China mobile suppliers to cut prices to gain more orders from emerging telecom markets

China mobile phone suppliers are producing more smartphones and 3G models as
they ride the trend for all-in-one functionality. Price cuts are another key
strategy as competition intensifies.

As competition tightens, most China suppliers are cutting their prices to gain
an edge. While reductions are generally at 10 percent or lower, some surveyed
companies plan to drop quotes by as much as 15 percent to attract more orders.

About one-third of manufacturers, however, feel the need to increase prices
slightly to compensate for higher expenditure amid rising labor costs and the
yuan appreciation.

While some raw materials are becoming more expensive, the falling cost of
chipsets in particular is enabling manufacturers to reduce quotes. Companies
are confident that their price advantage and heightened product capability
should boost sales in emerging markets, the EU and North America, which ranks
as China’s third-largest market for mobile phones.

China manufacturers are carving a niche with lower-priced models to avoid the
high-end dominated by top international brands.

Their releases offer a range of features, depending on the model and price
point. These include dual-SIM functionality, touchscreens, web browsers,
cameras, TVs, FM radios, MP3/MP4 players, video recorders, e-book readers and
games. Products incorporate Bluetooth, Wi-Fi and GPS, support GSM, CDMA and 3G

Among smartphones, the Android platform is gaining popularity, thanks to its
open source attributes. Even so, Windows Mobile 6.5 will continue to have a
solid foothold.

Small and midsize manufacturers of 3G phones are offering W-CDMA and CDMA2000
models in expanding their overseas presence. The first continues to dominate
supply, according to Global Sources.

In the months ahead, R&D efforts are expected to emphasize even better
price-to-performance ratio, especially as more suppliers target emerging
markets in South East Asia and South America.

96 percent of suppliers see their 2011 export volume surpassing last year’s
sales. Nearly half of manufacturers project increases exceeding 20 percent.
Besides their release of features-packed models, optimism for substantial
orders growth stems from suppliers’ success in cultivating emerging markets.

“For many companies, shipments to new markets such as Southeast Asia and
South America collectively now match their volume to the EU, traditionally the
main export destination,” said Livia Yip, publisher of the report.

Highlights of Global Sources report:

72 percent of surveyed suppliers plan to raise capital expenditure to meet
growing demand.

48 percent of manufacturers see price competition as their biggest challenge.

More manufacturers are utilizing independent design houses to bolster their
technical capability.

By Team
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