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Telecom Equipment markets in China: The Big Picture

Telecom Equipment markets in China: The Big Picture. Jean-Charles Doineau, Head of TDS division, IDATE Julien Grivolas, consultant. Telecom network Equipment market in China: The big picture. Fu Jun at Huawei technologies has said:

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Telecom Equipment markets in China: The Big Picture

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  1. Telecom Equipmentmarkets in China:The Big Picture Jean-Charles Doineau, Head of TDS division, IDATE Julien Grivolas, consultant

  2. Telecom network Equipment market in China:The big picture Fu Jun at Huawei technologies has said: “ in the past few years China has seen telecoms growth of seven times gross domestic product - not bad when your GDP is growing at around 7%. But he also predicted that the market will now be looking at increases of around the same as GDP or 7% for the next few years”.

  3. Market fundamentalsTelecom network Equipment market in China:The big picture • Claim to Fame: The biggest potential development perspectives in the market. • 3G licences (WCDMA, CDMA2000, TD-SCDMA) likely to be granted to operators in beginning 2004.. • China Telecom IPO in Nov. 2002 only raises half the expected amount. • MII carefully regulates the market; open to foreign vendors but essentially still closed to operators. • China Mobile surpasses Vodafone as world’s largest mobile operator

  4. 2002 figures 2000 China Telecom 2003 (e) China Netcom 2007 (f) China Mobile China Unicom Turnover (CNY millions) 75 496 67 600 128 561 50 800 North America 323.7 328.5 368.1 CAPEX (CNY millions) 28 919 na 41 000 na • Market structure is based on 4 network operators (2 in the fix market, 2 in the mobile) Western Europe 205.3 261.2 310.4 Employees na 210 000 59 633 na Asia-Pacific 256.6 348.2 445.5 Agreed restructured coverage 21 provinces 10 provinces Nationwide Nationwide Telecom services markets, BUSD China 37.1 61.5 89.3 • Growth of the market in value is one of the highest in the world, though ARPU is still very low Fixed lines(in millions) 57 77.4 - - Rest of the world 137.2 200.3 275.4 Mobile subscribers (in millions) - - 131(end July 2003) 71.4(end July 2003) Total 922.9 1 138.2 1 399.5 Source:IDATE Source:IDATE Telecom equipment markets in ChinaTelecom network Equipment market in China:The big picture

  5. In millions of USD 2003* 2007* North America 24% 27% USA 21% 24% • In 2003, for the first year ever, Chinese Network equipment market has become the first international market in volumes (all combined). • IDATE anticipates this situation to persist for the next 4 years. Asia-Pacific 41% 40% China 26% 29% Western Europe 22% 22% • Chinese market is one of the more strategic worldwide market, as well as in APAC. Telecom equipment markets in ChinaThe big picture Source:IDATE

  6. Narrowband switching: 212 million lines, second market worldwide The access equipment market for fixed networks is dominated by Alcatel and Siemens in China. Siemens has a manufacturing plant (BISC) for its EWSD circuit switches in Peking. Ericsson is also present in this market with its ENGINE fixed/mobile solution. • Broadband switching: 58 million internet users, 3rd market worldwide China's DSL infrastructure market leader is the joint venture Alcatel Shanghai Bell which holds 50% of China's DSL access market. In 2002, Alcatel Shanghai Bell announced that they had delivered 1 million DSL lines in China. Nokia, ZTE Corporation and UT starcom are also present; Telecom equipment markets in ChinaThe big picture: Who does what?

  7. Mobile infrastructure market: 58 million internet users, 1st market worldwide Market is dominated by Ericsson, followed by Nokia and Motorola. Other major providers are Siemens, Nortel Networks, Alcatel, and to a lesser extent, Huawei Technologies and ZTE Corporation. 3G roll out is a very important challenge for these technology providers. Telecom equipment markets in ChinaThe big picture: Who does what? • Mobile handset market: 49 million unit market 2003, first market worldwide A lot of regional manufacturers have invested the place.Market is dominated by Motorola and Nokia, followed by Ninbo Bird, TCL Group, Siemens, and SonyEricsson. Margins of western manufacturers are going to decline, and development of a consolidation mechanism will appear in the Chinese market.

  8. Strong investment in Local R&DTelecom network Equipment market in China:The big picture • China’s public R&D investment as been continuously growing from the 80’s • This huge R&D public investment has let emerge a 10000 staf in R&D ( ~ 40 %, over 22000 people), through common public and private R&D labs. This Would mean 36 K$/year cost module.

  9. Development of local playersTelecom network Equipment market in China:The big picture • Huawei Technologies: a comprehensive product portfolio combined with technical leadership • Huawei’s yearly revenues equals a quarter of the occidental NEPs • Internationalization of the strategy: 2 European country (BerliKomm), Russia, Mexico, Brazil, Colombia, Ecuador, Chile and Peru, Australia, India, Malaysia, the Philippines and Indonesia • Main competitive advantage: price (20 to 40% markup compared to occidental NEPs)

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