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Nokia Plans to Make Cell Phones in China

Posted on: Monday, 31 March 2003, 06:00 CST

HELSINKI, Finland (AP) -- Nokia Corp., the world's biggest manufacturer of cellular phones, said Monday it will start making its own brand-name phones in China and strengthen its presence in one of the world's largest markets.

The Finnish firm said it has already begun to merge its four Chinese manufacturing joint ventures, which make locally branded phones and network equipment, into a single Beijing-based company.

Nokia will hold a 60 percent stake in the as-yet-unnamed company. The local stake-holders will be Beijing Capitel Co. Ltd., Dongguan Nan Xin Industrial Development Co., Shanghai Alliance Investment Ltd. and the Beijing Hangxing Machinery Manufacturing Corp.

Nokia said it expects to begin making phones in China during the second half of 2003 that use CDMA, or "code division multiple access," the dominant standard in North America and South Korea.

China Unicom, the country's second-biggest cellular operator, supports both the CDMA standard and its major rival GSM, or "global system for mobile communications." The company signed up 7 million CDMA users in 2002 and expects to add another 13 million this year.

"Now it's clear that CDMA will account for some part of the Chinese handset market, so obviously we want to participate in that area of the business as well," said Nokia spokesman Kari Tuutti.

Nokia already makes phones compatible with GSM, the system used by 70 percent of the world's wireless users. The company supplies more than one of every three mobile phones sold worldwide, but controls just 10 percent of the CDMA market.

The Nokia-produced CDMA phones will be used mostly in China, Tuutti said.

China accounts for nearly a sixth of the world's approximately 1.3 billion mobile phone users. Last week, a report from analysts Lehman Brothers estimated that around 15 million CDMA phones will be sold in China this year.

Petri Arjama, an analyst with Handelsbanken in Stockholm, Sweden, said it was important for Nokia to build its market share in China.

"And the CDMA side is the side that they need to focus on," Arjama said.

In trading Monday on the Helsinki Stock Exchange, shares of Nokia fell 6.3 percent to close at 12.76 euros ($13.78). Analysts said the drop was part of a larger decline amid fears of prolonged war in Iraq.

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