(China Daily)
Updated: 2008-03-04 10:14

Ningbo Bird, one of the nation's largest cellphone manufacturers, said yesterday it will sell its 50 percent joint venture stake to French partner Sagem for 159 million yuan ($22.36 million).

Zhejiang-based Ningbo Bird set up Ningbo Bird Sagem Electronics with Paris-based Sagem, the world's sixth largest cellphone maker, in 2005. The joint venture had registered capital of $25.4 million to develop and produce cellphones for domestic sales and exports.

In a statement to the Shanghai Stock Exchange, Ningbo Bird said the agreed selling price was based on the net asset value of the joint venture company as at December 31, 2007. An extraordinary shareholders' meeting will be held on March 17 to ratify the proposed transaction, the statement said.

Li Fujiong, Ningbo Bird's deputy general manager for marketing, said the share sale was a capital restructuring move that won't affect the company's overall business. "It's just an ordinary capital adjustment for us," he said. "Our core business won't be affected at all after the sale of our stake in the joint venture," he said.

The global cellphone manufacturing industry is likely to slow, Shen Zixin, director of telecom research at Pday Research, said. It makes sense for Ningbo Bird and other local cellphone makers to boost their capital base to prepare for the lean times ahead, he said.

Many local cellphone manufacturers are facing cash flow pressure as operating costs rise and prices fall, analysts said.

Manufacturers must rely on sales volume as profit margins are squeezed by stiff competition and rising costs. "The cost of marketing, materials and human resources keeps going up," Shen said.

According to the Ministry of Information Industry (MII), 548 million cellphones were made in China in 2007, up 14 percent from 2006, but phone prices have dropped an average 85 percent.

"It's not only a domestic problem, the industry is facing the same issue worldwide," Shen said. Chinese cellphones account for more than 70 percent of those produced globally, the MII said.