Digital Manufacturing Dominance

By Eric Nee  |  Posted 2004-03-26 Print this article Print

?"> China is also emerging as a force to be reckoned with when it comes to manufacturing digital products. China is the leading manufacturer of laptops, making about half the worlds supply, according to IMS Research. It is also the leading manufacturer of mobile phones, making about 35 percent of the worlds supply, according to Chinas National Development and Reform Commission. But most of the laptop factories are run by Taiwanese companies, not Chinese firms. And most of the mobile phones are made for foreign firms like Nokia Corp., not for Chinese companies.

Theres the rub. China makes and buys more mobile phones than any other country, but much of the wealth that is created goes to the foreign companies that create the technology, set the standards and control the industry—firms such as Qualcomm Inc., Motorola Inc. and Nokia. But the Chinese government has set out to change that. One of the primary ways to elevate Chinese firms from mere assemblers into innovative firms that can compete worldwide is for the government to use Chinas market heft to create competing standards, and hand those standards off to Chinese firms.

Rather than adopting CDMA2000 or WCDMA, as has the rest of the world, the Chinese government, together with Chinese firms, has developed a third 3G standard, dubbed TD-SCDMA. The challenge for China is that the mobile-phone market is getting mature, with tens of millions of people outside of China already using the existing standards. So while CDMA2000 and WCDMA are already well established in the rest of the world—and even in China itself—TD-SCDMA is still undergoing tests.

Nevertheless, the TD-SCDMA effort has achieved one of Chinas goals: to solidify the position of Chinese firms in the telecom-equipment industry. Because China is such a huge market, and because TD-SCDMA is virtually guaranteed some portion of it, foreign behemoths such as Nortel Networks Ltd., Royal Philips Electronics N.V. and Siemens AG have partnered with smaller Chinese firms, such as Datang Mobile and Huawei Technologies Co. Ltd., to manufacture TD-SCDMA equipment.

China is playing catch-up in the 3G market, but it stands a better chance of wielding influence in emerging wireless markets where standards are still embryonic. Thats why the Chinese government devised a new encryption standard for Wi-Fi, dubbed WAPI, that is different from the IEEE 802.11 standard certified by the global Wi-Fi Alliance, and adopted by the rest of the world. China then provided its encryption technology free to 11 Chinese firms. By June 1, any company selling Wi-Fi gear in China will have to license the technology from one of these 11 firms and incorporate it into their equipment. The Chinese firms range from those already on the cusp of becoming world-class competitors, such as Legend Group Ltd. and Huawei, to much smaller firms trying to gain a foothold.

Check out eWEEK.coms Mobile & Wireless Center at for the latest news, views and analysis on wireless communication. Next Page: Will Chinas wireless encyrption standard become a major player?


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