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TCL triples mobile handset production
( 2003-12-10 14:38) (China Daily HK Edition)

Despite mounting warnings that the mainland's mobile handset market is oversupplied, leading manufacturer TCL Corp said it has tripled its production capacity to 42 million units a year.

A second manufacturing base at TCL's headquarters in Huizhou went into operation on Monday, bringing the annual production capacity in the small city neighbouring Shenzhen to 36 million units.

This followed the opening of a plant in Hohhot, the capital of North China's Inner Mongolia Autonomous Region, in August. The 48,000-square-metre plant has an annual capacity of 6 million units.

"We aim to be the top five in the global mobile communications sector in three years," Chairman Li Dongsheng told reporters.

While promoting its low-end black-and-white-screen handsets, the company has concentrated efforts to develop colour-screen handsets, said Wan Mingjian, general manager of TCL Communications.

"Although the market is crowded and competition is intense, we believe strong players like TCL will win more market share while some small-to-medium players have to give up the game because they are weak in technological development, marketing and brand building," Wan noted.

He said the company may acquire or merge with an overseas handset maker next year to sharpen the company's competitive edge, but did not give further details.

However, some market analysts are not as optimistic as Wan, saying TCL's expansion may worsen the domestic handset market and trigger a price war like in the TV and air-conditioner sectors.

According to the Ministry of Information Industry, 173 million handsets have been produced so far this year by 37 domestic makers, of which 70 million units were exported while 61 million units were sold in the domestic market, leaving about 40 million unsold.

Although domestic demand is estimated to rise a little to some 69 million units in 2004, the aggressive increase of production will simply pile up inventory, said analysts.

The stiffer competition is expected to further worsen TCL's profit margin, they added.

In the first half of this year, its domestically-listed subsidiary TCL Communications Equipment recorded a 28.2 per cent year-on-year rise in net profit but gross profit margin dropped from 27 per cent a year ago to 21. 2 per cent, as a result of the company's strategy to boost revenue by cutting prices.

TCL Communications had earlier revised its sales target upwards to 9.5 million units from the previous 9 million.

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