Tired of foreign domination of its telecom market share China...

China Waves Red Flag Over Telecoms
Tina Wang, 01.07.09, 08:24 AM EST
Nationalism plays a part in China's move to support a homegrown 3G mobile technology, in addition to more widely accepted standards.

or the sake of having its own, Chinese-made third-generation mobile communications network, Beijing is willing to spend billions, despite reaping little apparent benefit from doing so.

2009 is the year when China will officially unleash a $41 billion, two-year program to upgrade the country's mobile communications infrastructure to third generation, bringing it in line with the rest of the advanced cellular world. But it is doing so by implementing three different 3G technologies.


As widely expected for several months, the Ministry of Industry and Information Technology officially divvied up 3G licenses among three telecom giants Wednesday. Industry leader China Mobile will be saddled with the less developed homegrown technology standard, TD-SCDMA. Smaller peers China Unicom (nyse: CHU - news - people ) and China Telecom (nyse: CHA - news - people ) will have an easier time implementing the W-CDMA and CDMA 2000 standards, respectively.

The world has increasingly moved toward W-CDMA, as U.S., European and Japanese carriers upgrade to the standard. China's own TD-SCDMA network may turn out to be more costly and complex to install and service. While W-CDMA is the preferred technology, China Mobile, which has nearly a three-quarters share of China's wireless market, has the strongest capabilities as an operator, said ABN Amro analyst Wendy Liu. The burden of China Mobile's TD-SCDMA license will cause it to lose its competitive edge, even though the move was long anticipated, she projected.

But why is Beijing pursuing a third standard that no one else in the world is prepared to adopt? "That is the complication. But, politically, they think that it is their homegrown standard, and they think that it is important to be able to achieve some sort of technological breakthrough," said one Hong Kong analyst who asked to remain unidentified. Chinese consumers will not benefit much since foreign handset makers are unlikely to include the Chinese standard.

The political choice means billions of dollars more in spending. "If you're operating in an economy that is not entirely market driven, then it doesn't really matter. If the government wants to do it and the government wants to pay for it, then no big deal," said the Hong Kong analyst. National security may also be a consideration, as Beijing will have a mobile technology network it solely controls. China will be the only country to have three 3G networks, according to Caijing magazine. The United States uses two 3G standards.

I'm not optimistic that this proprietary scheme will succeed. A similar approach has backfired on Japan already.

Well, it's either spend billions for independent, non-restricted technologies, or spend billions for the licenses to someone else's stuff. The policy keeps pretty well with the emphasis towards self-reliance, imo. Telecoms is as important as any military platform. And as usual, the risk is hedged with (2) backup plans.

They cannot fail because there's no competitors. Also the standard is only for domestic consumption therefore they don't have to worry about compatibility.

The benefit is to provide jobs for doemstic firms.

RedMercury said:

Well, it's either spend billions for independent, non-restricted technologies, or spend billions for the licenses to someone else's stuff. The policy keeps pretty well with the emphasis towards self-reliance, imo. Telecoms is as important as any military platform. And as usual, the risk is hedged with (2) backup plans.

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The Japanese had the same reasoning. They have every reason and rationale to think so. They got the conditions on their side, being the biggest electronic giants and so on.

Now if you look at all the companies and names that dominate the celphone and smart phone market, how many names of Japanese companies do you see? Which companies are the ones truly dominating?

China doen't believe their tech can dominate the phone market internationally. Therefore it's a lost cause if they overstretch. No need to think too far and ahead of itself.

but they try to not let foreign firms dominate its own domestic market. It's not a zero sum game.

With this move, China now at least can have its own domestic market. otherwise, it could be worse, losing both international and domestic market.

an old saying, grab what you can but try not to grab everything cause most likely it can't done.

What really surprised me these past couple of months is that US wireless providers are selling HTC phones like the Touch and Diamond, thanks to Google's Android!

A couple of things to note for the in the cellphone world:
* Palm I'll bet you will go out of business or be bought by Apple, Google, or RIM in a couple of years, their phone OS are way to outdated for today world, hopefully they release a decent OS next week at their CES. I got stocks riding on them!
*The next Android phone is coming the Kogan Agora, hopefully some US wireless company can get it and jack down the price. Although Kogan is an Australian company all their phones are Made in China.
*Sprint will probably get an Android based phone, with T-Mobile having the HTC G1, Verizon RIM Blackberry Storm, AT&T/Cingular iPhone they are taking the market shares with these phone, even though Spring has the HTC Touch and Diamond (powered by Windows) I think they will go for something bigger/standardized and not to mention cheaper.

China doen't believe their tech can dominate the phone market internationally. Therefore it's a lost cause if they overstretch. No need to think too far and ahead of itself.

but they try to not let foreign firms dominate its own domestic market. It's not a zero sum game.

With this move, China now at least can have its own domestic market. otherwise, it could be worse, losing both international and domestic market.

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What you have in China are foreign brands like Nokia and Motorola. But its only the brands; the phones they sell in China are made in China and often designed or modified by Chinese engineers. Quite so often the "foreign" phones there are not sold in other countries under the same logo.

For example, the Motorola Ming Smartphones. These are beautifully cased, clam shelled phones with touch screens, Chinese text hand writing recognition, running on Linux OSes. These phones could rival with any smart phone in the market, but they're sold only in China, not in the US or Europe except on the gray market.

Let me point out to you that the Chinese language alone already constituted an important technical barrier and why every phone meant to be sold in China had to be modified for the Chinese language input.

Changing communication standards only means that the phone maker will only modify the transmission component of the phone. That's why you have the same phone with a version for GSM and another for CDMA.

Creating local proprietary standards will not stop foreign companies in getting in. But on the other hand, like what they did with the Japanese market, it prevented the local companies from getting out.

If you want a national example to be copied, don't copy Japan's, who locked themselves into NTT's proprietary protocol and is now trying to undo this legacy by embracing open standards for 3G. Copy Korea's which took on both the established standards head on like GSM and CDMA. Look at where all the Samsung and LGs now in the market, in respect to Japanese brands.

Well, the phone composed of the chipset, flash memory, dram memory.
Next thing China governement demand is all components should be made in China therefore it would excelerate its semiconductor growth.

CHina's TD-SCDMA chipsets are supplied by Qualcomm, therefore China still lacking. It needs to do its own chipset as well.

Not only semicondcutor, this will also promote its software, firmware development as well.

swimmerXC said:

What really surprised me these past couple of months is that US wireless providers are selling HTC phones like the Touch and Diamond, thanks to Google's Android!

A couple of things to note for the in the cellphone world:
* Palm I'll bet you will go out of business or be bought by Apple, Google, or RIM in a couple of years, their phone OS are way to outdated for today world, hopefully they release a decent OS next week at their CES. I got stocks riding on them!
*The next Android phone is coming the Kogan Agora, hopefully some US wireless company can get it and jack down the price. Although Kogan is an Australian company all their phones are Made in China.
*Sprint will probably get an Android based phone, with T-Mobile having the HTC G1, Verizon RIM Blackberry Storm, AT&T/Cingular iPhone they are taking the market shares with these phone, even though Spring has the HTC Touch and Diamond (powered by Windows) I think they will go for something bigger/standardized and not to mention cheaper.

Click to expand...

Haha wow didn't see this coming Sprint is allying up with Palm to target smartphone users now that the new Palm OS and Palm Pre are coming!

It's looks pretty amazing from all the previews I seen looks like I'm switching to Sprint and not AT&T when the Palm Pre hits the market unless Verizon can make the Blackberry Storm WiFi compatible