TCL unit recalls handsets over design flaws

The TCL section at a mobile phone expo in Guangzhou, capital of Guangdong province. TCL Corp is recalling devices believed to have design flaws. [Photo/China Daily]

The smartphone subsidiary of Chinese electronics giant TCL Corp is recalling devices believed to have design flaws, the first recall in the world's largest mobile market where more than 400 million handsets are sold each year.

MMD Communications, a maker of low-end Android phones and owned by TCL, said it is asking buyers to send back 28,000 handsets that are missing a critical profile and may cause overheating and signal instability.

The troubled device, named MMD 3S, was selling at 799 yuan ($131) and was released last month. MMD did not disclose shipments of the handset. The company said only one batch of the devices have the problems and the rest of its products meet industry standards. Buyers can either ask for a new device or a refund before August 3.

"As the first vendor to recall mobile phones, MMD sees customer rights as its priority," the company said in a statement apologizing for the malfunction.

Weeks before MMD, Huawei Technologies Co Ltd said it had destroyed more than 12,000 low-end smartphones over fears that a fire during transportation may have damaged product functions. The devices were worth around 20 million yuan.

Telecom researcher Xiang Ligang said the recall and self-destruction moves gave TCL and Huawei a good publicity opportunity in the highly-competitive lower-end smartphone market.

"Product recall will significantly add cost pressure to vendors who are already making a very slim profit in mid and low-end markets," said Xiang, who also runs an industry website cctime.com.

MMD, based in Shenzhen, Guangdong province, produces smartphones priced below 1,000 yuan and other accessories including ear plugs and power banks. The company launched its first phone a year ago.

TCL had become the eighth-largest mobile phone maker worldwide as of the first quarter by selling affordable devices, according to research company Gartner Inc. The company sold 14 million smartphones and featured phones and accounted for 3.1 percent of the global market share during the period, Gartner said.

Antonio Wang, an IDC researcher based in Beijing, said top Chinese vendors are introducing handsets with a 3,000-4,000 yuan price tag with an eye on higher profit margins. TCL is yet to unveil a flagship phone in the price range that is powerful enough to challenge Xiaomi Corp and even much smaller Meizu Telecom Equipment Co Ltd.

"The red hot sales performance of iPhone 6/6 Plus has prompted local vendors to jump into the high-end market. Chinese customers are also willing to spend more money on their smartphones because the device will need to run more tailored services that require higher reliability and better performance," Wang said.

In the affordable handset market where TCL is a key player, the fight is set to be tougher, said Wang.

With telecom carriers cutting subsidies to contract phone makers, companies are likely to report lower margins in the long run, said Wang.