Mobile handset design companies in China are cutting their research and development of TD-SCDMA due to the possibility that China Mobile could reduce its TD-SCDMA handset purchases in 2009, industry insiders told Interfax recently.

"Our company has been cutting jobs in its TD-SCDMA handset R & D team and has recently merged the team with the CDMA handset R & D team to form a new 3G mobile handset R & D division," a member of the R & D staff of mobile phone design company Shanghai Simcom, who wished not to be identified, told Interfax on Dec. 29.

Shanghai Simcom, which is a subsidiary of SIM Technology Group Ltd., was among the first batch of companies to start designing TD-SCDMA mobile phones. Its TD-SCDMA solution has been adopted by Guangzhou New Postcom Equipment Co. Ltd., which won approximately 15.77 percent of China Mobile's two TD-SCDMA mobile phone tenders.

Simcom's is not an isolated case. On Dec. 24, Chinese industry Web site CCtime.com reported that Singapore-listed mobile handset design house Longcheer Holdings Ltd. had closed its TD-SCDMA handset R & D team, which consisted of more than 40 employees. Half of the team members were sent to develop TD-HSDPA data cards, while the remainder were merged into other departments.

Prior to Simcom and Longcheer's actions, Nasdaq-listed mobile handset design company TechFaith Wireless Inc. was reported by domestic newspaper 21st Century Herald earlier this year to be planning cuts in its TD-SCDMA handset R & D department.

No one from either Simcom or Longcheer was available for comment when contacted by Interfax.

"The rumor that China Mobile could suspend forthcoming TD-SCDMA handset tenders has been worrying us," the Simcom source said.

Earlier this month, Chinese portal Sohu reported that China Mobile had ceased preparations for further TD-SCDMA handset tenders, which would result in mobile handset manufacturers being unable to sell their existing inventories of TD-SCDMA handsets.

According to China Mobile's own statistics, the operator sold just 12,000 TD-SCDMA mobile handsets in the eight months ending Dec. 5, despite a total of 78,000 users trialing TD-SCDMA services during the same period. The remaining 59,800 TD-SCDMA users bought data cards, which are mainly used for wireless Internet services.

In previous tenders, China Mobile had purchased a total of 260,000 TD-SCDMA mobile handsets and 40,000 TD-SCDMA handsets with CMMB capabilities, of which 105,000 units were provided to Beijing Olympics volunteers as gifts, and about 154,000 units were provided to selected users for testing. This would put the number of TD-SCDMA handsets available for sale at approximately 41,000 units. In addition, according to China Mobile's policy, the current 154,000 units being used in trials will be withdrawn once trials finish.

On Dec.16, Wang Jianzhou, president of China Mobile, said that wireless Internet would be a core part of China Mobile's TD-SCDMA business portfolio, although he declined to give a clear answer on whether the carrier would suspend or delay TD-SCDMA mobile handset tenders next year.

"TD-HSDPA data cards will be a breakthrough point for China Mobile to foster its TD-SCDMA user base," Will Kong, an industry analyst with iSuppli, said.

Source:INTERFAX-CHINA