. Major domestic manufacturers like TCL, BIRD and CECT are regarded as strong contenders for future market share.  For 2003, it is estimated that the total sales volume of handsets could reach 60 to 80 million units. However, with such a growth rate, the handset market may experience an over-supply.

Table 14

Comparison of new wireless subscribers with handset production







New wireless subscribers (millions)





Total handset production (millions)






(Source: Ministry of Information Industry)

Competition among domestic wireless handset manufacturers has begun with the emergence of a number of brands, including TCL and Bubugao, that have the lion's share of the market. Competitors are also coming from the U.S., Europe, Japan, and Korea. Price wars are one outcome of this kind of competition. These price wars will eventually put domestic manufacturers in a difficult position. According to a recent market survey, the average cost of a handset unit by produced by a domestic company is US$ 255.37, while the average cost of a unit produced by an international company is only US$ 226.04. On average, the cost of domestic products is 12.98 percent higher than that of international companies. Meanwhile, in the market for CDMA handsets, the price of international products is US$ 371.69 on average, while the price of domestic products is only US$ 315.91. (Source: China Telecommunications News)

In the market for Base station systems and mobile switching systems, U.S. and European companies own the core technology. There is no domestic competition so far. This, despite the fact that domestic companies such as Datang are focusing on 3G technologies, and are developing a new standard for the next generation of wireless communications.

Competition also exists in the services sector. China Mobile was a pioneer in wireless services when it introduced them to China in the 1980's. As a result of restructuring in the China telecommunications industry, China Unicom became the country's second wireless operator in 1994. But China Unicom could not find a way to compete with China Mobile in the GSM market, since it had such a small portion of the market.

To prevent potential competition from its counterpart, China Mobile introduced pre-paid cards to enhance its market share. It also had to work more closely with the leading global mobile operator, Vodafone, which currently owns 2 percent of the company. And it had to emulate the success of the NTT DoCoMo service, i-mode. It was impossible for China Unicom to compete with China Mobile until it introduced CDMA to the market in 2002. Competition between China Mobile and China Unicom then became a competition between GSM (GRPS) and CDMA, rather than a competition for subscribers. China Unicom aggressively targeted the potential CDMA market of high-end subscribers to China Mobile services, thus cutting away market share from China Mobile. However results still did not meet China Unicom's expectations. The company had to include low-end subscribers in its pitch for CDMA sign-ups, by launching a pre-paid card, too. While China Mobile and Unicom were redefining their margins, China Telecom and China Netcom were launching the PHS service in several cities.  PHS is expected to capture some market share from both China Mobile and China Unicom.

D. Sales Prospects

Sales prospects for product and service providers in China's wireless market in the next couple of years will be driven mostly by continued expansion and upgrading of the existing system, and the development and implementation of a new generation of networks and services. Investment in wireless equipment in China will continue to grow at 20 percent per year. Industry analysts predict that China will invest US$ 14.52 billion on wireless communications networks annually. According to statistics from CCID, total investment in telecommunications will reach US$ 25.13 billion in 2003. By the end of June 2003, China Unicom had invested US$ 3.12 billion in its CDMA network. Meanwhile, China Telecom had invested US$ 2.42 billion, including WLAN equipment. China Mobile had invested only US$ 1.88 billion in the same period. The reason for China Mobile's decrease in investment was that 3G licenses had not yet been decided, and the company was postponing its investment in 3G equipment. Ambitious investment by China's telecommunications companies always means enormous business opportunities for U.S. telecommunications service providers and equipment vendors. China's development of its own handset industry will also mean big business opportunities for the U.S. IC industry.


E. Regulatory Environment

1. CCC Mark:

On May 1, 2002, China began implementing a new regulation requiring the CCC Mark with a one-year transition period. The CCC Mark certifies that a product to be used in China meets certain quality and safety standards. It applies to 19 categories of equipment covering 132 individual products and components, both imported and domestically produced. Products must be tested by a certification authority in China, and the plant where the product is produced, whether in China or overseas, must be inspected. As of August 1, 2003, the CCC regulation was fully enforced. Certification and Accreditation Administration of the People's Republic of China (CNCA) regulates all types of CCC applications. China integrated its two previous compulsory inspection systems, one of which checked the content of products for import and export, and the other of which controlled quality, into a single quality control procedure. This was part of its commitment under the World Trade Organization. Since May 1, 2002, the two previous symbols used by the two systems, namely the "CCIB" (as safety mark introduced in 1989 and required for products in 47 product categories) and the "CCEE" (also known as the "Great Wall" Mark for electrical commodities in 7 product categories), have been replaced by the single symbol "CCC" (China Compulsory Certificate). The new Compulsory Product Certification System is applied to products related to human life and health, animals, plants, environmental protection and national security. Any product covered by the CCC Catalogue requires the CCC mark before it can be marketed, imported or used for any commercial purpose in China. Imported products without the CCC Mark may be held at the border by Chinese Customs and subject to penalties. Component parts of a manufacturer's finished products may in some cases require CCC certification; in these cases, the component manufacturer is generally required to apply for the CCC mark.  Contact information for the Certification and Accreditation Administration of the People's Republic of China (CNCA) is given at the end of this report.


2. Radio Approval:

The State Radio Regulation Committee of China, which is under the Ministry of Information Industry (MII), regulates all types of radio and wireless products. Allocation of radio frequency spectrum targets the optimal utilization of frequency resources. In China the approval of radio products is mandatory. The Chinese radio approval scheme is called "Type Approval of Radio Transmission Equipment". Radio transmission equipment is defined as equipment for radio communications, navigation, global positioning, determination of direction, radar, remote control, telemetry, broadcasting, television viewing, and low power communications. The Chinese approval agency categorizes this radio transmission equipment into the following categories:
1: Fixed telecommunications equipment
2: Public network mobile telecommunications equipment
3: Low power devices
4: Specialized mobile telecommunications equipment
5: Broadcasting transmission equipment
6: Aviation communications, and navigation equipment
7: Radar
8: Marine communications, and navigation equipment
9: Satellite communications equipment

3. NAL (Network Access License):

China's Ministry of Information Industry issues a Network Access License for all types of telecommunications network equipment. The NAL is required to ensure that the telecommunications and radio products operate correctly when connected to the national infrastructure and do not constitute a risk to the safe and proper operation of the networks to which they are connected.

4. Security Products Sales Permit: 

The Ministry of Public Security of China regulates the sale of security products in China. The Ministry has announced the following 11 types of products, which may be imported into China, with an Information Security Products Sales Permit.
1. Access Control Products: Firewalls, routers, proxy
2. Authentication Products;
3. Security Auditing Products;
4. Security Management Products;
5. Data Integrity Products;
6. Digital Signature Products;
7. Non-repudiation Products;
8. Commercial Encryption Products;
9. Tempest Products;
10. Information System Security;
11. Information Security Services.

Up to now, China does not have a telecommunications law, though there are many regulations and rules in the telecommunications industry. The State Council adopted a Regulation on Telecommunications in September 2000. In general, wireless services have been more closely regulated since the implementation of the telecom regulation. Wireless services whether for voice or for data service required a license from the telecom regulators. Without a license, no organization or individual is allowed to engage in wireless services.


F. Market Access

Most large U.S. companies prefer to establish an office in China and sell their equipment to end-users directly. Wireless terminals are always sold through agents and distributors. For companies new to China, there are various ways to access the market. The U.S. Department of Commerce has developed a number of programs to assist U.S. firms entering the China market.

The Gold Key Service is one of these programs. Via this service, the Commercial Service in China helps U.S. firms meet with potential Chinese partners face to face. U.S. companies can work with a U.S. Export Assistance Center (USEAC) close to their offices in the U.S, or contact the Commercial Service in China directly.

Another useful service for U.S. firms is the International Partner Search (IPS). Via the IPS the Commercial Service in China will locate, screen, and assess potential qualified sales representatives, agents, distributors, joint venture partners, licensees, or strategic partners for U.S. firm's products and services, communicating with the U.S. company via e-mail or through a USEAC. It is then up to the U.S. company to follow up and make direct contact with one or more of the potential partners.

Trade shows are another useful means of market access. The following are some of the better-known shows and conferences that include wireless participants:

China International Optoelectronic Exposition (CIOE)
Exposition: September 6-9, 2003
Technical Conference: September 5-9, 2003
Venue: China High-Tech Fair Exhibition Center, Shenzhen

Wireless China 2003 @ Beijing
Date: September 8-10, 2003 
Venue: State Guest Hotel, Beijing

CeBIT Asia
Date: September 18-21, 2003
Venue: Shanghai New International Expo Center, Shanghai

Value-Added Service Conference 2003 (VASC2003)
Date: October 15-16, 2003
Venue: Beijing

2003 International Conference on Computer Networks & Mobile Computing
Date: October 20-23, 2003
Venue: Shanghai

PT/ Wireless & Networks Comm China 2003
Date: November 12-16, 2003
Venue: China International Exhibition Center, Beijing

2003 China International Conference Technology and System Exhibition
Date: December 16-18, 2003
Venue: Beijing China International Exhibition Center, Beijing

China Cable Broadcasting Network 2004
Date: March 23-25, 2004
Venue: China International Exhibition Center, Beijing

China Western International Telecommunication Expo 2004
Date:  April 26-29, 2004
Venue: International Expo Center, Xi'an

The 9th China International Lasers, Optoelectronics and Photonics Exhibition , ILOPE
Date: April 27-30, 2004
Venue: China International Exhibition Center, Beijing

G. Key Contacts

1. Government offices

Ministry of Information Industry
Address: 13 West Chang An Avenue
Beijing 100804, China

Telecommunication Administration Bureau
Address: 13 West Chang An Avenue
Beijing 100804, China
Tel: 86-10-6603-3870

Radio Management Bureau
Address: 13 West Chang An Avenue
Beijing 100804, China
Tel: 86-10-6836-6480

Telecommunications Equipment License Office
Address: # 28 Xin Jie Kou Wai Dajie, Xi Cheng District,
Beijing 100088, China.
Tel: 86-10-8205-0166; 86-10-8205-2754; 86-10-8205-8761
Fax: 86-10-8205-0168

Ministry of Commerce
Address: 2 East Chang An Avenue
Beijing 100731, China
Tel: 86-10-6512-1919
Fax: 86-10-6519-8173

Certification and Accreditation Administration of the People's Republic of China
Address: A10 Chaowai Dajie, Chaoyang District
Beijing, China
Tel: 86-10-6599-4139
Fax: 86-10-6599-4559

Shanghai Communication Administration
Address: #1200 Yan An East Road
Shanghai 200003, China
Tel: 86-21-6390-2000
Fax: 86-21-6390-3000

Shanghai Informatization Office
Address: 7F Sun Tong Infoport Plaza, 55 Huaihai West Road
Shanghai 200030, China
Tel: 86-21-6282-2266
Fax: 86-21-6283-2939

China Wireless Telecommunication Standards group
Address: 28,  Xin Wai Avenue, West City District
Beijing 100088, China
Tel: 86-10-8205-1521/29
Fax: 86-10-8205-1524

2. Wireless Communications Operators

China Telecom
Address: 33 Er Long Road, Xicheng District
Beijing 100032, China
Tel: 86-10-6602-1209
Fax: 86-10-6602-7229

China Telecom, Shanghai
Address: 61 Sichuan North Road
Shanghai 200085, China
Tel: 86-21-6324-0069

China Unicom
Address: A133 Xi Dan North Street Xi Cheng District
Beijing 100032, China
Tel: 86-10-6650-5588
Fax: 86-10-6611-4366

China Unicom, Shanghai
Address: 9/F Unicom International Tower, 547 Tian Mu Road West
Shanghai 200070, China
Tel: 86-21-6353-5555
Fax: 86-21-6353-5533

China Mobile
Address: No. A53 Xin Bian Men Nei Dajie Xuanwu District
Beijing, China
Tel: 86-10-6360-0121
Fax: 86-10-6360-0145

China Mobile, Shanghai
Address: Rm. 2903 Hi-tech King World, 668 East Beijing Road
Shanghai, China
Tel: 86-21-5308-9988
Fax: 86-21-5308-0400

China Netcom
Address: Building C, 156 Fuxinmennei Avenue West City District
Beijing, China
Tel: 86-10-6611-0006
Fax: 86-10-6611-0009

China Satellite Communications Corporation
Address: Xueyuan Road Haidian District
Beijing 100083, China
Tel: 86-10-6202-6997
Fax: 86-10-6202-6997

Unicom Guomai Communications Co
Address: Guomai Mansion No. 1207 Jiangning Road
Shanghai 200060 China
Tel: 86-21-6276-0000
Fax: 86-21-6276-3318

3. Research and information resources for wireless industry

China Net for Information Industry (CNII)http://www.cnii.com.cn/ecnii/index.htm
CNII was established by the People's Post and Telecommunications News Office (PPTNA).  It is an authoritative news agency in China's info-communications industry. CNII is the only website that owns issuance rights granted by the State Council Information Office.
Address: No. 11, Anyuan Road,Chaoyang District
Beijing, China

China Telecommunications Network (C114)
C114 is a very important portal in China's telecommunications industry. It has contracted with many large telecommunications companies, such as China Telecom and China Netcom.
Address: Room 1102, 288 Zhaojiabang Road
Shanghai, China

CCIDNet is under the Ministry of Information Industry.  It was set up as an offshoot of the China Center for Information Industry Development.  It is widely recognized as one of the largest, most influential, and modern of China's top-tier information service conglomerates.
Address: FL10 CCID Building, 66 Zizhuyuan Road, Haidian District
Beijing, China

ChinaNex.com provides market information and analysis on China's telecommunications industry, including voice and data services, wireless communications, the Internet, broadband, satellite communications, electronics, and telecom manufacturing and regulations. The objective of ChinaNex.com is to keep equipment manufacturers, operators and investors well informed about China's fast growing market, now driven by technology, service, competition and demand. ChinaNex.com bases its operations in the United States.
Email: info@chinanex.com


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