Global mobile brands find lines busy in China(3)

Operating system

The widespread use of smartphones in China is poised to ignite a new round of competition among mobile operating systems, although Google Inc's Android system remains dominant at present.

The penetration rate of the Android system hit a record-high of 82.8 percent as of the second quarter of this year, data from Beijing-based research company Analysys International showed. The figure excluded the large shipment of knock-off smartphones, a unique product category for emerging markets such as China and India.

Analysts believed if knock-off phones were included, Android's market share would surge because it is the world's largest operating system for mobile devices.

The power of Android is eminent in China. On Sept 13, Taiwan PC maker Acer Inc canceled the launch of its new mobile phone running a cloud-based operating system developed by a division of Alibaba Group because of "direct pressure" from Google.

But, Acer said that it will continue its cooperation with Alibaba.

The biggest challenge to Android is probably the iOS, an operating system especially designed for Apple's mobile devices.

Yet the penetration rate of iOS barely stood at 6 percent in China, said Analysys International. Apple may pick up some market share after iPhone 5, launched widely outside the Chinese mainland this month, hits the local market.

"The release of iPhone 5 will accelerate Apple's shipment of smartphones before the end of this year," said Liu Peng, an analyst at Analysys International. However, the momentum will be limited, according to Liu, who added that manufacturers using Android systems were making moves ahead of Apple in a bid to seize a bigger market share.

As all the operating systems strive to boost user numbers, the only underdog is Symbian, an operating system abandoned by Nokia at the end of last year. Nokia said the Symbian operating system will be obsolete by 2016.

Symbian's penetration rate fell to 6 percent in the second quarter of this year in China, a drop from 32.3 percent a year ago, according to Analysys International.

But Nokia has found a stronger operating system to lean on: Microsoft's Windows.

In September, the Finnish cellphone maker launched its Lumia 920, the company's first device running the latest Windows Phone 8 system. The device is expected to enter the mainland market by the end of the year and will further squeeze the high-end market before the debut of iPhone 5.

During a New York news briefing earlier this month, Stephen Elop, chief executive officer of Nokia Corp, said China has become the largest Windows Phone device market in the world.

The country is also the biggest single-country market for Windows Phone devices manufactured by Nokia, according to Flann Gao, Nokia China communications manager. With 1.06 billion mobile subscriptions, China has great potential in the global smartphone industry, he said.

The powerhouse

China has the world's largest mobile population, with 1.06 billion mobile phone accounts as of July, according to the Ministry of Industry and Information Technology. It reached the billion landmark in March, becoming the world's first country to achieve it, thanks to people's eagerness to connect with each other.

The country took less than five years to double its mobile phone accounts to 1 billion, adding subscribers at a steady pace between 8 million to 12 million a month in recent years.

The huge subscriber base is the most important reason for China rising as a heavyweight in the global mobile phone industry. According to research firm Strategy Analytics, China overtook the United States in terms of smartphone shipments in the third quarter last year.

"China is now at the forefront of the worldwide mobile computing boom," said Neil Mawston, executive director at Strategy Analytics. "The nation has become a large and growing smartphone market that no hardware vendor, component maker or content developer can afford to ignore."

Sabrina Ren, research manager with GfK Group, said China is the strongest growth driver for the world's smartphone industry. The country is expected to achieve a growth rate of 109 percent in terms of smartphone shipments in 2012, almost three times that of the rest of the world's estimated average during the same period, GfK statistics show.

In addition, China, as the largest mobile phone manufacturing base across the globe, has started to influence markets outside the country.

In the first half of this year, China produced 535 million mobile devices, of which about 85 percent were exported overseas to markets such as South Asia, Africa and Middle East, according to the Ministry of Industry and Information Technology.

Meanwhile, with the rise of Chinese handset brands, such as Huawei's and ZTE's, some major market trends in China are having a global impact, said Ren.

"For example, the 1,000 yuan entry-level smartphone success has spread to other countries," she said. By working with foreign operators, domestic companies such as ZTE and Huawei have managed to ship affordable smartphones in quantities to the North American and European markets, she added.

It is not just the sheer scale of the mobile subscriber base that makes China a heavyweight in the world market, analysts say. KPMG's Zarrella said the increasing demand by Chinese people for connectivity and rich mobile functions, together with the nation's huge investment in infrastructure and innovation, have also pushed forward China's handset industry.

"Chinese consumers want higher quality phones at a very good price. Meanwhile, they need mobile phones not just for calls but for video on demand and the use of cloud computing concepts to allow subscribers to store even more data," Zarrella wrote.

Tom Kang, a director at Strategy Analytics, added: "China's rapid growth has been driven by an increasing availability of smartphones in retail channels, aggressive subsidizing by operators of high-end models such as the Apple iPhone and an emerging wave of low-cost Android models from local Chinese brands such as ZTE."