NEC to scale back Chinese cell phone business

NEC has decided to stop making mid-range cell phone handsets for China because it can't make money in that part of the market, the company said Wednesday.

The Japanese electronics company, which began a push into the Chinese handset market in 2004, will instead concentrate on high-end models, said Akiko Shikimori, an NEC spokeswoman.

When NEC originally identified China as a potential market it launched into the high-end with a range of phones that included the credit card-sized N900, which was one of the smallest cell phones available anywhere when it was launched, and the N940, which was China's first cell phone with built-in TV.

After building up its high-end business the company decided to attack the mid-range market but found it difficult to make a profit, Shikimori said. NEC also worried that cheaper phones would dilute the brand premium it was trying to build in the Chinese market so it's pulling back from the business.

"We've decided not to pursue the volume business but the profitability business," Shikimori said.

As a result, the company expects to release about 20 handsets in China during the current financial year, which began in April and ends in March 2006. In the previous financial year it released about 25 phones and in the year from April 2006 expects to release about 15 handsets, Shikimori said.

NEC expects total shipments in China to be about 2 million handsets, which is down from the 3 million it forecast at the beginning of the year.

NEC has also cut its global handset shipment forecast from 15 million to 10 million for the current fiscal year. The drop of 5 million is attributed to lower than expected shipments in China, Europe and Japan, the company said.