China: Nokia’s Biggest Market

In 2005 Mainland China became Nokia Corporation’s largest single market, with sales of Nokia handsets in the region accounting for 3.4 billion Euros. This accounts for almost ten percent of the company’s total 2005 sales of 34.2 billion Euros.

Nokia Increases its Lead in China’s 2G Handset Market

Nokia continued to increase its share of the China handset market in 2005, increasing its lead over Motorola after taking over the number one market position in 2004. 23.8% of all handsets sold in China during 2005 were produced by Nokia, a figure which includes eight of China’s ten best selling handset models.

One of the primary factors in the recent growth of Nokia’s market share has been its entry into the low-end GSM handset market. Nokia, like all other foreign handset vendors in China, had originally ignored the low-end market, but at the end of 2003 the company became the first foreign handset vendor to develop and sell low-end handsets such as its Series 1, 2 and 3 models in China.

Beginning in 2003, Nokia also cut out the middleman in its distribution channels by constructing its own distribution and retail network in small and medium-sized cities. In larger cities, Nokia signed distribution agreements directly with local electronic superstores such as Gome and Sunning.

Norson forecasts that Nokia’s market share will continue to improve in the coming year, but that the rate at which the company’s market share is increasing will slow down.

Nokia Prepares for China’s Future 3G Handset Market

Nokia has six R&D centers and four factories in China, including two handset factories which as of October 2005 had produced a total of over 200 million handsets. A number of these facilities are focused on 3G equipment and handsets - the company’s Beijing factory already produces WCDMA handsets, and in Guangdong a new production line for 3G equipment will be completed in the third quarter of 2006. Although all of the company’s 3G handsets are currently exported to Europe and North America, Nokia plans to launch its handsets in China once the Chinese government releases 3G licenses.

Nokia’s Beijing Production R&D Center focuses on the design of low end and middle tier handsets such as the company’s 5510i, 3350, 3610, 2100, 6108, 3108 and 2300 models. High end WCDMA handsets are typically developed in R&D centres outside China, often in Nokia’s home country Finland. Norson believes that Nokia’s Chinese R&D centers will take on the role of 3G handset localization in the future.

Due to Nokia’s strong brand recognition in China and the company’s good relationships with established operators China Mobile and China Unicom as well as potential 3G operators such as China Telecom, Norson forecasts that Nokia will be able to control a large section of the Chinese handset market, especially in the WCDMA sector.