CCID Consulting: Review and Forecast on the Chinese Mobile Phone Chips Market

BEIJING, Feb. 16 /PRNewswire-Asia/ -- CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), recently reviewed China's mobile phone chips market.

After a period of rapid growth over the past few years, the Chinese mobile handset chips market experienced a conspicuous decline in 2008. CCID Consulting predicts that the scale of Chinese mobile phone chips market is expected to reach RMB 110 billion, up by 6%, down to single-digit growth for the first time. In the coming years, the mobile phone chips market will rarely regain its explosive growth, as the mobile phone chips sector has entered the stage of flat growth from that of a rapid one.

Decline in handset production leads to lower demand of chips

The production volume of mobile handsets is the most crucial factor on the growth of chips market. In 2008, the number of manufactured handsets in China is expected to reach approximately 750 million, with the growth rate down to 8.6%, while the number of the so-called 'knockoff handsets' which have attracted so much of the industry's attention is around 150 million. The following are the several reasons why the production volume of mobile handsets in China decreased: Firstly, China has already become the largest production base for mobile handsets in the world, with several major suppliers including Nokia and Motorola having moved part of their production bases to China, and the annual decrease in the growth rate of mobile handset production will be an inevitable trend; Secondly, experience from the past years shows that the fourth quarter is the crucial period, a time when new technologies in the production of mobile handsets are released. However, due to a gloomy economic outlook and the shrinking of the global terminals market, the Chinese mobile handsets sector experienced a conspicuous decline in the fourth quarter of 2008 compared with the same period over the past years; following the explosive growth in 2007, knockoff mobile phones witnessed no new breakthrough in terms of production volume in 2008, which had limited impact on driving the growth of the entire industry. Therefore, given the impact of various factors, Chinese mobile phone chips market experienced a drastic decline.

The rise of Taiwanese and mainland vendors

MTK remains the star of mobile handset chips market in 2008. With the constant expansion of MTK footprint, the competition landscape in mobile handset baseband chips market is undergoing quiet changes, from Infineon's acquisition of Agere, NXP's acquisition of Silicon Lab, to MTK's acquisition of ADI's handsets production lines and the merger of ST and NXP's wireless business. In the context of the withdrawal and consolidation of the traditional mobile handset vendors, the position of Taiwanese and mainland chip vendors has been increasingly enhanced. In terms of shipments, MTK accounts for 23% of the total market, with its target market focusing on domestic brands and knockoff handsets. In comparison, TI, with its partnership with international vendors and its advantages in smart phones and WCDMA baseband chips, accounts for 13% of the total market. In light of the growth in the recent years, TI's position in mobile handset chips market has been weakened significantly. In the meantime, TI is moving its focus of product development to the area of application processors. Qualcomm accounts for 12% of the market share through its monopoly position in CDMA field. Infineon,

ST-NXP, Freescale and Broadcom, with their respective advantages, have all secured their positions in the baseband chips market. In addition, Spreadtrum, a domestic mobile baseband chips vendor which has gained popularity among domestic mobile handsets enterprises in the field of GSM and TD-SCDMA, is growing rapidly.

Lack of momentum in the market growth of multimedia chips and memory chips

In terms of application structure, baseband process modules, multimedia application and memory chips are still the top three application fields in the mobile handset chips market, accounting for 70% of the market share in all, of which baseband process modules accounting for 27% of the total market. Though there is fierce competition in the baseband chips market, with the increase both in the integration level of baseband chips and the proportion of high-end chips, there is no significant decrease in its average prices. The rise of multimedia chips market owes much to the popularity of multimedia functions in mobile handsets. However, in the wake of growth over the past years, multimedia applications such as MP3 and photo-taking have reached saturation while new applications have not sprung up. Meanwhile, with the continuous upgrading of the baseband chips' performance, a host of mobile phone solutions enable MP3 and photo-taking functions through baseband chips without additional processors. In this context, the market proportion of multimedia chips experienced a slight decline, accounting for 20% in 2008 according to projection. In terms of capacity, the storage capacity for unit handset increases significantly while its price decreases slightly. In the meantime, the ratio of memory product MCP is further increased. Therefore, there is a slight increase in the proportion of memory chips market, reaching 21% by estimate. Apart from these three major fields, the market of application processor chips for smart phones, though only accounting for 4.1% of the total market, is expected to have huge market potential as the proportion of

high-end handsets continues to grow with the coming of 3G age.

Emerging applications to drive future market

Given the fact that China is the most important production base of mobile handsets in the world, the development of the global mobile handsets market will have direct impact on the growth of Chinese mobile phone industry as well as on the trend of Chinese mobile handset chips market. In light of the future development, given the impact of the current economic situation, the production volume of mobile handsets is expected to maintain its slower growth in China in 2009, which will in turn weaken its driving force for mobile handset chips market. GPS, mobile TV, Wifi and payment through mobile phones are all the potential application fields for mobile phone chips. With the reduction in chips costs and setup of relevant policy standards, these applications will gain in popularity among mobile phone users. CCID Consulting predicts that the new applications will become the major force in driving the development of chips market in the next two years.

About CCID Consulting

CCID Consulting Co., Ltd. (hereinafter known as CCID Consulting), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: 8235.HK), is directly affiliated with China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu, with over 300 professional consultants after many years of development. The company's business scope has covered over 200 large and medium-sized cities in China.

Based on major areas of competitiveness: industrial resources, information technology and data channels, CCID Consulting provides customers with public policy establishment, industry competitiveness upgrading, development strategy and planning, marketing strategy and research, HR management, IT programming and management. CCID Consulting's customers range from industrial users in electronics, telecommunications, energy, finance, automobile, to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to becoming the No. 1 advisor for enterprise management, the No. 1 consultancy for government decisions and the No. 1 brand for informatization consulting.

For more information, please contact:

Cynthia Liu

Coordinating Manager

CCID Consulting Co., Ltd.

Tel: +86-10-8855-9080

Email: liuyan@ccidconsulting.com