Coolpad's Smartphone Is Hot in China but Little Threat to Apple, Samsung

GUANGZHOU, China (TheStreet) -- About one in 10 smartphones sold in China is a Coolpad, a brand with little name recognition in other countries.

In February, consumer IT market research firm IDC picked Coolpad as one in a “crowded list of vendors jockeying for position” this year. Its market share in China, where 700 million people use smartphones, had surpassed all but Samsung (SSNLF) and Lenovo (LNVGY) as of the first quarter of 2013. In March this year the Coolpad was ranked as China’s No. 2 4G phone.

The developer, Yulong Telecommunications, says it pushes out 60 million units a year.

When I traveled to China this week, I wanted to find out more: What exactly is cool about it, and will it follow the developed-in-China, iPhone-like Xiaomi phones by breaking the ice in other countries?

Answers point to more heated sales in China but, in the long term, not threatening high-end favorites such as Apple (AAPL) or Samsung.

I first found few Coolpad handsets on display, compared to their Android peers, in the electronics-mad metropolis Guangzhou. The Coolpad brand stands out only in terms of price, sometimes as little as 780 yuan ($127), vendors told me.

When I tried the latest model Coolpad, its F1 8297, I found it hard to distinguish it from Huawei’s most recent model, a 750-T01. They both run on Android 4.2 and 8-gigabyte processors. Screen sizes are an identical 5.5 inches.

The Coolpad easily runs hot for a smartphone (so much for the name), cautions one seller of multiple brands.

The handsets are unlikely to grow outside China, I was also told. They lack the branding, distribution and intellectual property expertise to make it except in a few countries near China, says Neil Mawston, global wireless practice executive director at Strategy Analytics in the U.K. He picked (low-income) Russia as a possible taker.

Otherwise, Mawston calls the Coolpad “a niche smartphone player outside the home market of China for the foreseeable future.”

So it’s not one of those sleeping success stories you hear about.

But the emphasis on research and development by four-year-old Yulong Telecommunications has given Coolpad a single feature that should hold its place in China, another vendor says.

It sells mainly to the lower tier, which describes the biggest share of Chinese consumers, but with the specs of higher-priced Android handsets.

Coolpad marketing is simple and traditional (read “cheap”), a PR executive in Guangzhou says, while the production scale is huge, earning the developer money even at low prices.

This market dynamic -- typical of emerging China – will not threaten Apple or Samsung because both sell to the high end. But it threatens lower-priced rivals such as HTC (traded in Taiwan) and homegrown PC-smartphone makers such as Lenovo and Huawei.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

Ralph Jennings is on LinkedIn.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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