Mobile phone suppliers in China accounted for about 50 percent of global shipments in 2007. These were mainly feature-rich and fashionable mobile phones that targeted the low-end segment. However, despite being the world's largest production center for mobile phones, there is little brand recognition for China suppliers in the overseas market, which is dominated by industry giants such as Nokia, Samsung, Motorola and Sony Ericsson. As a result, most China makers are focused on OEM business and the domestic market.

The widespread availability of low-cost chip solutions has lowered the barrier to entry, leading to an influx of manufacturers and trading companies into the industry. This forces mobile phone suppliers in China to aggressively slash their export quotes to remain competitive. In their bid to outdo each other's price decreases, some small-scale makers tend to neglect their quality control, resulting in products that suffer from poor reliability and performance.

Furthermore, the lack of differentiation in their products means that China makers run the risk of excessive reliance on a single solutions vendor and having to fight for survival only through price competition.

Due to the delay in the issuance of a national 3G license by China's National Development and Reform Commission, export-ready China makers have stepped up their effort to tap into international markets by forging partnerships with overseas telecom operators. However, growth in mobile phone shipments in mature markets such as the United States and Western Europe has reached a plateau. Hence, China suppliers are likely to focus on producing cost-effective mobile phones for emerging markets such as Asia, the Middle East and Africa.

The following are some of the key trends in China's mobile phone industry:

•	Prices of mobile phones will continue to be on a downward spiral as makers adopt more cost-effective chip solutions.
•	China is expected to maintain its dominance in mobile phone production with many makers aiming to increase their capacities in 2008 by upgrading their facilities or expanding their manufacturing space.
•	The integration of multimedia functions will remain a significant product development direction for many makers. Add-on functions include mobile TV, video phone, streaming, mobile gaming, GPS, camera and MP3 playback. Mobile phones featuring touch screen will likewise increase.
•	North America, EU regions, Asia and the Middle East will continue to absorb the bulk of exports from China. In particular, Europe and North America will be the major markets for China-made 3G phones.

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All information contained in China Sourcing Reports is the result of exclusive, ground-level and definitive research conducted by Global Sources' analysts. Companies featured in these reports may or may not be clients of Global Sources.

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