Nokia, one of the world's mobile communications giants, plans to locate its second global 3G (third-generation) equipment manufacturing site in China.

By choosing China, Nokia will become the latest in a stream of major mobile telecoms gear makers - including Germany's Siemens and Canada's Nortel Networks - to build a 3G manufacturing facility in the country.

"We plan to start manufacturing 3G WCDMA (wide code division multiple access) base stations in China in the first quarter of next year," Sari Baldauf, executive vice-president of Nokia Corp and general manager of the firm's network division, told China Business Weekly last week.

Currently, Nokia manufactures 3G base stations only in its home country of Finland.

Nokia will locate the new 3G base station manufacturing facility in Suzhou, a city neighbouring Shanghai.

Nokia already has a 3G research and development centre in Suzhou.

The centre employs more than 100 engineers, and is "expanding" its headcount, Baldauf said.

Last year, Nokia established a global sourcing centre in Suzhou.

In the run-up to the 3G roll-out in China, global gear makers are moving their manufacturing facilities to the country.

Last year, Siemens announced it will build Shanghai into its second global 3G WCDMA manufacturing base.

The firm has committed US$30 million to expanding its manufacturing capacity in Shanghai.

Nortel in June signed a memorandum of understanding with China Putian Corp to form a joint venture to research, develop and manufacture 3G products based on TD-SCDMA (time division synchronous code division multiple access) and WCDMA.

Nortel did not disclose how much it will invest in the joint venture.

Europe-initiated WCDMA, US-backed CDMA 2000 and China's TD-SCDMA are the three major standards for 3G mobile communications.

The Chinese Government has not indicated when it will award operators licences to deploy 3G networks, and operators have not indicated which standard they will adopt.

Industry observers believe the 3G licensing will occur in the middle or the second half of next year.

David Ho, president of Nokia (China) Investment Co Ltd, said Nokia's 3G manufacturing facility will mainly target exports, at least initially.

Ho earlier said the government's indecision on 3G licensing had affected Nokia's plans to build a 3G manufacturing site in China.

Now, the timing of 3G licensing is becoming less obscure, industry observers said.

And global telecoms giants' moves to build WCDMA manufacturing facilities in China indicates WCDMA will dominate the future 3G market in China, they said.

Cellular duoply China Mobile and China Unicom are expected to adopt WCDMA and CDMA 2000, respectively, as a "natural upgrade path" of their current networks.

Fixed-line carriers China Telecom and China Netcom have showed strong interest in WCDMA, insiders said.

There have been numerous indicators that operators will choose to bundle WCDMA and TD-SCDMA in their 3G networks.

Technically, "WCDMA and TD-SCDMA complement each other well," Baldauf said.

GSMA, a global trade association representing more than 630 GSM and WCDMA mobile operators worldwide, signed an agreement with TD-SCDMA Forum, which was designed to promote the Chinese standard, in June in a bid to co-ordinate the development of the two 3G standards.

WCDMA is the 3G upgrade for GSM (global systems for mobile communications).

The alliance was intended to help promote interoperability and international roaming between the two technologies, maximizing the economies of scale for the benefit of end-users, operators and manufacturers.

According to the agreement, GSMA will assist TD-SCDMA Forum in promoting its standard worldwide.

The European Union is now supporting the coupling of WCDMA and TD-SCDMA, media have reported.

Nokia since 2002 has proposed the bundling of WCDMA and TD-SCDMA. But the Chinese Government showed little interest.

As WCDMA dominates the European market, TD-SCDMA will hardly succeed there as a stand-alone technology, said Baldauf.

Compared with other standards, TD-SCDMA remains an unproven technology.

A complete product line-up, based on TD-SCDMA, will not be ready for commercial use until next June, a senior official with the Ministry of Information Industry (MII) said recently.

A bundling will help TD-SCDMA gain acceptance in Europe, Baldauf noted.

Nokia has noticed some Chinese operators are showing interest in the bundling of WCDMA and TD-SCDMA, Ho said.

China Mobile, China Telecom and Netcom hope to bundle WCDMA and TD-SCDMA in their 3G planning, insiders said. The firms submitted their plans to MII officials.

Bundling will create a "win-win" situation, Ho said.

Market inches up

Baldauf said she is seeing a mild "rebound" in global operators' spending on mobile telecoms gears.

The past three years have been "difficult" for gear vendors, but now a market rebound, characterized by operators' investment activities, is happening, especially in Europe and Asia-Pacific, including China, she said.

Ericsson and Nokia were hard hit during the past three years, due to operators' curtailed spending.

"We see the global mobile infrastructure market is slightly growing (compared with last year)," she said.

"New growth markets and investments in next-generation equipment fuelled growth."

In the first half of this year, Nokia Networks' net sales increased 11 per cent.

Last year, Nokia suffered a loss.

Nokia is gaining customers in new markets such as China, India and Russia, and that has boosted its business, Baldauf said.

The firm recently won a deal from New World Mobility for the expansion of the Hong Kong operator's GSM network, including EDGE and Push to talk over Cellular.

Nokia was also awarded a deal by Taiwan's Chungwa Telecom to expand the latter's 3G networks.

The future 3G market in China is expected to provide a gold mine to gear vendors such as Nokia.

The total cost of building 3G networks in the Chinese mainland is expected to reach 200 billion yuan (US$24.096 billion).

This year, spending on mobile infrastructure by Chinese operators is projected to grow 34 per cent, year-on-year, a record high, to reach 62 billion yuan (US$7.469 million), Beijing-based research house Analysys International said.

(Business Weekly 08/31/2004 page15)