China Mobile Ltd (中國移動) has disclosed it is considering collaborating with Hon Hai Precision Industry Co Ltd (鴻海精密) to sell its own smartphone products, but analysts said the Chinese telecom’s new strategy would have a limited impact on the smartphone market.
China Mobile deputy chief executive Lee Cheng-mao (李正茂) told reporters on the sidelines of a forum on Tuesday that China Mobile may place smartphone orders with Hon Hai and start selling its own smartphone products as part of the company’s long-term plans.
As Chinese telecoms upgrade their services with TD LTE network infrastructure being installed in China, Lee said China Mobile plans to purchase more than 1 million smartphones this year that can be used with fourth-generation mobile communications networks, adding that Taoyuan-based smartphone vendor HTC Corp’s (宏達電) products are on the firm’s shopping list.
“If Apple Inc can work with Hon Hai, why can’t China Mobile?” Lee asked.
China Mobile is looking to sell smartphone products that support the TD LTE mobile technology standard and carry price tags of more than 1,000 yuan (US$163), Lee said.
Arthur Liao (廖顯毅), an analyst at Taipei-based Fubon Securities Co (富邦證券), said China Mobile’s plan to work with Hon Hai and sell its own smartphones may help boost its service revenue, but yield limited benefit to Hon Hai, which has been keen to diversify its customer portfolio.
“China Mobile is not likely to place a large quantity of orders with Hon Hai and even if it plans to do so, the smartphone products it plans to sell will be mostly mid-end rather than high-end models,” Liao said by telephone yesterday.
China Mobile would likely not be able to compete with experienced vendors because “it doesn’t know much about competition in the smartphone market,” Liao said.
To telecoms, selling smartphones is a way to boost their service revenue and expand their customer bases, he said.
As the smartphone market is reaching saturation point and each smartphone vendor has been forced to develop mid-end or entry-level products in order to grow their profits, China Mobile may provide “zero-priced” or customized smartphones to its customers to differentiate itself from rivals in the smartphone industry, Liao said.
“Players in the smartphone market know the importance of marketing, which requires experience,” Liao said. “For China Mobile to grow as big as the world’s leading smartphone vendors, there is a long way to go.”
Echoing Liao, First Capital Management Inc analyst (第一金證券投顧) Rick Yu (俞瑞華) said China Mobile’s new business plan may have little impact on the smartphone market because “it is not possible for China Mobile to place too many orders for smartphones and shift their business focus from telecom services.”
“Though making smartphones is not a challenge now, achieving good sales figures is the most challenging task facing smartphone vendors,” Yu said by telephone yesterday.