PluggedIn: Blackberry fever brings headaches to China By Wei Gu http://news.yahoo.com/s/nm/20060811/wr_nm/column_pluggedin_dc_1
HONG KONG (Reuters) - It was only a matter of time: China is catching Blackberry fever. And like most other things in that burgeoning economy, it's likely to be at cut-rate prices. John Hsu, a reporter in China's commercial capital of Shanghai, got in ahead of the September launch. He bought his Blackberry online for just $65 -- roughly a fifth of its retail price in the United States. He uses it like a regular phone because it looks cool and he thinks its sound quality is better than an average smart phone. Still, he has no plans to subscribe to a Blackberry e-mail service provided by China Mobile, which can cost as much as 598 yuan ($75) a month. "I would like to get work e-mails on my Blackberry, but the price has to be right," said Hsu, who now pays 20 yuan ($2.50) a month to get personal e-mails on his Hewlett Packard PDA phone. If Hsu is representative of price-sensitive Chinese retail customers, the most debilitating and lingering effects of Blackberry fever may be felt by the device's maker, Research in Motion, and service providers such as China Mobile Ltd. The problem is a familiar one: cheap knock-offs. And that's not all. While used phones have come calling on the world's largest telecommunications market and are cannibalizing business from foreign and local phone manufacturers alike, generic handsets made by unlicensed factories pose an even bigger challenge. "In China, there is always undercutting in the market," said John Ure, who directs a telecommunications research project at the University of Hong Kong. "It is virtually impossible to police." Also, many foreign investment banks and law firms have already equipped their Chinese employees with Blackberries using services provided in Hong Kong, leaving little room for explosive sales from corporate customers there. The Blackberry's probable fizzle illustrates an endemic problem in a country with a poor track record of enforcing intellectual property rights. "Piracy is something that affects everybody in China," said Mark Natkin, managing director of Beijing-based research firm Marbridge Consulting. "Domestic Chinese companies got hit just as hard, if not harder." Used phones and phones sold by unlicensed vendors forced all the major local mobile phone makers except Lenovo Group Ltd. into the red last year, said George Guo, senior vice president at top Chinese mobilephone manufacturer TCL Communications. In 2005, China sold roughly 15 million so-called black-market phones, compared with 80 million handsets sold through licensed dealers, according to Marbridge Consulting. That means an estimated 16 percent of handsets sold in China are either made by unlicensed companies or smuggled in. Use of refurbished and unlicensed phones is also rampant in Eastern Europe and Middle East, but not in more developed markets. Such products pose a growing threat to the likes of foreign brand names such as Motorola Inc., Samsung Electronics Co. Ltd and Nokia as well as home-grown players such as TCL, Ningbo Bird Co. Ltd., Shenzhen Konka Group. An unlicensed factory needs as little as 1 million yuan ($125,000) to start, and can get its phones to market early by skipping the government testing process. Makers of the so-called "black phones" often evade taxes and provide no customer service. These factories have a more viable business model than smugglers, Guo said. While smuggling can be a capital offense in China, makers of unlicensed phones merely get a slap on the wrist. "Black phone manufacturers are getting larger in scale and the pressure on us is ever rising," said Guo said. "To survive and grow, we have to be successful in overseas markets." TCL, which bought France's Alcatel's cell-phone assets, is making a big bet on the better regulated, and arguably less competitive markets abroad. "Manufacturers will have an ongoing problem in China if customers continue to buy things based on price, not quality," said Ken Dulaney, a Gartner analyst. Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
