technology of GSM and CDMA mobile phones. This is true also for many Japanese and South
Korean companies (as of 2004) since core technologies of chip design were controlled by Texas
Instruments (TI), Qualcomm and a few other companies.

Overall, there is a dynamic balance between Chinese domestic firms and foreign owned
enterprises in the handset market. China’s policy has successfully empowered local firms to
dominate the low-end and some medium-end Chinese markets with the help of foreign-owned
and joint venture enterprises. On the other hand, foreign owned enterprises have continued to
successfully dominate the high-end and some medium-end markets in China through joint
ventures and intermediate goods export. China’s domestic firms have occupied a large market
share but have a long way to go to achieve technological leadership.

IV. BEHIND THE HYPER GROWTH

Chinese domestic mobile phone manufacturers are “latecomers” since they entered the
handset market about ten years later than the foreign producers. In this sense, the mobile phone
manufacturing industry in China provides a good test case of the catch-up process by firms who
are “latecomers”. The word “latecomer” has been used extensively in previous economic and
organizational studies. For example, the Korean semiconductor industry has been widely cited
as an example of the successful latecomers (Cho, et al, 1998; Mathews and Cho, 1999; Hobday,
1995; Choung et al, 2000). Cho et al (1998) classified the sources of early mover advantages, as
well as latecomer advantages, into three areas: market, competition, and the characteristics of the
early moving firm (see Table 4).

China's Mobile Handsets FINAL DRAFT 2006.sph ERSA2006 Greece

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