Despite investor thirst for Chinese Internet and technology companies China Techfaith Wireless (ticker: CNTF) has seen its share price fall since its IPO in early May. However, CEO Defu Dong is bullish on his company's prospects. Why? He is encouraged by both CNTF's increasing number of international clients and trends in the mobile handset industry. Dong's comments from management's Q2 2005 earnings results conference call:
....the global handset environment continues to be favorable to TechFaith. Competition remains fierce in end markets, and we saw steady declines in the leading brand owners' handset margin. These brand owners report results such as Nokia and LG. For the results, these brand owners are refocusing strategies to dedicate more resource to develop higher-end multimedia and 3G handsets where margins are more attractive. By being a cost-effective leader in the independent handset design space with the broadest solution base we believe that TechFaith is best position to help our customers to cut their costs and to address competition and margin pressure.
....in the past the Chinese brand owners, they prefer to....do everything in-house -- design, manufacturing, everything. But now under the tremendous pressure you can see that, for example, Hyacinth (ph) has spin off their R&D center.
....we are a large-scale designer. Therefore, we enjoy a significant economies of scale. One is best example is that there are a lot of technologies and platforms that we develop can be repeatedly adopted as a way to dramatically reduced our development costs.
....in summary I think the trend for the domestic brand owners to use more and more design outsourcing is unavoidable.
(Quotes are from the CCBN StreetEvents transcript.)
Comment: CNTF's latest results here.
Not subscribed to The China Stock Blog? You can get updated headlines for free by adding The China Stock Blog to your My Yahoo page. Just log into your My Yahoo
page, then go to The China Stock Blog and click on the "+ My Yahoo"
button on the top right of your screen. You can do the same for other sites, such as The Internet Stock Blog, ETF Investor, and Sound Money Tips.