Taipei, Tuesday, September 2, 2014 10:29 (GMT+8)
mostly cloudy
Taipei
31°C
Commentary: China telecom market dominated by local firms
Irene Chen, Taipei; Jackie Chang, DIGITIMES [Friday 21 June 2013]

In the past 2-3 years, Taiwan-based telecom firms have been seeking business opportunities in the growing wireless hotspot and broadband network market in China. However, only a small number of Taiwan-based firms have entered the market and succeed.

China's Internet and telecom market has a lot of business opportunities, but gross margins are generally low.

Taiwan-based Z-Com reported a gross margin of 26%m but the firm's China-based subsidiary Nanjing Z-Com Wireless reported a gross margin higher than the consolidated gross margin reported by the parent company.

China-based wireless device provider TP-Link stated that the firm's average gross margin has been above 30% with profit ratio above 10%. Compared with China-based firms, Taiwan-based telecom equipment firms have relatively low profit ratios.

Taiwan-based telecom equipment firms are not the only firms that are facing challenges in the China market as China-based firms have a combined market share above 60%.

Z-Com was one of the first Taiwan-based firms to invest into the development of WLAN products for the consumer market. However, the firm decided to exit the consumer WLAN equipment market in 2005. The firm shifted focus to WLAN equipment for niche industries and entered the China market in 2005.

The success of Z-Com in China is based on its Nanjing subsidiary. In China, only a few people know Z-Com but most know Nanjing Z-Com Wireless.

Z-Com stated that China-based telecom firms can have opinions on the standard of wireless hotspot equipment during procurement, hence Nanjing Z-Com Wireless has been establishing strong relationships with local telecom carriers. In addition to superior technology and business development, the firm has been supported by local governments through tax benefits and this is the reason for the relatively high profits, said Z-Com.

Z-Com stated that expanding capacity may be able to help the firm obtain a larger market share, but the firm needs to consider various business models and cooperation with the local ecosystem before expanding capacity.

Localization is the key for firms developing the international market, and despite that fact that Taiwan-based firms have been aggressive in achieving localization in the China market, firms have been facing increasing competition. Localization has become a necessity but does not guarantee success.

Realtime news
  • Gigabyte Communications to ship 2G feature phones

    Mobile + telecom | 12h 19min ago

  • Panel makers look to vehicle industry as handset panel shipments remain conservative

    Displays | 12h 25min ago

  • Automated production lines still not yet efficient for back-end assembly players

    Before Going to Press | 12h 5min ago

  • Apple cuts iPad mini prices; non-Apple vendors may follow suit

    Before Going to Press | Sep 1, 21:43

  • Digitimes Research: DRAM shipments to drop 20% on year in 2014 due to weak PC demand

    Before Going to Press | Sep 1, 21:42

  • LED demand turns weak in 3Q14, says Epistar chairman

    Before Going to Press | Sep 1, 21:24

  • Digitimes Research: Kickstarter wearables expand their presences in sleep sensing industry

    Before Going to Press | Sep 1, 21:23

  • Three flexible PCB makers raise funds to address growing business operations

    Before Going to Press | Sep 1, 21:18

  • Apple iWatch still under EVT despite components already in production

    Before Going to Press | Sep 1, 21:16

  • Taiwan market: HTC to launch HTC Butterfly 2 through cooperation with Chunghwa Telecom

    Before Going to Press | Sep 1, 21:14

  • Trend and technologies at Touch Taiwan 2014

    Before Going to Press | Sep 1, 21:13

  • Asustek readies new 2-in-1 products for competition

    Before Going to Press | Sep 1, 21:12

  • Demand for 8-inch wafer foundry heating up

    Before Going to Press | Sep 1, 21:12

  • New mobile products to benefit component suppliers until end of 2014

    Before Going to Press | Sep 1, 21:11

  • Acer becomes top PC and projector vendor in Philippines

    Before Going to Press | Sep 1, 21:09

Pause
 | 
View more
DIGITIMES Research Tracker Services
DIGITIMES Marketing Services
  • 2014 global high brightness LED market, trends and shipment forecast

    For the global LED lighting market, the market size will reach US$25.82 billion in 2014 or a market penetration rate of 23.4%. This is attributable to exponential shipment growth for light bulbs, tubes, and directional lamps.

  • Greater China touch panel shipment forecast through 2015

    This Special Report provides forecasts through 2015 for Greater China touch panel shipments with breakdowns based on technology (glass, film, resistive), application (smartphone, NB and tablet) and by firm.

  • 2014 global tablet demand forecast

    This report analyzes the main players, their strategies and shipments forecasts for 2014, as well as other factors contributing to either growth or decline in various segments within the tablet market, with a particular focus on Apple, Google, Samsung, and Microsoft, along with whitebox vendors.