China handset subsidization policy to benefit some Taiwan chip players

Leading China telecommunication companies including China Mobile, China Telecom and China Unicom are said to be planning to subsidize 3G handsets bundled with service starting in 2009. Taiwan IC distributor WPG Holdings is pleased to see this strategy and expects handset chip suppliers, such as MediaTek, Infineon Technologies and Spreadtrum, to benefit directly.

China telecommunication players are actively preparing for network operations in order to successfully promote their 3G business in the second half of 2009. Since 3G systems especially emphasizes telecom services, it will be the related telecommunication service providers that will have the greatest effect on handset sales next year, according to market sources.

IC distributors believe the subsidization will push demand for 3G handsets and stimulates sales during an economic downturn.

WPG indicated the subsidization aims to support the local market in China, though international brands will benefit to certain level as well. The company expects to see shipment growth since it distributes products from MediaTek, Infineon and Spreadtrum. However, MediaTek noted that it would not make concrete expectations for the market until a final decision has been made by China telecommunication companies about their strategies.

MediaTek's order volume of handset chips in October had a slight decline compared with September. The company expects its October shipment volume of handset chips to drop within 5% since most customers have cleared out their inventories. The market expects MediaTek to see increased sales in December because customers will stock ahead for the Lunar New Year in 2009.

source