The news of the two carriers’ intentions came from Alain Blancquart, CEO of embedded Java developer Esmertec AG, which has had to set aside $7.9m for bad debts after several of the new Chinese handset makers found they were unable to pay their bills for software licenses. Blancquart said that after a boom year in 2004 for local handset manufacturers, the tier-one vendors hit back, leaving some of the local manufacturers that license Esmertec’s software in financial difficulties. To compensate, he said he now expects Chinese carriers to favor local manufacturers. This will also benefit Esmertec, which despite the problems in China and the collapse of UK customer Sendo, expects 2005 revenue to grow at least 46% to in excess of $39m.
China has a policy of nurturing local industry and this could badly hit the major manufacturers that have invested heavily in China to take advantage of its growth potential and the fact that it is on its way to becoming the world’s largest market for wireless products.
Nokia, the world’s largest handset vendor, said in November that it increased handset sales in mainland China by 77% to 23 million in the first nine months of 2005. Despite fears that a company best known for its high-end handsets would not do well in developing markets, for the combined mainland China, Hong Kong, and Taiwan markets, Nokia said it believed it had an estimated device market share of well over 30%, the same as its share of other world markets.
CEO Jorma Ollila said: China currently has 380 million mobile subscribers. We believe that by 2010, China will have added another 250 million mobile subscribers, making it the single largest mobile market in the world. Nokia had invested $2.2bn in China, employs nearly 6,000 staff across Greater China, and claims to have created over 30,000 jobs in related industries. Such an enormous investment could now be at risk if local manufacturers are given support by the leading carriers to take back market share.
If Blancquart’s information is correct, this would be the latest in a series of moves by the Chinese government and large corporations to guarantee market share for local industry. Beijing announced last week that the home-grown 3G standard for mobile telephony TDS-CDMA, developed in China and accepted as part of the UMTS family, would be mature and ready for use when Chinese 3G licenses are awarded. Local manufacturers will develop handsets to support the standard, and foreign vendors will have to follow suit if as expected one or more of the licensees uses it in their network.
China is also moving to impose a restriction on government agencies’ acquisitions of WLAN equipment whereby the kit they buy will have to support another locally developed standard, this one for WLAN security, called BWIPS. Again, foreign vendors will face the headache of following suit if Beijing manages to impose the requirement.
