A Hangzhou factory will soon pro duce the mainland's first indigenous mobile phone, starting a national effort to wrest 50 per cent of the domestic market from foreign brands within three years. Eastern Communications (Eastcom) is one of the pioneers chosen by the Ministry of Information Industry (MII) to take on foreign telecommunications giants in the new era dawning with hopes for World Trade Organisation entry. Eastcom is one of the mainland's biggest telecoms firms, with turnover last year of 5.67 billion yuan (about HK$5.29 billion) and A and B shares listed on the Shanghai market. It aims to become one of the world's top 50 telecoms companies within five years. It is spending 450 million yuan on a new production site on the banks of the river that flows through Hangzhou which it has named 'Silicon Valley in Paradise' - the paradise refers to a city that is famous for its West Lake. The first phase of the plant - which will also make handsets for US giant Motorola - will open next month. Eastcom fired the first shot in the mobile war in September, with the launch of a first indigenous handset model. Initially, the handset is being sold in the cities of Wuhan and Shanghai, and Zhejiang and Anhui provinces, costing 1,600 yuan. A production target of one million sets has been set for next year. Mainland brands account for less than 5 per cent of the domestic market, which is dominated by handsets made by Nokia, Ericsson and Motorola. MII wants domestic brands to have half of the market by 2002. To date, mainland brands have been made under licence from foreign designs. 'Ours is a set we have developed on our own, at our subsidiary in the United States,' said Shen Yuyin, secretary to Eastcom's board. 'It uses a chip of Lucent Technologies. It is the first Chinese-made mobile.' Official projections put the number of mobile telephones in the mainland at 160 million by 2005, up from 60 million next year and 32.85 million at the end of June this year. MII has set aside a war chest of 1.4 billion yuan to support nine firms to produce mobile telephones, with Eastcom and Nanfang High-Tech of Shenzhen at the top of the list. 'We have applied to the government for a grant of 50 million yuan and a low-interest loan of 20 million to develop our mobile telephones,' said Mr Shen. 'MII's support for the domestic mobile phone industry will not change after entry into WTO. The form may change but the support will continue.' In 1991, Eastcom was the first mainland firm to make mobiles, under a co-operation agreement with Motorola, and has research and development centres in Los Angeles and Hangzhou. Eastcom officials stress that, although it now competes with Motorola, it will continue its co-operation with the US firm which is seen as a long-term partner. Eastcom and the other mainland handset-makers face a big challenge to change the public perception that, when it comes to buying mobile phones, foreign brands are best. Most consumers are unaware there are mainland brands on the market and the three big foreign makers, each with a share of about 30 per cent, have spent heavily on advertising and sponsorship, making them household names. Eastcom is spending 20 million yuan on advertising this year and will spend more in future. 'Mobile telephones are not just a means of communications but also a symbol of style, modernity and success,' said one US telecoms consultant. 'Eastcom and the others have to convince the public not only that theirs are good-quality sets, with wide functions at a reasonable price, but that they are smart and stylish and yuppies want to be seen using them. It will be a long, hard slog,' he said. A Nokia spokesman said the company felt strong pressure from the entry of mainland brands into the market. 'Companies like Konka, TCL and Haier have famous brands as well as after-sales service and national sales networks and they are strongly supported by the government,' she said. 'But the pie is getting bigger. Mobiles are both a hi-tech and a personalised products and we have the full range. All but our 9110 [model] are made in China and we have a local content rate of 30 to 40 per cent, not lower than the Chinese manufacturers, and in future could do global sourcing from China. 'We export 30 per cent of the products from our Beijing plant. We are confident of our place in the market.'