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Clampdown on handset imports

The mainland government has taken aggressive measures to ease a glut in the handset market by imposing new restrictions on imports, paving the way for a major shake-up in the industry.

Wang Bingke, director of the economic operation department of the Ministry of Information Industry (MII), said new rules, including the setting of a limit on import quotas and the extension of application procedures on mobile handsets, would be launched soon to save the saturated market.

'These new rules are not meant for multinational companies like Nokia, Motorola and Ericsson because they don't import handsets, but are targeted against domestic vendors who simply put their own labels on imported handsets,' Mr Wang said.

He said handset makers were increasingly importing more handsets than they were exporting, creating a major trade deficit problem. 'Domestic handset vendors need to advance themselves. They need to produce their own components, to develop their own product research and development capability and to export their products,' Mr Wang said.

According to the MII, China imported 17 million mobile handsets last year, but import volume substantially increased to 25 million in the first half of this year.

Although about 55 million handsets were exported last year, only about 500,000 units were domestic brands. The handset industry in China is facing oversupply and heavy inventory pile-up problems as the pace of growth slows.

Mr Wang said the new measures were aimed at discouraging local vendors from using semi-knocked-down (SKD) and complete-knocked-down (CKD) handsets, which require simple assembly procedures and discourage technology and product design.

Most SKD and CKD handsets were imported from South Korea, Japan and Taiwan, he said.

The MII recently met the 37 licensed handset makers to inform them of the import restrictions. Local vendors who continue to import SKD and CKD handsets will receive warnings from the MII.

The MII said although it would not stop vendors from importing SKD and CKD handsets, it would reduce the volume allowed. Of every 100,000 units of handsets local vendors apply to import, the telecommunications regulator will only approve 20,000.

The regulator is hoping the measures will gradually ease the glut in the domestic handset market. Companies such as Legend Group and other smaller players that have a high proportion of SKD and CKD products will be most affected.

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