CHONGQING: Leading Chinese home appliance maker Sichuan Changhong Electric Co Ltd is eyeing the Middle East and Southeast Asia to expand its fledgling mobile phone business outside China, a company executive said.

Wan Mingjian, chief executive officer of Ahong Communication & Digital Information Co Ltd, the mobile phone unit of Changhong, said Changhong's handsets have passed tests and assessments by major telecom operators in the Middle East, which could lead to handset exports to the region.

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Changhong, which secured a license from regulators to make and sell mobile phones in China in September 2005, has been developing mobile phones for the Middle East market over the past few months and aims to be one of the top three handset makers in the region in 2007.

The firm last year won an order to supply mobile phones to Taiwan Province and has made its first foray into the Vietnam market.

"Southeast Asia and the Middle East will be our top priority in expanding overseas this year," said Wan.

Changhong's overseas push comes at a time when domestic handset makers face declining sales and margins due to intensifying competition.

In the past three years, leading domestic makers such as Ningbo Bird and TCL have been entering overseas markets to generate new revenue streams.

"This year in the home market we will focus on improving profit margins," Wan told China Daily. He declined to reveal Changhong's mobile phone sales last year as Shanghai-listed Changhong has yet to announce its financial results for the full year of 2006.

But an executive from Taiwan's MediaTek Inc, which provides mobile phone chips to Changhong, said Changhong sold nearly 3 million handsets last year with 3 billion yuan in revenue.

That means the average price stands at 1,000 yuan per unit, a small profit margin compared to previous years.

Most Chinese handset makers are aggressively entering the low end of the domestic market, selling handsets with retail prices ranging from 800 yuan to 1,500 yuan.

Yet Wan noted that Changhong will launch a series of high-end models this year priced at more than 2,000 yuan in a turf challenge to established foreign makers Nokia, Motorola, Sony Ericsson and Samsung.

Chinese manufacturers dominated the domestic handset market in 2000 and 2001 with flexible distribution networks and pricing advantages but have since been losing ground to foreign rivals.

Wan, former head of TCL's mobile phone unit, said domestic makers are now staging a turnaround, especially now that underperforming Japanese handset makers like Panasonic, Mitsubishi and NEC have pulled out of the Chinese market.

Changhong has established a mobile phone manufacturing base in southwestern China's Chongqing Municipality with an annual output of 10 million handsets, which Wan expects will boost expansion both at home and overseas.

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