China wants for support for TD-SCDMA

March 15, 2007

The Chinese government is striving to gain more support for China-patented TD-SCDMA from both domestic and foreign handset manufacturers.

TD-SCDMA was developed in China and is one of the world's three next-generation mobile standards. It will prove a great opportunity to China's proprietary handset brands, Yang Hua, secretary-general to the TD-SCDMA industry association, said at a 3G mobile terminal application forum recently held in Shenzhen.

The secretary-general appealed to the support of domestic producers for the TD-SCDMA standard. He introduced the association's preferential policies to more than 20 independent- branded handset start-ups, including Hedy, Telsda, and Skyworth.

"New association members can enjoy preferential policies," he said.

An association member will enjoy more discount in patient fees. And what it pays as patient fees is destined to be much lower than the patient fees charged by WCDMA and CDMA 2000, the two foreign next-generation mobile standards.

High patient fees have been a huge stress to telecom equipment manufacturers. Domestic manufacturers have to earmark more than 5 percent of their sales income patient fees if they adopt WCDMA or CDMA, said an insider from Alcatel Shanghai Bell, established through the integration between the former Shanghai Bell and Alcatel's key business units in China.

More fees need paying for the use of WCDMA or CDMA. The cost during the initial R&D period is even fairly higher, including USD 1 million to USD 2 million as platform fee.

"We need to pay big patient fee when buying chips from foreign producers, and some more patient fee when testing the chips on our products and when putting our products installed with chips into operation," complained an executive from TechFaith (NASDAQ: CNTF), a handset application software and handset solution provider in China.

In addition, association members can help each other if they are not strong enough in technology or some other fields, said Li Jinliang. They can combine themselves to survive bitter competition.

The Chinese government is also in talks with foreign handset manufacturers such as Qualcomm, Ericsson and Nokia upon the TD-CDMA patent. But they have not reached accord yet in many issues like how to authorize manufacturers to use the TD-CDMA standard, said Li Jinliang, a Telecom expert.

The government is sparing no efforts in accelerate the TD- SCDMA tests these days in order to formally commercialize the TD-SCDMA standard as early as possible. The standard's formal commercialization will not start until early 2008, said industry experts.

The second round of TD-SCDMA tests is scheduled for commencement in March. The round will cover another five cities including Guangzhou, Shenzhen, Qinhuangdao, Tianjin and Shenyang with more than CNY 4 billion investment. The TD-SCDMA network is estimated to cover most of big Chinese cities in 2008.

The National Development and Reform Commission, China's top macro-economic planning body, asked Chinese telecom carriers to invest more in TD-SCDMA network construction.

The move will increase the investment by 48 percent from CNY 18 billion to CNY 26.7 billion, industry experts predicted.

About CNY 23.7 billion will be poured into procurement of base stations and network equipment. Chinese telecom carries are scheduled to purchase about 15,000 base stations.