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Chinese Smartphone Upstarts 'no Threat' to Google

Stocks in this article: MOT GOOG BIDU

By the Financial Times ( Financial Times) -- The success of Google's Android operating system in China is not under threat from a host of mobile operating systems being unleashed on the mainland as they will be "niche" products, according to a senior industry executive.

Over the past few months, Chinese groups including Alibaba, Baidu and Tencent have been moving into an area dominated by the U.S. group's Android platform, raising questions about what that could mean for Google's one big success story in China.

But David Ku, chief financial officer of MediaTek, the world's biggest supplier of chips to Chinese phonemakers, said that phones based on these new operating systems will lack wider appeal as they are designed primarily to draw users towards using one company's services exclusively.

For example, the first phone based on the Aliyun operating system -- a collaboration between Beijing Tianyu Communications and Alibaba -- went on sale in China last month, with an English version of the OS expected in the next few weeks and an Aliyun-based tablet PC by November.

However, although applications made by other developers can run on Alibaba's Aliyun mobile operating system, Aliyun-based phones are designed to encourage users to use Taobao, the group's domestic consumer e-commerce business, on their phones.

"They will definitely be niche market" products, Ku told the Financial Times.

"From an industry perspective, Baidu, Tencent and Alibaba may be competitors," but from the consumers' point of view it is not about choosing just one service to have on their phones, Ku said. By contrast, Android-based phones can run a variety of applications and services from competing providers because Google's operating system is open to all developers.

Unlike in Europe and the U.S., China's mobile market still consists largely of traditional mobile phones running on slower, second-generation networks. While international brands such as Nokia and Motorola initially had great success supplying this market, MediaTek's chips enabled a generation of Chinese phone manufacturers to produce cheaper and often more innovative phones that are now challenging top-tier brands across many emerging markets.

But as the Chinese phone market shifts towards smartphones running on faster, third-generation networks, Google's Android operating system has emerged as a clear favorite because Chinese phonemakers can use Android free of charge. MediaTek's smartphone chips all work with Android, while its chips for traditional mobile phones use the Taiwanese company's own operating system.

Analysts generally agree with Ku in that the new operating systems will have a tough time gaining mass adoption. "If you look at all the major Chinese manufacturers now they are all making genuine Android-based phones," said CK Cheng, analyst at CLSA.


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