As China's Mobile Markets Slow, Handset Companies Face More Problems

Telecom & Wireless

Published: April 22, 2009 5:20 am

Last Updated: April 27, 2020 4:36 pm

The recent earnings numbers from China’s big telecom firms illuminated more than their profitability.

One of the assumptions about the health of the global handset makers and companies that build hardware for 3G systems has been that, as growth of mobile penetration slowed in the US, Japan, Europe, China and India would more than pick-up the slack.

That critical assumption is turning out to be wrong. Writing about the Chinese wireless market and the largest cellular provider in the country, The Wall Street Journal reports “Mobile penetration is only 50%. But the company’s number of new subscribers fell 6% in the first quarter from the previous quarter.” To some extent that is because many of the potential new customers live in rural areas and are less likely to need or want a phone. Many simply cannot afford one.

The data has to be a blow to Nokia (NOK), Motorola (MOT), Samsung, and Sony Ericsson. The four largest makers of handsets have already reported large drops in units shipped during the first quarter. If China’s demand falls off it will be very hard for those numbers to improve much.

China’s mobile market could reach 1 billion subscribers, if market penetration moved even close to what it is in Japan and the US. But, farmers don’t want cellphones and that can’t be changed.

Douglas A. McIntyre

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