Mobile-phone supply tops mainland demand
Updated: 2008-03-01 07:22
By Karen Cho(HK Edition)
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An increase in exports offset plummeting mainland sales by mobile-phone manufacturer TCL Communications Technology last year, helping the company book HK$33 million in net profits - a 120 percent surge over the HK$15 million it registered in 2006.
According to figures released by the company Friday, mainland sales dropped 31 percent. TCL Chief Executive Officer (CEO) Liu Fei attributed the losses to the mainland's challenging operating environment.
The company sold about 1.08 million units on the mainland last year, compared with about 1.57 the year before.
Liu said that since the government began relaxing licensing regulations, a number of new handset makers have poured into the industry.
"Market supply on the mainland well exceeds demand," Liu explained. "When this happens, prices fall."
The CEO estimated that there are over 100 different players in the mainland's mobile-phone industry right now, creating a huge challenge for the company to maintain its profitability there.
Fortunately for the company and its stakeholders, overseas sales more than made up for the mainland losses. The company sold about 10.83 million units last year, compared with 9.94 million in 2006 - a 9 percent increase.
Nonetheless, Liu said that TCL remains committed to the mainland market.
"The mainland market is going through a major contraction, but we believe that it will end in the near future," Liu said.
He said the group's strategy is to secure and expand its home front, and return mainland sales this year back to about where they were at in 2006.
Still, the overseas market - where 90 percent of the company's 2007 sales came from - won't be ignored. TCL mobile phones are growing in popularity abroad, particularly in areas such as Latin America.
Clearly, as Liu pointed out, the enterprise is realizing gains from its expansion into the global market.
In 2004, TCL signed into a joint venture with international mobile-phone maker Alcatel to produce Alcatel brand phones.
But despite the company's profits, TCL shareholders can forget about getting a dividend check this year.
The company's board voted against the payouts.
Thomas Liu, TCL's chief financial officer, said: "We are currently in a growth mode. So, we decided to keep more resources to finance that growth".
Looking ahead, CEO Liu said that he is confident the mobile manufacturer will become an increasingly significant player in the global wireless industry in the next three to five years.
TCL set its worldwide sales target for this year at 16 million handsets.
The company's share prices made a 5.45 percent gain yesterday to close at HK$0.29.
(HK Edition 03/01/2008 page2)