With the continuing growth in our smartphone chipsets and modem business, we have firmly established our leadership position in TD-SCDMA smartphone market. Our best-in-class modems are designed into top-of-line handsets and our smartphone chipsets are in neighboring 1 Ghz devices at a price of as we low as RMB500.
With this innovation at the low end, we're now seeing consumer preferences shifting rapidly from 3G feature phones to low-cost smartphones. As a result, in the short term of our strong growth in the smartphone segments will occur in tandem with lower shipments on TD feature phones. However, we expect that smartphone units, which carry higher margin and ASP, to continue to grow rapidly in the coming quarters and more than offset this near-term market transition.
Recently, China Mobile has taken steps to speed up TD-SCDMA handset sales in the second half of this year. At a recent conference, China Mobile discussed a plan or plans to increase their investment in TD-SCDMA. In addition, they also encouraged handset makers to sell their TD-SCDMA product through open market with China Mobile providing support with the quality monitoring.
With the China Mobile's handset replacement market now approaching 100 million units per year, this shift in distribution model will make the TD-SCDMA devices even more broadly available and help speed up the 3G adoption in China.Now, turning briefly to our 2.5G business. Our 40nm baseband and the SC6530 have been well-received by the consumers, by the customers, and it's ramping up nicely. We are now continuing to increase our volumes, in particular in midrange of the market, and expect this trend to continue in the coming quarters. In the next few months we will be introducing our 2.5G products with integrated connectivity. We believe this shift delivers a superior performance and quality at a competitive price. This shift also will help address pricing pressure in the coming quarters. I'd now like to turn the call to Shannon, our CFO, who will give you a more in-depth look of our financial results this quarter. Shannon? Read the rest of this transcript for free on seekingalpha.com
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