In stark contrast to the spiralling growth of mobile subscribers, China’s domestic handset makers are for the first time feeling the adverse effects of competition, following a decision to loosen controls over the licensing of mobile phone manufacturing. Since the state relaxed regulations no fewer than nine new companies have entered the market posing a major threat to China’s established vendors, which have posted profit drops in the first half of this year. Last week Eastcom, one of China’s leading manufacturers, said that it may see profits fall by CNY40 million to CNY60 million in 1H 2005, while Amoi, another major phone maker, posted a similar warning, saying it expected to suffer a big profit loss for the period January-June, compared with a profit of CNY86.6 million last time round. A similar message is being delivered by TCL and Bird. The former reported that net profits fell by 30% (or CNY327 million) as a direct consequence of the effects of newcomers and foreign brands.