Ambitious TCL targets US, China with smartphones

TCL is yet another of those lesser-known Chinese firms edging its way up the global handset charts.

It shipped 8.52m devices in Q1, or 2.0% of the worldwide total, placing it seventh between Huawei and Sony in Gartner’s rankings.

These days Chinese vendors occupy five of the world top ten spots, admittedly with a combined market share below second-ranked Nokia.

And although smartphones is where the action is, TCL’s story at the top end of the market isn’t too shabby, either. After nearly doubling shipments in Q1, smartphones accounted for 17% of units shipped and nearly half of handset revenue. In the last three months it’s increased that to 27% of all devices sold.

The other TCL wrinkle - apart from its use of the old Alcatel brand - is that it tends to do most of its business outside China. In Q1 offshore sales totaled 80%, mostly to EMEA and Latin America.

But TCL is trying to change that. TCL Communication CMO Dan Dery says it’s targeting the US and China with its mid-range smartphones, such as the Idol X, which it launched in Hong Kong on Monday.  

He described China as “really a new market." Whereas Euope and Africa are TCL replacement markets, the massive China market is mostly virgin territory.

“Even though it takes more time, because of its structure, our intention is to get strong in China and strong in the US as well,” he said.

Both countries - the US in particular – require a presence in operator channels. Dery cites TCL’s sales to 180 markets globally and relationships “with some of the most demanding carriers in the world.”

While the company seems to have hit a sweet spot, with revenue tripling over the last four years, it’s still a small outfit.

Total sales last year topped HK$12.031 billion ($1.55b), with a gross margin of 17.4%. Despite that it came in at a HK$220,000 loss on higher R&D and sales costs.

Qualcomm sweeps aside Chinese firms in TD-LTE device tender

Qualcomm-powered devices have dominated China Mobile’s just-completed TD-LTE tender, sweeping aside local firms.

The 200,000-unit tender was not large by Chinese standards, and comprised mostly data cards and MiFi devices, but is significant as China Mobile’s biggest single procurement of 4G terminals to date.

A rueful piece in 21^st Century Business records that the only China-built chipset to win was Huawei’s Hisilicon, which was used primarily in Huawei’s own devices.

Qualcomm won primarily because of its ability to support ‘5 modes and 10 bands’ (the modes are GSM, W-CDMA, HSPA, TD-LTE and FDD-LTE; the bands vary from market to market). Moreover, the US firm last year gave a big assist to China Mobile’s plan to make TD fully global by declaring that all of its chips would support both modes of LTE.

The outcome of the tender “frustrated” local players Spreadtrum and Leadcore, and Taiwan’s Mediatek, the story said.

An executive from one firm complained that at the current stage, the market was all about data cards and CPE, which didn’t require “all modes”.

He said the 4G handset era, still a year or so away, would allow domestic chip players to play to their strengths in pricing, but also called on operators “to give us more opportunities and time.”

In the meantime, for focus for all three firms would be on developing multi-mode single chip products, the article says.

China Unicom: Sure, we like TD-LTE

China Unicom has bowed to the inevitable and has become the third and final Chinese cellco to sign up for TD-LTE.

At least, symbolically. 

After much industry speculation, chairman Chang Xiaobing has confirmed that the operator has already begun building a TD-LTE trial network, citing the lure of the early issue of TD-LTE licences.

Chang said at the company’s interim result in Hong Kong that it was highly likely that TD-LTE licences would be issued first, just as TD-SCDMA was the first 3G licence handed out five years ago.

In the past, Chang had indicated a preference for FDD-LTE, the natural choice for a W-CDMA player.

But, like his counterpart Wang Xiaochu at China Telecom, his views have evolved over the last few months. Earlier this year Chang said Unicom aimed to transition to 4G through its “own strategy” – a reference to FDD – and last year spoke of “unswervingly remaining on our own technology path.”

Given the limited benefits of TD and the complete lack of detail about either the trial or future rollout, Chang’s commitment appears little more than a politically correct gesture.

China Telecom has said it will use TD as a supplement to FDD-LTE in urban areas, but Chang has not even gone that far.

As an anonymous source put it to Sina Tech:

Unicom will implement a TD-LTE test network to support national innovation, but it still will maintain every kind of preparation and trial for FDD-LTE. In the 4G handset and network era China Unicom still probably will be predominant.”

For all that, Chang said that while he thought the TD-LTE licence would be issued first, he didn’t think it would happen this year as the MIIT has promised.

EU curveball to test China market fairness

The European Union has thrown China a massive curveball.

EU Trade Commissioner Karel De Gucht is willing to drop his case against Chinese telecom subsidies if European firms win a big share of China Mobile's 4G tender, FT.com reports.

China Mobile’s tender for a 100-city TD-LTE rollout is the telecom industry’s biggest contract this year.

But Nokia Siemens surprised everyone by becoming the first non-Chinese vendor ever to undercut local players. It pitched a price of 33,000 yuan ($5,460) per carrier, compared with 35,000 yuan offered by both Huawei and ZTE.

Huawei and ZTE last year won the lion’s share of China Mobile’s 4G trial contracts, infuriating NSN and other foreign vendors.  Under China’s tender rules China Mobile is bound to award the biggest portion of the business to the lowest bidder.

The operator now has another reason to make sure that NSN gets the biggest piece of the pie.

Yet, as local website Sina Tech observed, this flies in the face of China’s practice of using fat domestic tenders to nurture the local industry:

“But for many years tenders by Chinese operators have tilted towards domestic suppliers, with Huawei and ZTE accounting for the lion’s share, [making it] impossible for foreign vendors to dominate.”

The FT story, published late Monday, has not been picked up by  China's usualy lively tech press, who will have been instructed to wait for the official Xinhua version. The tone of that statement, when it appears in the next 24 hours or so, may tell us a lot about China’s response.

It may report the story straight. Or, emboldened by their decisive win in the solar panel dumping case, Chinese officials may press home the advantage and complain strongly about EU blackmail.

Chinese operators get into bed with WeChat

Chinese operators – well, two of them anyway – have bowed to the inevitable and are striking deals with popular messaging service WeChat.

The pathbreaker is China Unicom, which is to announce a partnership in Guangzhou this afternoon.

China Telecom is also said to be prepping a service which would give users 2GB of WeChat and Sina weibo data for just 6 yuan (0.98) a month.

Both partnerships will take place in Guangdong, the wealthy southern province, and have a flavour of ‘suck it and see’ as operators test out the cooperative approach to dealing with OTT.

Missing from the party is China Mobile, which early this year skirmished with Tencent, the company behind WeChat, complaining the service was using up valuable network resources.

Rumours swirled that WeChat would be forced to charge its 300m users but, as this blog pointed out at the time, it was only China Mobile that had a problem, thanks to its under-powered 3G network. Plus it was unlikely that a newly-installed government would make itself so gratuitously unpopular.

The washup of that imbroglio is that the two smaller operators have gone over to the ‘enemy’ while China Mobile is on its own.  

According to Sohu IT, China Unicom is offering WeChat Wo for WeChat data at 15 yuan a month for those already with a minimum 36-yuan monthly package. (Wo is Unicom’s mobile data service.)

WeChat Wo will come with HD photos and HD movies, some free games, and the ability to support Unicom’s Wo payment feature. If all goes well in Guangdong, Unicom is hoping for quick expansion into other southern provinces such as Jiangsu, Zhejiang and Fujian.

For the operator, this is an important ‘ice-breaker’ in forging cooperation with OTT players, a Unicom source told Sohu IT. For Tencent, it is a chance to grow the business with a strong partner with a deep channel. Tencent chief Pony Ma reportedly played a direct role in the negotiations.

Such OTT partnerships are new to mainland China, but they’ve been in the Hong Kong market since last year. Hutchison launched a WhatsApp bundle last September, while PCCW has been selling a WeChat package since February.

Meanwhile, China Mobile is trying to go it alone with messaging app Fetion and Skype-like voice application Jego. Embarrassingly it had to pull Jego from the domestic market just after launch because mobile VoIP is still illegal in China.

Yet this won't trouble China Mobile. It's still working the old playbook, focusing on networks, not apps. At year-end, while Telecom and Unicom are planning their LTE networks, it will be racking up 4G subs.