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Aligning with China's handset market

Posted: 01 Nov 2005 ?? ?Print Version ?Bookmark and Share

Keywords:raymond? tsang? sim? technology? handset?

Tsang: China's handset demand continues to grow by 15% year-on-year; the outlook for the rest of 2005 and 2006 is strong.

As China takes center stage in wireless technologies, mainland ODMs are advancing in technological capabilities and design expertise to better meet customer requirements. One such ODM is SIM Technology Group Ltd, a handset and wireless module developer in mainland China. In 2004, the company was engaged in 84 GSM mobile-phone design projects, 40 of which involved industrial design and casing. EE Times-Asia recently spoke with the company's ceo, Raymond Tsang, to discuss current and future handset trends and challenges, and how SIM plans to meet those obstacles.

EETA:You are holding three positions in the company. Which role demands most of your time and how different is one over the other?
Raymond Tsang: Recently, I was promoted as CEO. I suppose it is relatively common for management of a fast-growing organization to have multiple tasks. My role as executive director remains unchanged in that I shall continue to review all statutory reports and approve future plans for the company. In my previous role as COO, I was more focused on the overall operation of the company, particularly on the balance of resources deployment and interdepartmental coordination. However, in my new role as CEO, I will focus more on setting the group's strategic direction and act as corporate spokesperson, enhancing communication with customers, suppliers, employees and investors to ensure that the vision and goals of the company are shared, understood and executed.

What would be your biggest challenge as newly appointed CEO?
My role is shifting more to providing strategic thinking, direction and positioning of the company. We are focusing particularly on how to bring our products to the global market and what new technologies are needed to help the company grow. One big challenge is shaping the technology road map because what we invest on today will become our products for the future.

You just joined the company early this year. Can you tell us more about your mid- and long-term goals for the company?
I would rather say that I 'rejoined' the company in January 2005, as I was the CEO of Sunrise Technology Group when the company sold its electronic components distribution business to Avnet Inc. in 2001. At the time, I had an obligation to provide services for not less than three years to ensure that the business transaction between Sunrise and Avnet was smooth. I became the president of Avnet Asia from 2002 to 2004 and helped Avnet grow their revenue from $600 million to $1.3 billion.

The plan to transit the Sunrise business from component distribution to mobile handset design house started back in 2001. I have to say that the execution of strategies has been ideal for us and, during the last three years, SIM Technology Group's mobile handset business grew to $200 million in revenue and $20 million in net profit for 2004. We are confident that our wireless technology, new product development and customer-base expansion will ensure that growth will continue for quite some time.

Can you name some of SIM Technology's big-name customers and biggest competitors in the business?
We have over 40 regular customers using our mobile handset solutions. Key customers include Bird, Lenovo and Telco Italia Mobile in Italy. We provide one-stop product design with manufacturing services, but without the burden of intensive capital investment on factory facilities and machinery for handset manufacturing.

The outsourcing trend in mobile handset design is irreversible, not just for global players like Nokia and Motorola, but also for upcoming makers of Japanese, Korean and Chinese brands.

How can you describe the handset market in China? What is the outlook for 2006 and beyond?
There was a misconception that the China handset market is weak because a small group of Chinese domestic brands have performed poorly. China's handset demand continues to grow by 15 percent year-on-year and the outlook for the rest of 2005 and 2006 is strong.

The strong demand is generated by new subscribers and replacement markets. According to CCID, the volume percentage of handset demand in China remains the strongest for midrange mobile phones, which represent over 50 percent of the total market.

Today, SIM Technology focuses on midrange, multimedia handsets. In this category, consumer demand and profit margins are much higher than for low-end phones. Our strong product offerings in the midrange market have resulted in profits for our customers and ourselves.

I am very optimistic about the future of China's handset industry. Today, China leads the world in handset manufacturing and the growth of handset design activities in recent years has further strengthened the industry in general. Sometimes, people think that manufacturing is a labor-intensive industry that makes China a manufacturing backyard for global companies due to low labor costs. However, machinery automation that's currently taking place in many parts of China has continuously reduced the dependence on its direct labor force.

Have you ever entertained the thought that the 'design process' can be more dependent on human resources than on 'manufacturing?'
Today, product design and development processes are more engineer-intensive than ever and the cost differentiation between the United States/Europe/Japan engineers vs. China engineers remains high; it is actually very cost-effective to employ elite Chinese engineers.

With a well-trained and resourceful engineering pool, China is becoming the mobile handset product design house of the world. As an example, during the last nine months, three top China mobile design houses went public, including SIM Technology Group on HKEx Main board. The combined output of these three design houses for the first half of 2005 is almost 200 new mobile handset designs for their customers. This is a very exciting and powerful message.

How ready is SIM Technology to meet future demands?
Our core competence as a differentiator is on the communications technology that we provide. We offer mobile solutions advancing from 2G to 2.5G, to 2.75G and 3G. Also, we are very good at setting multimedia feature trends. We led the China market by launching 20 different camera-phone models in mid-2004 and released phones with MP3 functions early 2005. Today, we are pushing MPEG-4 features and the latest slide-phone models. We are not the first to come up with these features, but we are certainly the first to launch these features in midrange productsand that enables more end-users to enjoy the latest technologies at affordable prices. SIM will continue to focus on mobile handset products development and slowly grow into smart portable devices.

Do you think that feature creep in handsets is good?
In the future, it may become difficult to differentiate mobile handsets with other portable devices such as PDAs, digital cameras, handheld game consoles and MP3 players. Features and functionalities will continue to improve and consolidate. As a result of technological advancements, there should be a series of low- to high-end smart portable devices coming to the market soon. The mix and combination would be customized to each niche user groupi.e. in the near future, one will soon find the standalone single-function portable device becoming obsolete.

This trend actually posits great opportunities for handset manufacturers and design houses because we are not competing on cutthroat price wars. Instead, we can focus on market trends to add value to the product in areas that we know will surely satisfy our customers.

Do you think the flurry of features such as cameras and MP3s in handsets should stop?

No. It's not a matter of whether the industry wants more compact or simpler phones, but rather of what the consumers want. I just went on a vacation and I had to carry a phone, a charger, a digital still camera and my daughter's iPod. It's amazing how much electronic equipment you have to pack when going on a trip. Users ask why we can't have something like a smart portable device to use for e-mail, as a camera and for entertainment. You look at what you can produce to fulfill customer wants and this is what you should go after. If it has to be a compact model, it has to be. The winner will be the one that drives changes in the market. That is always the difference between leaders and followers. You have to find a way to do it.

- Jerico Abila
Electronic Engineering Times-Asia




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