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April 12, 2005

China Techfaith seeks $150m in IPO

China Techfaith Wireless Communication Technology, which claims to be one of the largest independent mobile handset design houses in China, plans to raise $150m in an IPO on Nasdaq.

By CBR Staff Writer

The company is heavily dependant of technology developed overseas. It has been producing GSM-based mobile handsets using baseband technology platforms, developed by Philips, Texas Instruments and Skyworks Solutions and has begun developing mobile handsets for use on WCDMA and CDMA networks through cooperation with NEC and Qualcomm.

China Techfaith argues that it can capitalize on the growing trend among Chinese and international mobile handset brand owners to outsource the design function and counts among its customers local companies such as Bird, Haier, Konka and Lenovo, and international players such as Alcatel, Kyocera, Mitsubishi, NEC and UTStarcom.

The Beijing, China company quotes estimates from International Data Corporation (IDC) that worldwide mobile handset shipments will increase from 514 million units in 2003 to 890 million units by 2008, or a compound annual growth rate of 8.2%.

But there is ferocious competition to get the outsourced business. China Techfaith says it is up against electronic manufacturing services providers (EMS), original design manufacturers (ODMs) and independent mobile handset design houses.

It reckons that design houses will have the edge, with rapid technological changes and higher level of system integration requirements. It believes they can handle shortened product life cycles and the need for more distinctive and innovative products.

China Techfaith has a brief but impressive financial record. Net income leapt from $4.9m to $18.2m in the year to December 31 on revenue that rose from $9.7 to $46.6m.

The company is expanding rapidly. In 2004, its payroll increased from 311 to 890 and the company expects to expand our engineering team significantly in the near future in anticipation of the potential growth of our business.

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