Smartphone sector to see continued growth

The number of users of third-generation (3G) telecommunication services in China is expected to grow rapidly and surpass 230 million this year, which will help the country to remain one of the world's strongest smartphone markets, according to officials of Chinese telecom carriers.

Mid- and low-end smartphones, which usually sell at a price below 2,000 yuan ($317), will attract the most attention from Chinese customers this year, said Zhou Youmeng, general manager of the sales and marketing department at China Unicom (Hong Kong) Ltd, at a Beijing news briefing recently.

"At present, more than 90 percent of Chinese mobile-phone users own a handset worth less than 2,000 yuan," Zhou said. The market for low-price smartphones in China is massive, and Zhou predicted that approximately 90 million 1,000-yuan smartphones will be shipped this year, together with 60 million in a price range between 1,000 and 2,000 yuan.

She added that China Unicom, the country's second-largest telecom operator by subscribers, believes the number of 3G service users in China will reach 230 million in 2012, rising from 118 million at the end of November.

Since Chinese telecom operators obtained licenses to launch 3G services in 2009, the improved 3G networks, rich mobile applications and gradually declining handset prices have persuaded more people to buy a smartphone, rather than a simple-function feature phone.

"Though high-end flagship smartphones, such as Apple's iPhone series and Samsung's Galaxy devices, have helped carriers to attract many clients, the low-priced smartphone market still weighs a lot for operators," said Sun Kai, telecom analyst with the researcher GfK Group.

That's why China Unicom, the sole Chinese carrier offering Apple Inc's iPhone series on contract, aggressively launched its "1,000-yuan smartphone" promotion in June last year. In that initiative, the company set a pattern for mobile phone makers to produce smartphones with a 3.5-inch screen, a 600 megahertz CPU and a price of around 1,000 yuan.

China Telecom Corp Ltd, the nation's smallest telecom operator, followed the low-price strategy and offered attractive subsidy plans for mid- and low-end smartphones, according to analysts.

However, China Mobile Ltd, the world's largest telecom carrier by user numbers, failed to catch up with its domestic rivals in the race to launch diversified affordable handsets, because its 3G networks are based on homegrown technology which lacks sufficient support for chipsets and terminals.

The promotion of the "1,000-yuan smartphone" has achieved great success for China Unicom so far, said Yu Yingtao, the former general manager of the company's sales and marketing department, who recently went to Zhejiang province to act as the company's local head. Yu revealed that China Unicom had sold more than 10 million "1,000-yuan smartphones" in the past six months.

The Blade V880, a low-price smartphone produced by ZTE Corp, has achieved sales of more than 3 million units in the Chinese market since June, a record for domestic device sales. He Shiyou, executive vice-president of ZTE, said the company hopes to ship twice the number of smartphones this year as it did in 2011.

The prospect of affordable smartphones has also raised interest from other industry players. Qualcomm Inc, the world's leading mobile-phone chipset maker, has increased its efforts to take advantage of the market for low-priced smartphones.

Qualcomm, which provides chipsets for a number of high-end smartphones including the iPhone 4S, recently announced its 3G Qualcomm Reference Design ecosystem program. The program is similar to a "turnkey" solution, which enables device manufacturers to develop differentiated smartphones with lower development costs and a faster time to market.

"Qualcomm's market share in China's mid- and low-end smartphone market will continue to increase, which will obviously put more pressure on rivals like Taiwan-based MediaTek Inc," said Roger Sheng, a semiconductor analyst with Gartner Inc.

Of the eight newly launched 1,000-yuan smartphones promoted by China Unicom in December, five of them use Qualcomm's chipsets.

"In China's affordable smartphone market, domestic brands have a dominant position. The recent decline of some foreign mobile phone makers, such as Nokia and Sony Ericsson, also pushed Qualcomm to find new partners and cooperate with more Chinese companies," said Wang Ying, a telecom analyst with the Beijing-based research firm Analysys International.