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Nokia Presses CDMA Handset Manufacturing in China

The rush of western mobile phone manufacturers to China continues, and this time it's the Finns.

Nokia is the latest to devote considerable resources to the Chinese market. The company said it will merge four existing joint ventures in China, while spurring production of handsets based on the CDMA standard.

Nokia is chasing after Motorola , which leads the race for shares of the rapidly growing mobile handset production market in China. Qualcomm also recently said it will expand its presence in China. Nokia said the CDMA handsets it makes in China will be based on its own chipsets, rather than licensing competitive chipsets from Qualcomm.

Analysts say it is possible in the future that Nokia could get a license to make CDMA handsets in China without local joint venture partners. One source said the Chinese market is adding five million handset subscribers per month. However, it is the GSM standard which has primarily taken hold to date, and Nokia's push into CDMA in China is a secondary market.

China Unicom , the second largest mobile phone operator in China, said the company signed up 7 million CDMA users in 2002, and expects to add another 13 million in 2003. Lehman Brothers has said there will be 15 million CDMA phones sold in China this year. Nokia said the lion's share of its handset production in China will be targeted at the explosive growth in the Chinese mobile phone market.

It is still unclear how the market for third generation mobile phone technology will rollout in China, as the country considers multiple future standards, including the successor to GSM , known as WCDMA , or Qualcomm's CDMA2000 standard, while also considering the local Chinese alternative standard known as TD-SCDMA.

Nokia's Chinese announcement comes as the company is rolling out five new CDMA handsets in its focus on its global CDMA market share, and its weak sales performance in the U.S. CDMA market.

As part of Nokia's consolidation of several joint ventures in China, it will control 60 percent ownership of a new company, which will be based in Beijing. Nokia said the company will be "one of the largest foreign invested enterprises, as well as the largest manufacturer and exporter in the mobile telecommunications industry in China." The deal will be reviewed by Chinese regulatory authorities.

Nokia has recently made it clear that it wants to achieve 15 percent market share of the CDMA market in 2003 en route to more than 25 percent in the future.

Nokia had sales of more than $3 billion in China in 2002, and its latest push are also designed to challenge both Motorola and Qualcomm in the lucrative Chinese mobile handset manufacturing market.

Analysts aren't expecting Nokia to shift to new handset volumes before the fourth quarter of this year, and that it won't be until 2004 before meaningful financial results are realized.

Nokia's partners in the new combined phone and network company are Beijing Capitel Co., Ltd., Dongguan Nan Xin Industrial Development Co., Ltd., Shanghai Alliance Investment Ltd. (SAIL), and Beijing Hangxing Machinery Manufacturing Corporation. While based in Beijing, the company will have branch offices in Dongguan and Suzhou.