The majority of mobile phone subscribers in China use entry-level cell phones for making calls and sending text messages. But the country's smartphone market is expected to take off in the next six months.

Apple's iPhone is expected to be officially introduced in China in partnership with China Unicom.

HTC will introduce three custom Android handsets by the end of the year.

Computer makers Lenovo and Dell reportedly are ready to release their smartphones in China in the next few weeks. Meanwhile, companies such as Samsung Electronics and Nokia are already on the battlefield.

These companies hope China's nearly 700 mobile phone users (as of the first half of 2009) can help them build new profits to counter declining entry-level cellphone profit margins.

Fu Liang, an independent telecom analyst, said the low-end mobile phone market is hotly competitive in China, but that the country's smartphone market is in its infancy.

"With the success of companies like Apple and RIM, many companies are expected to enter the field," Fu said.

Fu said Chinese telecom operators also are aggressively pushing their 3G services and plan to soon start their own online application stores.

Research firm Gartner Inc reported that in the last quarter, the overall mobile phone market declined year-on-year for the third consecutive quarter. And the fall in average selling prices is accelerating, the research firm added.

Global sales

But global sales of smartphones continued to rise in the second quarter as some users sought more features for their money.

Shipments of Apple and RIM smartphones, for example, only accounted for 3 percent of the global market, but absorbed 35 percent of the profits, according to Brian Modoff, an analyst at Deutsche Bank

Although the majority of subscribers in China use entry-level phones for making calls and sending text messages, they are increasingly upgrading to sophisticated handsets that can play music, browse the Internet and send e-mails.

According to a report from the China Internet Network Information Center (CNNIC), the number of mobile Internet users reached 155 million during the first half of this year -- an increase of 37 million over the end of last year.

Of the mobile Internet users, 28 percent of users said they are willing to try 3G services by the end of this year, the center reported.

Guo Haitao, vice-president of the domestic research firm CCW Research, said the economic downturn slowed the growth rate of China's cell phone market to about 6 percent last year, while sales of smartphones surged by 20 percent last year.

Growing market

Guo said China's smartphone market is expected to grow 30 percent this year, and that smartphones are expected to account for 40 percent of China's overall cell phone market by 2012.

However, experts said it is not easy for cell phone vendors to profit from China's smartphone industry, since the smartphone sector relies heavily on telecom operators.

Among telecom operators, China Mobile is leading with 480 million subscribers, followed by China Unicom with 136 million and China Telecom with 37 million.

But China Mobile has been mandated to deploy its 3G network based on China's homegrown TD-SCDMA standard, which lacks support from cellphone vendors, especially foreign ones.

China Telecom and China Unicom, which introduced their 3G services earlier this year, lack the experience of running mobile networks, according to some experts.

"Chinese operators have the habit of launching new services before they are well-prepared," said Wang Yuquan, a senior consultant at the research firm Frost & Sullivan. "That significantly hurt the users' experiences with 3G services."

(China Daily August 17, 2009)