China Perpetuates the 3G Boom

While industry statistics indicate that the wireless phone market is declining globally, emerging markets like China and India are helping handset makers to more than compensate the loss. Users in these countries can now have more data-intensive services on their mobile phones, such as video call and film download through the high-speed 3G networks. China will invest approximately $58 billion in 3G networks over the next three years.

The Chinese government completed the first phase of its plan to upgrade the nation's wireless infrastructure to 3G networks in January 2009. Licenses were issued to the country's largest telecom companies, China Mobile Ltd (CHL - Analyst Report), China Unicom Ltd (CHU - Analyst Report), and China Telecom Corp (CHA - Analyst Report), to build and provide the nation's premier high-speed wireless networks.

The three Chinese players plan to spend over $20 billion this year alone rolling out the initial phases of their 3G deployments. Providers of semiconductor and other telecom equipment in the United States and China are benefiting from this massive spending initiative, offsetting slower spending in the developed world. Thus, semiconductor companies with China exposure are clear winners from the global economic downturn.

TriQuint (TQNT - Analyst Report) is one such company that is gaining strength from China’s investment in 3G infrastructure. Its rivals Xilinx (XLNX - Analyst Report) and Altera (ALTR - Analyst Report) (which has a large exposure to the telecommunications industry), recently raised their guidance on better-than-expected demand from OEMs providing equipment for Chinese 3G wireless networks.

LSI Corp (LSI - Analyst Report) is also banking on customers like Huawei for expanding its networking revenues. The company had earlier said that almost all primary equipment providers for this build out in China are using LSI networking products. Skyworks Solutions (SWKS - Analyst Report), a leader in handset markets, continues to benefit from diversified exposure across both handsets (smart phones) and analog markets (China base stations, energy management) which have made up for broader handset inventory adjustments.

It now remains to be seen which company wins the race as US chip makers have to compete not only with each other but also their Chinese and Taiwanese counterparts.