Date
26 April 2018

China Wireless selloff overlooks improving fundamentals

China Wireless Technologies Ltd. (02369.HK) shares plunged nearly 7 percent on Tuesday on worries that an earnings drop at China Mobile (00941.HK) in the third quarter will encompass the homegrown handset label as well, as sales to the users of the country’s biggest mobile carrier accounts for half of the phone maker’s revenue.

The fears, however, seem to be overblown. By touting affordable yet high specifications, China Wireless has cornered about 11 percent of the domestic market for smartphones under the brand Coolpad, giving a fight to Samsung and Lenovo Group (00992.HK). The company is well-positioned to ride on an eruption of replacement demand when Beijing awards 4G wireless communication licenses.

As part of its efforts to reduce its reliance on the domestic market, China Wireless has begun tapping the burgeoning 4G demand overseas since the second half of 2012. But result has been far from satisfactory as the low-end segment abroad has already been saturated. The situation may change when Taiwan-based MediaTek begins large scale shipments of its new processor.

The low-cost chipset solution provider plans to ship its groundbreaking octa-core processor in volume at the beginning of next year. China Wireless is said to be on the list of first shipment clients. With the help of cutting edge chips, the brand will have a good chance to move up along the value ladder and reduce its dependence on the sales channel of China Mobile.

– Contact the writer at [email protected]

RC

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