Nokia signals China ambitions(2)

In a China Mobile outlet in Changchun, in Jilin province, salesman Zhao Xin said many people were curious about Nokia phones, especially the latest Lumia 920, but there were too few in stock and the outlet missed out on the traditional Spring Festival shopping season.

"The biggest winners now are domestic brands, such as Huawei, Lenovo and ZTE. People buy them because they are good quality and also are much cheaper," Zhao said.

"The Chinese market is highly competitive. The dynamics of the competition are probably the most advanced I have ever seen," Eichelmann said. With about 1.1 billion mobile phone subscribers, China attracts a lot of industry players both at home and abroad.

"The product cycle in China's smartphone market is the fastest. Nokia needs to drive the consistency of its brand and innovation," he said.

Chinese rivals emerged and gradually snatched the market share that Nokia lost. Huawei, the Shenzhen-based telecom giant, rose to become the world's third-largest smartphone vendor in the fourth quarter last year, with a 4.9 percent market share worldwide, according to a report issued by International Data Corp.

In contrast, Nokia's China ranking dropped to fifth place in the first half of 2012, from the top position at the end of 2011, according to research by IHS.

Samsung topped the list and shipped more than double the number of smartphones than Nokia managed, gaining a market share of 20.8 percent - 14.4 million smartphones - in the first six months of last year, IHS said.

Nokia faced the most direct competition in the territory of Windows Phone devices. Taiwan-based HTC jumped ahead of Nokia to launch the first Windows Phone 8 handset in the Chinese mainland. Samsung, ZTE and Huawei have also expressed an ambition to develop Windows Phones.

"Nokia welcomes the competition, and the competition fuels the strength of the Windows Phone ecosystem," Eichelmann said. Among all the devices, Nokia definitely has its own unique qualities, he said.

The latest Nokia smartphone Lumia 920 has the ability to synchronize content between Windows Phone 8 smartphones, Windows 8-based PCs, tablets and the Xbox, said Flann Gao, Nokia China communications manager.

There are other innovative functions as well, he added. The Nokia City Lens, one of the highlights, is an augmented reality software that gives dynamic information about users' surroundings. "City Lens makes finding the best of what's around you as simple and natural as looking through the smartphone display," Gao said.

"Nokia has a unique position within the latest Windows Phone 8 ecosystem. All our best work and resources is on the Windows Phone 8," Eichelmann said.

What's next?

Unlike other international smartphone players such as Apple that focus mainly on the North American market, Nokia has long positioned the Chinese market as its top priority.

Eichelmann said Nokia would be part of China's progression as it enters the fourth generation mobile network age. Rumors have circulated that China is likely to kick off the 4G commercial rollout in the second half of this year. China Mobile Ltd, the nation's biggest telecom carrier, is conducting large-scale 4G trials in 13 Chinese cities.

Eichelmann did not respond directly to questions as to whether Nokia would develop smartphones suitable for the Chinese homegrown TD-LTE 4G technology but did say: "Clearly that's something we will be part of."

In order to revive its Chinese market performance, Nokia has also started to cooperate with local e-commerce websites and expand its online sales in the country.

"Online shopping is booming in China," Eichelmann said. He emphasized the importance of e-commerce but said Nokia will not open its own mobile phone e-store, a step that Chinese rivals Xiaomi Corp and Huawei have already taken.

"Nokia will strengthen cooperation with third party e-commerce websites," Eichelmann said. All future Nokia devices will sell through online and offline channels in China simultaneously.

360buy.com, China's second-largest business-to-consumer e-commerce retailer, agreed to buy 2 billion yuan ($320 million) of mobile phones from Nokia this year.

About 30 million mobile phones were expected to be sold online in China last year, up 68 percent from 2011, according to a report issued by SINO Market Research. The growth rate is more than 10 times that for mobile phones that were sold in offline outlets during the period, according to the report.