China 3G delay hurting vendors

July 21, 2004

China's decision to postpone issuing 3G licenses is testing the patience of telecom equipment manufacturers and pushing them to breaking point, according to a recent report titled "Analysis of China's 3G Market Operation and Equipment Manufacturing Investment". The report published by CCID Consulting, a think tank for the Ministry of Information Industry (MII), says the delay is stretching vendors' financial reserves.

The MII has been conducting trials of the three 3G technologies since October but it is equipment manufacturers who are bearing the bill and the longer the trials goes on, the more cost they have to soak up. China is testing the home-grown TD-SCDMA plus WCDMA and CDMA2000 technologies.

Equipment manufacturers are keen to break into the China which has more than 300 million mobile phone users. China's 3G infrastructure market is expected to be worth around US$60 billion. CCID Consulting forecasts China will by the end of 2007 have around 500 million users, of which 30% would be using 3G phones.

Foreign firms, such as Nortel Networks, are pouring money into China for research and testing 3G technologies. Nortel Networks said it would spend $200 million in 3G R&D in China over the next three years while Alcatel Shanghai-Bell R&D Center spent $100 million in 3G research last year and has allocated another $45 million.

Local vendor ZTE has spent $24 million on 3G development while Huawei Technologies is conducting costly tests on all three 3G technologies.

China has not set out a timetable for the awarding of licenses and nor has details of the number of licenses been disclosed. The question of which technologies will be deployed is still unknown but it has been said in the past that license winners would be allowed to choose their own technologies.