A press conference in the eastern city Xiamen was recently held to promote the RMB700 million (US$103) film Red Cliff. But while some representatives from the distributor China Film Group Corporation were on hand, the real focus of the event had little to do with movie stars or films.

Instead, Chinese mobile phone maker Amoi Electronics was there to talk up its new strategy. The purpose was to introduce two sets of Red Cliff smart phones based on the new operating system Windows Mobile 6.0. They sell for more than RMB3, 000 (US$440) each.

Several years ago, domestic mobile phone producers like Amoi, TCL and Bird, occupied more than half of the mobile phone market in China. But these days Bird is shifting its focus to automobile production while TCL has almost vanished from the mobile phone market. Even Lenovo mobile phones have been sidelined.

In recent years, Amoi’s market presence, and profits, has also gradually faded. After two straight years of losses, Amoi become a stock under “special treatment” on the Shanghai Stock Exchange, and was warned that it would de-list if it wasn’t able to make a profit this year. At the end of last year, the Amoi board of directors fired President Li Xiaozhong and installed Lu Zhenyu from computer maker Great Wall as the new head.

Lu initiated a T-type strategy: the horizontal stroke in this letter stands for the mid- and high-end markets while the vertical stands for the low- and medium-end. The medium and high-end market became the main target. Amoi would attempt to dominate domestic mobile phones priced over RMB1,500 (US$). In the low- and mid-range markets, the plan was to abandon the labor-intensive tactics and start taking advantage of the power of sales channels. Here, channels have verified forms, including traditional retailers and mobile phone markets, 3C (computers, communications and consumer electronics) markets and tailor-made service of mobile phone carriers.

In the second bid for China Mobile’s TD-SCDMA (China’s homegrown third-generation standard) mobile phones, Amoi won 19,000 out of a total 95,000 on public offer. This amounts to 20% of the total market share and puts Amoi in the first place in this segment. However, the TD-SCDMA mobile phones will have very limited positive effects on Amoi. Since the procurement price of a phone is RMB1,000 (US$146), its order will only be RMB19 million (US$2.8 million). As well, the timing for the next stage of procurement is still unclear.

However, there is a glimmer of hope for Amoi in overseas markets. Last year Amoi’s overseas shipments exceeded one million sets, a 40% increase over 2006. Sales volume grew by over 20%. With retail prices of over US$100, these mobile phones apparently cost even more than the customized versions from Huawei and ZTE. Amoi’s overseas strategy is to aim at the high-end, customized market. It has reached delivery agreements with six of the world’s largest mobile operators, with the main export target pointing to sell smart phones and 3G mobile phone in Europe and North America.

Amoi’s former president, Li Xiaozhong, originally specialized in technology. Before his relief, Amoi was a domestic leader in mobile phone R&D. It could be argued that any success Amoi is having today in TD-SCDMA bids and overseas markets is the result of intense R&D during Li’s time.

So what’s the ultimate reason behind Amoi’s troubles? This is what I think: technology alone is not enough, but neither is having a sound management system. In the first six months since Lu Zhenyu took over Amoi, he sold its Shanghai facility, constructed a comprehensive budget control system, and compressed its stores and funds on account. A sprawling, undisciplined management structure was the cause of Amoi’s problems. By simply mass-producing mobile phones, notebook computers and even flat-panel TVs without strong, centralized management, Amoi was on track to fail. In other words, Li Xiaozhong might have been excellent at R&D management, but he knew little about basic company management.

Lu Zhenyu believes that an enterprise should work from the usual while seeking the unusual. In this case, the usual refers to basic management while the unusual refers to opportunities for development. Many Chinese producers now mistakenly take the unusual for the usual. However, they never realize that the unusual, the opportunities, are always changing. Working from the usual is the foundation of seeking the unusual. Yet many producers treat the two in the opposite way. Therefore, it is evident that an enterprise would never survive without its basic management.

Assuming they do well in basic management, I believe the prospects for domestic mobile phone makers are still bright. There is even hope that they could someday surpass the success that domestic PC producers had ten years ago. The secret of Lenovo’s success at that time lay in the standardization of PC production, such as chips from Intel and operating systems from Microsoft. Competing successfully means understanding Chinese consumers, brand image and supply chains.

Now, chip producers like Taiwan-based Mediatek and Shanghai-based Spreadtrum Communications are able to produce chips that were once exclusively the properties of Texas Instruments and Qualcomm. With their effort, mobile phone production has shifted from exclusiveness to openness. It’s the same trend for mobile phone software. Nokia intends to open its platform after it purchases Symbian while Google is about to create an open platform called Android.

History shows that exclusive production processes tend to become more open and public. This will help domestic producers compete better against international producers. So within five years, it is possible that a Chinese mobile phone producer could become one of the world’s top five. As long as domestic mobile phone producers maintain basic management practices, opportunities will appear.