China's comms sector feels the economic pinch

Sen-lun Yu
10 Feb 2009
00:00

China's usually-buoyant telecom sector is feeling the pinch from the global financial crisis. The Ministry of Industry and Information Technology (MIIT) and industry analysts predict a slower growth rate for year 2009.

MIIT statistics show that telecom equipment exports in the first 11 months of 2008 grew 16.5% to $80.4 billion, compared to the previous year's growth of 22.2%. As buyers from North America and Europe have largely slashed their cost on mobile businesses, sales of mobile equipment were affected.

Electronics revenue grew just 1.9% in October, the lowest in recent years, according to Zhao Bo, the deputy head of MIIT's electronics information department.

He said exports progressively slowed over the year, from 32.6% year-on-year growth in May down to 12% in October.

Computer-maker Lenovo blamed the domestic market for the weaker demand for PCs and notebooks as it axed 2,500 jobs, or 11% of its workforce, in January.

Huawei Technologies, China's largest comms vendor, has not cut staff but also foresees slower revenue growth in 2009. Chairman Sun Yafang predicts contract sales will reach $30 billion this year, 28.8% higher than 2008, but down from 46% growth last year. Shanghai-based China Business News also reported that Huawei will begin a stricter employee appraisal in 2009, which will lay off approximately 5% of the company's employees.

Rival equipment provider ZTE reported 'stable' third quarter in 2008, but a Shenyin Wanguo Securities analyst report said delay in payments from existing clients and more caution from new customers could result in slower growth in sales.

Taiwan-owned Foxconn, China's largest contract manufacturer, warned that its full-year profit would show a 'significant decline' as a result of weaker demand, and also well as higher operating costs because of lower utilization of facilities.

Three well-known video sharing websites announced layoffs in December. UUSee.com and PPLive.com each laid off 10% of their employees, and 6.cn reportedly laid off 140, or 60% of its staff. Most of the businesses rely heavily on overseas venture capital, and many have burnt through their funds and found none more available.

Li Zhu, CEO of UUSee.com, even predicted that most of the currently 200 video websites would have trouble surviving and only less than five would stay in the business at the end of 2009.

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