The pact signals a deliberate shift from full design and manufacturing services, said Billy Crotty, chief operating officer of Cellon, to a transfer of manufacturing volumes to Qiao Xing's own plants. Eventually, engineering expertise will be transferred to the Chinese company as well.

Cellon has developed nine reference platforms for digital cellular handsets to date, and will be adding additional platforms with advanced features such as third-generation data and Java execution engines. New reference platforms will be introduced every 12 to 18 months, Crotty said. At each stage, Qiao Xing will be able to add additional designs to the development and manufacturing pact.

"We have the ability to put a cap on a relationship on our side, based on marketability," Crotty said. "For example, if they wanted to perform joint work on a handset with full streaming video, but we did not see a short-term market for that in the China domestic market, we could say 'No, thank you' from our side."

Nevertheless, Cellon will pay close attention to different application markets that emerge as cellular use spreads from large urban areas to provincial cities in China, Crotty said. For example, business users in major metropolitan areas want many advanced features, broadband connectivity and personal fashion features. The handset market in the provinces, by contrast, is likely to emphasize lowest cost and minimal short-message-service functionality, Crotty predicted.

Cellon is an independent wireless design and development house, with expertise in baseband and RF. Its subsidiary, CEC Wireless, already holds a charter from the China Ministry of Information Industry to manage an independent national R&D center for next-generation wireless terminals.