China eyes growth in comms segment

CCID Consulting has analyzed the development trends of China's communications market in 2009. Here are the highlights of the research firm's findings.

The telecommunications market is experiencing a growth in number of users. In 2008, China's telecom operations market revenue reached 813.99 billion Yuan, up 11.8 percent year-on-year. Affected by the worldwide economic crisis, the growth rate of China's urban residents锟? disposable income in 2009 will slow down, but China residents锟? telecom spending accounts for a relatively fixed proportion of their income. Thus, generally speaking, China锟絪 telecom services锟? business will experience rapid growth.

Figure 1: China's Telecom Services' Income and Growth, 2004-2008. Source: CCID Consulting (Click to view full image)

Mobile communications users' growth is the major impetus of China's telecom operation market. Having a 48.5 sets/100 persons rate, China锟絪 mobile communications users will have a stable development.

In 2008, the size of China锟絪 communications equipment market reached 295.29 billion Yuan, up 12.1 percent year-on-year. This growth can be attributed to three factors: the nationwide GSM and CDMA networks锟? upgrade and expansion; 10 cities锟? TD-SCDMA technical application trial network锟絪 plan and deployment; and mobile VAS market锟絪 strong growth.

3G equipment market
China锟絪 W-CDMA, CDMA2000 and TD-SCDMA have different progress in 3G networks锟? construction in 2008. China Mobile has launched the second stage of TD-SCDMA network construction; China Telecom has begun CDMA network biddings, which face 81 key cities; China Unicom has set up W-CDMA trial networks in seven cities. In all network constructions, China锟絪 local vendors use 3G opportunities to rapidly improve competitiveness, which accounts for large market share of the total 3G network construction.

In the field of TD-SCDMA, ZTE has the largest market share, accounting for 36 percent of the total market. In W-CDMA, Huawei has been putting pressure on Ericsson, which has the largest market share. In CDMA, ZTE has the largest market share.

In 2008, the unified communications market was prosperous. One of the important factors is that many manufacturers paid more attention to the realization of technical development and applications. Considering users锟? practical demands and objective application environment, they launched unified communications products, which were close to customer demands.

Large enterprises' network constructions were nearly complete. Hence, they had their focus on network applications.

Figure 2: Size and growth of China锟絪 communications equipment market, 2006-2008. Source: CCID Consulting (Click to view full image)

Convergence
As the PC, IC, mobile communications and software progress, the convergence trend becomes more obvious. Mobile communications terminal convergence manifests in two aspects. The first one is services convergence—the convergence of mobile TV, mobile media and mobile advertisements. The second is the convergence of products—the integrated terminal products has taken shape, representing IT, consumer electronics and communications.

Because of 3G, consumers enjoy diverse services. In addition to the choices provided by mobile operators, the mobile terminal can also perform different tasks such as taking photographs, camera shooting, recording, playing movie clips, editing files. These functions once belonged to home appliances and computers.

The government issued 3G licenses to providers in January 2009, officially marking its beginning. In 2008, TD-SCDMA large-scale commercial use faced social testing. As for 3G, users锟? feedback will become an important basis of follow-up development. China Mobile has high requirements for customized manufacturers锟? technology R&D, products锟? capability and testing, and in-depth customization capabilities.

China锟絪 mobile phone manufacturers锟? support and input on TD-SCDMA had initial results: Their cooperation with operators and their accurate grasp of technology trends helped them win the bids. In 2008, China Mobile promoted TD-SCDMA testing and trial for commercial use. Now, China锟絪 3G terminal market has begun. As China's own IP rights of 3G technology, China锟絪 domestic manufacturers such as ZTE and Datang have an advantage in this field. China锟絪 domestic mobile phone manufacturers have accounted for over 84 percent of the total sales of 344,000 TD-SCDMA mobile phones;189,000 data cards are from China锟絪 domestic manufacturers. ZTE锟絪 TD-SCDMA terminal sales volume has accounted for 38 percent, which leads in market share.

New opportunities
China锟絪 mobile communications value-added services (VAS) are also experiencing rapid development. Today, China has hundreds of service types, including trading, information, database and entertainment. Currently, major income-based businesses include SMS, WAP, CR, MMS etc., whose trend is on the lane of rapid growth.

China锟絪 VAS market has entered a mature period. The VAS market has been contributing to the growth of the overall communications market. China锟絪 operators have started 3G since 2008. The TD-SCDMA network has also entered commercialization after a three-year trial. Commercial 3G network will bring new opportunities to the VAS market. The 3G network will improve user experiences to VAS greatly, especially to high-bandwidth services.