Manufacturers of mobile phone handsets are expanding capacity more than twice as fast as growth in sales, according to a report on the industry prepared by US investment bank UBS Warburg. Analysts employed by the bank forecast that handset sales would grow 10 per cent in 2003 to around 75m units.
However major domestic manufacturers such as Eastcom, Ningbo Bird, TCL, Nanjing Panda and Legend Group have plans to expand capacity by as much as double. Eastcom intends to produce 17m units, compared with 9m in 2002, and Ningbo Bird is doubling capacity to 10m units. The report forecasts that this will lead to a decline in prices and profit margins, but concludes that margins are big enough to provide a buffer. Foreign firms typically report gross margins of around 40 per cent, while domestic makers' margins are about 20 per cent.