Business Week on China Techfaith Wireless (CNTF)

In the latest issue of Business Week reporter David Rocks discusses mobile handset designer China Techfaith Wireless (ticker: CNTF). The following is a short extract from his article:

Investors, it seems, are concerned that China's handset market is due for a shakeout, which could trim the ranks of TechFaith's customers. Another potential worry is growing competition from the 50-plus Chinese rivals that provide handset-design services.

Despite the stock swoon, there are plenty of believers in the TechFaith story. Qualcomm Inc. (ticker: QCOM) and Intel Corp. (ticker: INTC) own stakes in the company. And TechFaith and NEC Corp. have a joint venture that last year designed about 20 phones for China and is now developing models -- including 3G handsets -- for international markets.

Dong, meanwhile, says he's not concerned about flagging sales at Chinese cell-phone makers. "If they're losing money, they'll have to outsource to us," he says. But he knows he must expand beyond China to keep growing. Today 70% of Techfaith's sales are to NEC and other non-Chinese customers, although much of that work is on handsets destined for China. So the company is negotiating for design jobs from four of the world's top six mobile-phone makers and this year is opening sales offices in Japan and the U.S. If Dong can successfully break into international markets, TechFaith's future may be bright indeed.

CNTF chart.