Datang Mobile Communications Equipment is seeking to pull out of T3G Technology, one of the five major chip suppliers for mobile phones based on TD-SCDMA, a Chinese home-grown 3G (third generation) mobile telephony standard.

Datang Mobile, the second largest stakeholder of T3G, is putting its 32.11 percent stake on sale for 122.2 million yuan, according to a notice posted on the website of Beijing Equity Exchange.

The move comes on the heels of the collapse of Commit Inc, another major TD-SCDMA chipmaker, which has dimmed the prospects of TD-SCDMA.

There are rumors that Geneva-based semiconductor maker STMicroelectronics might take over Datang Mobile's stake in T3G.

T3G was formed in 2003, with NXP semiconductors - the former chip unit of Philips - holding a 42.7 percent stake. Datang Mobile, Samsung and Motorola owned 32.11 percent, 16.91 percent and 8.28 percent respectively.

The Beijing Equity Exchange notice showed T3G recorded only 1.29 million yuan in revenue with a loss of 117.29 million yuan in the first half of this year.

Commit has had its own share of woes, forcing it to shut shop at the end of April after failing to secure fresh funding and pay its employees for months. Commit's shareholders include Hyper Market, Texas Instruments, Nokia, LG and State-owned Potevio and Datang Telecom, parent of Datang Mobile.

Industry observers blame Commit and T3G's woes on the slow roll-out of TD-SCDMA in China.

China Mobile began the first public trial of TD-SCDMA on April 1 with just 60,000 phones and data cards on order. In the first 10 days the operator sold only 1,800 phones due to the cold market response.

The slow roll-out and lackluster handset sales brought little revenue to chip makers, threatening their viability.

That would hurt the already "immature industry chain", said Wang Guoping, analyst at China Galaxy Securities.

A lack of mature chips as well as mobile phones has been one of the major hurdles to the development of TD-SCDMA.

Despite the government's endorsement of TD-SCDMA, China Mobile has preferred WCDMA, a foreign standard widely used in many countries. In contrast, TD-SCDMA has been tested for years and has never been used in any commercial network.

On June 11, Li Yizhong, minister of industry and information, summoned an emergency meeting with China Mobile executives and industry experts, according to media reports.

China Mobile Chairman Wang Jianzhou pledged full support to TD-SCDMA at the meeting and the ministry has already clarified it will give China Mobile only a TD-SCDMA license although it has been lobbying for deploying both TD-SCDMA and WCDMA networks, the media reports said.

However, analysts doubt whether China Mobile is fully committed to TD-SCDMA as the world's largest mobile phone operator by subscribers cannot afford to choose a standard that is still being tested.

"It could be a tough battle for China Mobile if it chooses TD-SCDMA as it has to fight against the entire WCDMA industry chain (which is already mature)," Wang Guoping at China Galaxy Securities said.

By April, China had 583.5 million mobile phone subscribers, with China Mobile dominating the market with nearly 400 million.

(China Daily June 19, 2008)