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Rumor: China Mobile to Reinstate 5-mode Requirement for 4G Chips

Tencent Tech, 3/07/14

According to industry sources, China Mobile (NYSE: CHL; 0941.HK) has recently notified its handset supplier partners that all China Mobile-customized 4G mobile terminals received by China Mobile from May 2014 onwards must support five major networking standards used in China and overseas. Shipments of "three-mode" terminals (primarily suited for domestic usage) will only be accepted until April 30. China Mobile will offer subsidies to its sales channel partners to compensate for orders that cannot be fulfilled due to the new supplier requirements.

At the time of China Mobile's initial tender of 160,000 TD-LTE terminals in Q2 2013, overseas chipmakers such as Qualcomm won the majority of terminal contracts, while domestic chipmakers won a relatively small number of contracts due to China Mobile's requirement that terminal chips support 5 network modes and 10 frequencies. China Mobile subsequently altered its requirements at the end of 2013, permitting three-mode 4G terminals in order to provide an adjustment period to Chinese chipmakers. Accordingly, manufacturers began to release three-mode terminals in early 2014.

As explained by one industry veteran, five-mode chips from domestic chipmakers are still in the development phase, with mass production expected to begin in Q2 2014 and terminals equipped with the processors appearing no earlier than Q3 2014. China Mobile's new requirement likely stems from pressure to compete with China Telecom (NYSE: CHA; 0728.HK) and China Unicom (NYSE: CHU; 0762.HK; 600050.SH), both of which are aggressively rolling out 4G networks, packages, and terminals in 2014.

Five-mode terminals, especially suited for global roaming, support TD-LTE, FDD-LTE, TD-SCDMA, WCDMA, and GSM networking protocols. Three-mode terminals support only TD-LTE, TD-SCDMA, and GSM.

Editor's Note: For more background on this topic, please see "China Mobile to Lower Frequency Requirements for Terminal Chips" MD 12/03/13 issue and "China Mobile to Sell 100 Mln 4G Terminals in 2014" MD 12/18/13 issue.

Keywords: China Mobile handset wireless 4G FDD-LTE GSM CHL TD-LTE TD-SCDMA WCDMA 0941.HK procurement handset chip

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