Chinese Venture Suspends Production of Cheap GSM Chips

China's Qiao Xing Universal Telephone has said that after considering the current stage of technological development in the Hui Zhou Cosun-Celbon Communication Technology Co.,Ltd (JV Company), the partners involved in the JV, have decided to temporarily suspend their low cost base band chips for GSM mobile phone handsets project in the JV company. Huizhou Qiao Xing Communication Industry, Limited (HZQXCI), another subsidiary of the Company, picked up some of the orders originally intended for the JV. Rapid growth of 'COSUN' brand lower end mobile phone handset business in HZQXCI.

The JV Company was formed in August 2004 principally by XING's subsidiaries Qiao Xing Mobile Communications Company Limited, HZQXCI, and Celbon of Korea (Celbon). The business plan of the JV at that time was to develop low cost chips for mobile phone handsets and to produce low cost GSM mobile phone handsets. Soon after its establishment, a large number of orders came in from mobile phone handset distributors in China and abroad. However, because further time is needed to reinforce the stability of its GSM base band chips' technical performance, it was decided not to produce on a large scale at this time. The Joint Venture partners therefore decided that the project would be postponed. It would be resumed at a later date if or when technological conditions have improved to a point where this project is viable.

Mr. Wu Rui Lin, Chairman of XING, said, ''So far the operations of the joint venture company have been on a limited scale. Except for a small amount of personnel costs, few expenses have been incurred by the joint venture. Continuing the project would have entailed a huge amount of expenses, which would have been spent prematurely without a reasonable chance of an early successful outcome. Temporarily suspending the project at the joint venture level has effectively limited the investment risk for its partners.

Mr. Wu added, ''We have been prudent and conservative while preparing our sales forecasts, so income from the joint venture was not included in the estimates we previously announced.

''With the enriched product mix from the ''COSUN'' brand offerings, the year 2004 would see sales of 400,000 pieces of COSUN brand mobile phone handsets by HZQXCI. It is forecasted that production of low end models by HZQXCI would increase to about 1.5 million pieces for 2005, for sales revenue of about US$180 million. The year 2005 should also see significant increase in sales revenue and profits compared with previous periods in XING.''"

Posted to the site on 28th December 2004