Interview | YLE | Nokian kännykkämyynti Kiinassa notkahtaa

How long was it since you last practiced your Finnish? A few weeks ago we responded to an interview by Finland’s national broadcasting company YLE (Finland’s CCTV) about the evolution of the Chinese mobile market – with a special interest in Nokia (Nokian?).

The following article (Google translate) came along with a video interview planned to air later on. Some of the ideas we shared are highlighted below.

First, some data about Nokia and China:

• Nokia’s 4Q08 sales by volume were 12.9 million units and down 36% in Greater China (!) – only LatAm and Europe were maintaining volumes
• Nokia-Siemens Networks sales were down 16.9% – only Middle-East & Africa + APAC were up
• Nokia sold 71.3 million devices in China in 2008 (15% of global units)
• Nokia sales in China represented 10.85% of its global turnover

A quick calculation with Nokia’s Q4 revenues, staff and sales volume lead to find that:

• Avg. price / handset = 75 EUR (Europe: 107 EUR | APAC: 49 EUR)
• Avg. devices sold / staff = 479 (Middle East: 1,546 | North Am: 177)
• Avg. sales / staff (estimate) = 92 KEUR (Middle East: 302 KEUR | North Am: 64K)

The price / unit seems in the higher range of handsets sold domestically, which makes it difficult to penetrate smaller cities and rural areas. The calculations of units / staff and sales / staff reflect the economic development of the areas. The Middle-East seems like a fantastic market.

According to Analysys International, market shares in 2008 were:

• Nokia | 38.9% | Samsung | 18.6% | Motorola | 8.8%
• K-Touch (Tianyu) | 8.1% | Lenovo | 3.9% | Sony-Ericsson | 3%
• Jingli | 2.5% | LG | 2.3% | Konka | 2.2%
• Amoi | 2.1% | Bird | 1.5% | Changhong | 1%
• Haier | 0.9% | Others | 6.3%

Foreign manufacturers would control ~70% of the local market. Domestic makers – excluding the grey market of unlicensed makers and second hand – would share 30%.

What is going to happen in the handset sector in 2009?

• Still good volumes: China Mobile recruits 7 million new subscribers per month, which should go along with the sale of about 80 million handsets.
• Handset renewal by the existing 650 million subscribers might sell another 100 million.
• 3G will likely represent 10% of new sales at best, so ~10 million users by year end including China Telecom and China Unicom should be in the 1-2 million range. Nokia is on par with local makers for TD-SCDMA and will share the same development troubles.
• Rural markets represent half of new subscribers and are likely to buy cheaper phones from local makers using the popular MTK platform from Taiwan to make feature phones at a fraction of the price of a foreign-branded one.

So unfortunately, if volumes will remain pleasant in the 200-250 million range including the gray market, thus selling in a single year more devices than there are mobile users in the US, margins are unlikely to improve for most vendors aside from iPhone resellers in Hong Kong…