SHANGHAI After sizzling growth in the first half of the decade, the go-go days of China's PHS market are over, with a contraction expected in 2008 or 2009.
The PHS market grew by 6.2 percent last year, for a total base of 92.7 million users, according to government figures. That's a noticeable decline from the year before, when the market grew 23 percent, and in previous years when the market doubled or tripled in size.
The slow down occurred as operators turned their attention to laying a foundation for 3G services, expected to roll out this year or in early 2008. That's unwelcome news for the handful of chipmakers that recently started shipping PHS chips, such as Airoha Technology, Comlent Inc and RDA Microelectronics. Firms that moved in earlier, such as Atheros Communications, have fared better, but still face increasing competition among the decline.
Opinions are mixed among executives regarding whether this year will see a dramatic decline, in part because uncertainty over the introduction of 3G services could help sustain moderate investment and promotion in PHS.
No one doubts, however, that the days of double- and triple-digit growth are ancient history. Analysts estimate the PHS market will start shrinking in 2008 or 2009. What may help cushion chipmakers looking to wring out some profit is the likelihood that the replacement market will still be viable for at least few years.
Also known as Personal Handyphone System, PHS is a legacy technology that's found a second life in China because its lower calling fees make for a light monthly bill.
Developed by NTT and introduced in Japan in 1995, PHS moved to China in 1998 under UTStarcom's leadership as the Personal Access System (PAS). That turned PHS from a distinct, separate, widely deployed network into a wireline extension essentially a glorified cordless phone. In this scheme, a picostation can be placed atop any copper line anywhere to encompass a small radius of typically 4 km per station. The picocell structure extends battery life beyond that of wider-area cellular networks.