China Mobile Industry Bets On Low Cost Smartphones

Smartphone manufacturers and wireless service providers in China are beginning to focus on mid-range handsets to try to expand the 3G market. The magic price they are looking for in the handsets is below $150, which is where more than 60% of the market lies.

Smartphones are growing in popularity in China, but until now they have been largely limited to the wealthy and upper middle class. For the most part, they have settled into the $290 to $440 range, prices that scare off the average consumer and prevent the phones from gaining widespread acceptance.

In an effort to provide affordable mobile Internet and open up new markets, manufacturers and wireless service providers say they will work to promote 3G smartphones that cost around $150. They are hoping to target students and city workers who have a need for mobile Internet but cannot afford high-end handsets.

The nation's WCDMA provider, China Unicom, will follow a two-pronged attack in the 3G-handset market, according to Gu Minxia, a manager in the company's technology department. On the one hand it will continue to push high-end phones like those released by Apple and Lenovo, while it will also look to appeal to greater numbers of consumers by offering the lower cost smartphones.

The telecom provider plans to release a $150 3G smartphone next week, according to an insider, but the model has not yet been revealed.

China's largest telecom gear maker, Huawei Technologies, is one of the handset manufacturers working with China Unicom. The company previously said it plans to launch a model called the U8110, which is the Chinese version of the Ivy, a low-cost Android 2.1 model for the Spanish market. One of Huawei's key strategies for gaining market share in China (and globally) is to offer smartphones below $150, which the company believes will accelerate adoption of the devices.

Another company that will work with China Unicom is ZTE. Its chief operating officer, He Shiyou, said that smartphones are one of the key products the company will focus on this year and that it will launch a $150 or less smartphone with China Unicom in June or July.

Another telecom operator looking to capture the mid-end market is China Mobile, the nation's largest operator with some 520 million subscribers. It is looking to build support for China's homegrown TD-SCDMA 3G technology by supplying low-cost handsets, but they will face a severe challenge from the abundant range of handsets available from the more mature W-CDAM and CDMA2000 standards.

He Zhili, the deputy department chief of China Mobile's terminal department, said less than 19% of TD-SCDMA-compatible 3G smartphone handsets cost $150 or less. He would like to see greater emphasis placed on increasing the number of phones priced under $150 while preserving online browsing and other smartphone capabilities.