China to produce 40% of mobile phones in '07

Roughly 500 million of the world's mobile phones, or more than 40 percent of the global total, were or will be produced in China this year, according to the country's Ministry of Information Industry.

Those numbers, which were reported via the Chinese government's press agency Xinhua, represent a 41 percent increase in handset production over 2006.

The report also says that 80 percent, or 400 million of those devices, were or will be exported. There are currently 38 companies in China making mobile handsets, according to the report.

Chinese handset makers saw a drop of two percentage points in domestic market penetration, however, due to increased competition in the space, namely from Finland's Nokia. Chinese mobile phone manufacturers shipped less than two-thirds as many devices to Chinese retail outlets than Nokia. The country also says it "failed to command core technologies," resulting in an inability to reduce production costs as much as rivals.

Nokia recently predicted that the global mobile phone market will increase by 10 percent in 2008 to roughly 1.2 billion units, according to Xinhua.

Another recent study by market research firm In-Stat, said the number of smartphones, or Web-enabled mobile phones, in use throughout the world will increase by an average of 33 percent each year through 2012, so demand for Chinese handsets will likely only grow as more and more people purchase such devices.