A TCL smartphone model is on display on the top of a leather bag. The technology company plans to expand its smartphone business in the mainland market. Provided to China Daily

TCL Communication Technology Holdings, the Chinese mobile handsets maker, plans to expand aggressively in China in the next few years, as it believes the domestic mobile phone market has great potential and could be its next driving force.

"I can't say that the company has been doing a great job so far in China," Wang Jiyang, chief operating officer at TCL Communication told China Daily in Shenzhen, explaining that the company used to focus on its overseas markets, like Middle East, Africa, Latin America as well as Europe, but did not pay enough attention to the mainland domestic market.

For the first eight months of this year, TCL Communication sold a total of 25.2 million units of handsets and other products, of which, only 3.82 million were sold in the domestic market.

In terms of sales volume, TCL Communication is not even one of the "top 10" handset brands in China, said Wang, adding that the company is lagging far behind several of its domestic peers, not to mention international names like Samsung and Apple.

But the company has a huge ambition to boost its sales in China, as TCL Communication believes the room for it to grow in overseas markets is limited while its potential in the domestic market is huge, he said.

"In about three years, our sales volume in China is expected to account for one third of the company's total sales volume," said Wang, adding that it also aims to become one of the top three mobile brands in China.

The company plans to achieve its targets by expanding its sales channels as well as by increasing its promotional activities.

"Currently, our mobile handsets are selling in up to 8,000 stores across the country, and by the end of this year, the number will increased to 12,000," said Wang.

Besides, the company is also cooperating with its sister firm, the television manufacturer - TCL Multimedia Technology, to sell its handsets in over 4,000 TCL Multimedia stores, he added.

The company will also allocate more resources for promotional activities. Recently, it launched a series of promotional campaigns for each of its new products to create consumer awareness, said Wang.

TCL Communication is also increasing the proportion of its smartphone product mix, said Wang.

In the first eight months of 2012, the company sold 3.417 million units of smartphones, accounting for 13.6 percent of total handsets it sold, and the smartphones' sales volume has increased by 6.5 times from a year ago.

Wang said that currently, the global shipment of smartphone accounts for over 30 percent of the total mobile handsets shipments, and TCL Communication plans to equal the general market shipments level of smartphones by the first half of next year.

Tu Feng, TCL's general distributor in Guangzhou, told a media briefing in Guangzhou that as TCL is targeting the mainland mass market, most of its smart phones are priced between 999 yuan ($158.42) to 1999 yuan.

"We sold over 20,000 TCL smartphones in Guangzhou each month," said Tu, adding that the price range is attractive to consumers.

He said that as the smartphone is very popular in Guangzhou, the gross profit margin for selling smartphones is over 10 percent higher than selling "feature phones" (low end mobile phones with fewer features). TCL has already ceased selling feature phones in Guangzhou since October 2011.

Although TCL Communication has a huge ambition to take up a greater market share in China and to enhance smartphones in its product mix, analysts warned that such ambitions may come with great costs.

Simon Tsoi, analyst at First Shanghai Securities, said in a research report that as TCL Communication had to undergo through the restructuring of its product mix in the first half of 2012, the company paid 27 percent more on Research and Development (R&D) than it paid in the same period a year ago; and its sales and distribution expenses also increased 25 percent year-on-year, which all weighed on its profitability.

Tosi also sees that the sales of TCL's feature phones continuing to decline and will depress its revenue growth for the next two years. Meanwhile, the company will have a hard time to widen its profit margin due to the fierce competition between smartphone makers.

sophiehe@chinadailyhk.com

(HK Edition 09/29/2012 page2)