Local handset makers suffer as Finnish giant grabs a quarter of the market

China's mobile phone sales grew almost eight per cent to 78.96 million units last year. But local brands were forced into retreat as foreign firms, led by Nokia, stormed the market.

The market share of domestic phone makers, which had been rising, plummeted from around 40 per cent to just under 30 per cent over the course of 2005, research company Analysys International announced at the weekend.

Many Chinese mobile phone makers lost money following the sales slump last year, the Beijing-based research firm said.

The result was a "vicious circle" where local manufacturers were in danger of lagging still further behind as they lacked sufficient capital for research and development, sales and after-sales support, and marketing.

Leading foreign manufacturers Nokia, Motorola and Samsung all increased their respective market shares in China last year, Analysys found. Nokia's share alone reached almost 27 per cent, approaching that of all domestic phone makers combined.

The leading local firm, Ningbo Bird, had just under seven per cent of the market. Looking at GSM sales alone, which now account for about 90 per cent of all phones sold in China, Motorola had 13.31 per cent and Samsung 10.06 per cent.

Of the 78.96 million phones sold in China last year, 72.13 million were GSM handsets. Almost all of the remainder were CDMA units.

While Nokia led in the overall mobile market, Samsung and LG Electronics were strongest in the rapidly shrinking CDMA sector, Analysys reported.

The two Korean firms together held almost half the CDMA market. Just under seven million CDMA phones were sold last year in the country, a fall of 30 per cent on 2004.

Foreign firms have invested tens of millions in R&D and manufacturing in China, sometimes, observers say, as part of tacit agreements under which Chinese authorities allow relatively hassle-free entry into the market.

Some of China's home-grown manufacturers, such as Ningbo Bird, Huawei and ZTE, have successfully expanded to overseas markets, particularly in developing and third-world nations.

Ningbo, for example, claims to have sold 30 million handsets outside China last year. Analysts attribute this overseas push to the increasingly competitive nature of China's home market.