Taipei, Tuesday, September 23, 2014 13:43 (GMT+8)
partly cloudy
Taipei
32°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
  • Xian SinoChip reportedly uses Powerchip foundry services

    Bits + chips | 1h 16min ago

  • Notebook demand undermined by new Apple devices

    IT + CE | 1h 27min ago

  • TSMC Solar president reportedly to resign

    Green energy | 2h 56min ago

  • Taiwan August export order value slightly up on month, says MOEA

    Bits + chips | 3h 1min ago

  • Sony Mobile to focus on high-end smartphones, will decrease ODM orders, say Taiwan makers

    Mobile + telecom | Sep 22, 22:43

  • Taiwan market: Meizu likely to launch smartphone MX4

    Mobile + telecom | Sep 22, 22:40

  • Tablet panel pricing for 7-inch units remains flat in mid-September

    Displays | Sep 22, 22:39

  • Digitimes Research: Japan TV vendors see their proportion of 50-inch and above size Ultra HD TV sales drop

    Displays | Sep 22, 22:35

  • Great Wall plans to start fund raising for solar investments, says report

    Before Going to Press | Sep 22, 22:26

  • Argument between China vendors shows weakening of China smartphone industry, says report

    Before Going to Press | Sep 22, 21:31

  • Tablet panel pricing for 7-inch units remains flat in mid-September

    Before Going to Press | Sep 22, 21:07

  • Digitimes Research: TV vendors see their proportion of 50-inch and above size Ultra HD TV sales drop

    Before Going to Press | Sep 22, 21:06

  • Digitimes Research: Taiwan makers continue to focus on production of a-Si panels for use in the high-end smartphone panel segment

    Before Going to Press | Sep 22, 21:06

  • LCD monitor pricing increases in September

    Before Going to Press | Sep 22, 21:02

  • Taiwan market: Microsoft to launch Xbox One

    Before Going to Press | Sep 22, 20:59

  • Digitimes Research: Alibaba faced with operational difficulties

    Before Going to Press | Sep 22, 20:58

  • Digitimes Research: Apple uses iPad, iPhone models extend music business model started by iPod

    Before Going to Press | Sep 22, 20:54

  • LG to announce new smartphone with in-house AP, says report

    Before Going to Press | Sep 22, 20:52

Pause
 | 
View more
DIGITIMES Research Tracker Services
DIGITIMES Marketing Services
DIGITIMES Translation 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.