Mobile-phone sales rose slightly on the mainland in July, the first increase since the Sars virus struck in April, but they are unlikely to dent the huge inventory that has plagued China's handset manufacturing industry.
Sales hit 5.8 million units, up 6.3 per cent from June, according to an HSBC equity research report, which cited figures provided by the China Centre for Information Industry Development (CCID) under the Ministry of Information Industry. Sales were 5.7 per cent higher than in July last year.
In the first seven months of the year, Chinese consumers bought 46.2 million handsets, up 34 per cent from the same period last year. But while the growth figures might seem impressive, a huge overhang of inventory and a glut of manufacturing capacity continue to haunt the industry, putting pressure on average selling prices and margins. As of June, there were about 20 million handsets stockpiled in warehouses and stores.
In addition, the mainland's 37 licensed mobile-phone manufacturers are capable of producing between 200 million and 210 million units annually. But in the first six months, total sales were just 80 million, with 43.2 million units sold in the domestic market and 36.9 million units exported.
HSBC has raised its forecast for mainland handset sales by eight million units to 80 million for the full year, compared with 55 million phones sold last year. But it warned stiff competition among handset vendors would continue to intensify in the second half, increasing the risk of margin erosion.
In its latest market survey, the CCID said Finnish handset giant Nokia outpaced rival Motorola to become the top brand in the mainland after gaining additional market share in GSM sales.