The iPhone-led smartphone revolution that has swept much of the world, as
people find ever more reason to access the Internet while on the go using
high-speed connections, has yet to sweep China, the world's largest mobile
phone market. That is about to change, with one major difference - Apple's
high-priced iPhones will be largely absent.
The catalyst for the Chinese smartphone market will be Google's Android
software, and many phone manufacturers have already embraced Android as the de
facto standard, said Benjamin Joffe, a telecom expert based in Beijing. He
pointed out that it is free and as an open standard it allows them to have more
control over the pre-loading and distribution of applications.
Applications designers such as Hong Kong-listed NetDragon are
already preparing to capitalize on the new market Android will bring. Their
success will helped by Taiwan's MediaTek, which supplies China's numerous
phone-makers with the chipsets that drive their products - smart or otherwise.
MediaTek, which last year shipped 360 million mobile-phone chipsets to China,
with half of these staying in the country, has been sending Android-supported
chips to Chinese manufacturers since October. That is helping to put affordable
smartphones into the mass market where top-end gadgets such as the iPhone or
Research in Motion's BlackBerry are far too expensive for most Chinese
An iPhone handset costs about 5,000 yuan (US$753) - the high end of the
3,000-5,000 yuan per month pay of an average office worker - and the software
it uses is considered by many application developers to be a closed system,
although the US-based company has recently moved to make it more accessible.
At present, there are up to 2 million iPhones in China supplied by the official
channel, China Unicom, and another 3 million to 4 million imported from places
such as Hong Kong and the United States, researcher BDA estimates. Those
numbers are dwarfed by the more than 800 million mobile-phone users in the
country and the 300 million or so who already access the Internet for existing
low-end services such as games and music downloads.
iPhone will remain a niche market for high-end users in China, said Harry Xiao,
chief executive of d.cn, a mobile game community with more than 35 million
registered users in China and over 1.5 million visitors a day.
In Shenzhen, the southern heartland of China's metamorphosis into a modern
thriving economy, Android phones sell at around 1,000 yuan, and iPad-like
tablet PCs go for about twice as much. That makes them much more available than
iPhones to the country's heavy users of mobile Internet services in China -
notably students, factory workers and soldiers - who cannot readily access home
computers, said a venture capital investor who has backed several mobile
Internet businesses in China.
Many such people live in dormitories with very limited personal space, and
mobile phones are often the only devices they can use to entertain themselves
or kill time - hence the popularity of mobile games and music download.
Next year, the market will be flooded with Android phones, said Joshua Maa, CEO
of Madhouse, a leading mobile advertising firm in China. Shanghai-based
Madhouse runs 200-300 advertising campaigns each year for clients that include
Nokia, Samsung, Cisco and BMW.
That may make life difficult for companies like Sky-mobi, which in five years
has grown into one of the country's more successful mobile Internet ventures
with more than 1,000 applications for low-end phones available on its
store-like platform. Led by chief executive Tao Song, it won US$5 million in
backing from Sequoia Capital in 2006 and now claims to have over 400 million
users, although industry experts say at least 100 million users may be a more
Whatever the number, they drove revenue to 700 million yuan last year, reaping
the company a 100 million yuan profit. Sky-mobi on November 19 filed for
listing in the US. It plans to raised up to US$150 million. Citi, Piper
Jaffray, Oppenheimer & Co and Rodman & Renshaw are underwriting the
initial public offering.
Fuzhou-based NetDragon, an online game company, is already winning new business
from smartphones. It has developed two highly popular mobile apps, Panada
Reader (an e-book reader) and 91 Assistant (PC-to-mobile software that helps to
manage a user's phone and gives access to a portal with 20,000 applications
that can run on iPhones whose software has been "jail broken". )
Led by brothers Liu Dejian and Liu Luyuan, and their cousin Zheng Hui,
NetDragon has moved its attention from the iPhone to Android-driven gadgets and
other smartphones. In July, its Panada Reader had more than 400,000 daily users
and 91 Assistant 200,000. The Hong Kong-listed company is now raising more
funds for its mobile division and plans to spin-off a 200-strong team of
workers to boost its application offerings.
Still, outfits like NetDragon and Ski-mobi have a long way to go to catch up
with the giant of the pack, Tencent. The Hong Kong-listed company's wide range
of services, including its instant messaging (Mobile QQ), blogging (QQ space),
news and games has won it about 25% of total mobile Internet traffic, according
to a survey in April by top phone operator China Mobile.
Other leaders in the China Mobile survey include UCWeb, a mobile Internet
browser, with about 6% of total WAP traffic, and Monternet, the WAP site of
China Mobile, which works like a portal and offers news, music and game
downloads. It has about 4% of total WAP traffic. Uodoo, UCWeb's video service,
has about 4% of total WAP traffic and the 3g.cn portal, again offering news,
music and games, has about 2.5%.
The ranking was rather stable in the six months prior to the survey (ie from
November 2009 to April 2010), indicating that although Apple's iPhone has
revolutionized how mobile phones are used in the West, the Chinese mobile
Internet sector is still rather primitive and change has yet to come - Android