Beijing-based Techfaith was founded in July 2002 by former Motorola employees. Lenovo and NEC each contributed more than 10 percent of its revenue last year, according to a preliminary prospectus.

The company, which started its management roadshow in Hong Kong last week, is coming to a lukewarm market in which investor interest has been dampened by several poor performances by Nasdaq-listed Chinese firms.

Shares in Beijing-based software developer Ninetowns Digital World Trade Holdings, which raised US$105.6 million (HK$823.68 million) in December 2004, are trading 21 percent below their IPO price of US$11 per American Depositary Share.

KongZhong, a provider of mobile messaging services in China, has fallen 29 percent since its July 2004 listing.

Besides Techfaith, Chinese software maker Watchdata Technologies, also plans to raise up to US$80 million by selling four million ADS at US$18-US$20 each. Listings of Techfaith and Watchdata will be tailed by other Chinese firms like Baidu, Alibaba, Kingsoft and Focus Media.

Fund managers expect Techfaith, which is involved in entire handset design including software and hardware, to offer 8.727 million ADS, or 19.9 percent of its enlarged equity capital at 13 to 15 times 2005 earnings, or US$15-US$17 each.

By comparison, handset manufacturer and designer Foxconn International Holdings, the mobile handset arm of Taiwan's top electronic component maker Hon Hai Precision Industry, and Flextronics International trade at 16.9 times 2005 earnings.

Solomon Systech International, a chip design house which was also founded by former employees of Motorola, trades at 11.2 times forward earnings.

Techfaith's management will meet investors in Singapore Wednesday and price the deal on May 6.

A spokesman for Merrill Lynch, the bookrunner of the deal, declined to comment. China's independent handset design market, which has low barriers to entry, is highly competitive and fragmented. Techfaith faces challenges from other handset design houses including Cellon, which is also seeking an overseas listing.

But Ding Yi, a fund manager at Ginger Capital Management said China, as the world's biggest and most competitive handset market, offers good opportunities for an independent design house like Techfaith.

``Intense competition in the downstream market is good for Techfaith. Mobile handset brand owners are increasingly outsourcing the design functions to third parties,'' he said.

Global handset shipments increased from 400 million units in 2000 to 660 million units in 2004. IDC, an advisory firm, projects shipments will increase to 890 million units by 2008, driven by growth in both new subscriptions and replacement markets.

IDC expects China to add 37 to 56 million mobile subscribers each year in the coming three years to 506 million users by 2008.