Ladies and gentlemen. In this corner, wearing the Macintosh red trunks, Apple (AAPL) and its partner China Unicom(CHU)
In the other corner, wearing the Chrome trunks, Google (GOOG) and its partner China Mobile (CHL).
That’s the lineup that’s about to cross gloves in China’s smartphone market later this year, according to The Financial Times.
Apple is days, weeks, months away from signing an exclusive, three-year deal with China Unicom, the country’s No. 2 wireless operator, for its iPhone.
Google is about to launch a line of smartphones based on its Android operating system with China Mobile, the country’s biggest wireless operator.
At stake is not just China’s wireless market but momentum in the global battle over smartphones.
You can get a sense of the importance of that battle from these figures from China: The average monthly revenue per user in China is about $8. China Unicom hopes that iPhone users  will run up bills closer to $40 a month.
Both wireless operators intend to subsidize the purchase of the new smartphones. Plans call for China Mobile to offer buyers of its phones a subsidy of about 50%.
As always in China, there’s more at stake here than profits. The Chinese government restructured the wireless phone industry in 2008 in an effort to create stronger competitors to China Mobile as the country upgraded its network to the third generation (3G) of wireless technology. In that restructuring Beijing gave the smaller China Unicom and China Telcom (CHA) the rights to license proven W-CDMA and CMDA-2000 from Europe and the United States. China Mobile, the largest wireless operator in the world with 700 million subscribers, was charged with building a network around TD-SCDMA, China’s home-grown 3G wireless technology. That technology is still struggling to prove that it’s ready for prime time.
And that makes this into not just a faceoff between two Western technology icons but a test of China’s ability to build its own wireless technology and set standards that, because of China’s huge market size, the rest of the world’s handset and network makers would have to take seriously.
If any single company stands to win or lose big from this battle, though, it’s Google. Its Android operating system and phones based on it hasn’t grabbed anything like the mindshare that Apple earned with its launch of the iPhone. The T-Mobile wireless division of Deutsche Telekom (DT) reported selling 1 million of its Android-based handsets in the United States during the first six months of sales. That compares to th sale of 1.75 million iPhones during its first six months on the market.
But if China Mobile wins the battle in China, then Google’s Android operating system could suddenly leap over Apple and be ready to go for the big prize–first place in the global market for wireless operating systems now dominated by Microsoft (MSFT).
Hello Jim, good to see you back.
Same question as manuelcbs above.
Wouldn’t you consider it is time for an update of your long term picks, particularly, HSBC, ING, Cemex as compared to Lafarge and Accor?
Hi Jim,
Given this, what is your take on Nokia’s market share in China going forward? Since it’s one of your Picks long term, and there is not a lot of buzz on a new product or service from them (their N series has not gotten a lot of press, and their new OS and app store don’t get as much coverage as the Apple app store or Android, could this start eroding Nokia’s dominance in China and India? Or will the projected sales of the iPhone and Android-based smartphones not pose a significant number compared to Nokia’s overall sales and projected growth?
The smart phone is a growth market that’s just starting. I think both companies stand to win just by being in China’s growing market.
… and then Chinese government steps up and says “buy Chinese only”. We just heard the story of Australian companies. If you dig the history a little bit more, you will find many other similar stories.
@DeficitHawk – I am no expert on those markets, but I would look at MSFT as someone closer to an AAPL and their success (or lack of it) in the PRC market (in other words they seem to have a similar profile to what youv’e attributed to AAPL). From what I can tell they are reasonable successful.
AAPL has a hot product – there is no q bout it. So if I were to bet, the floodgates will be flying off. Asian consumers (esp the younger one’s) just love their gadget and I cant see how GOOG can even compete in the very near term. Longer term is another story. My 2c anyways..
I don’t invest in these types of companies, because they’re too expensive, and I don’t really know who would win. Flip a coin… but it is kind of interesting to follow.
I’d say in China one must always consider the government. Which carrier do you think will get Chinese government preference? Google, the company built around open collaboration, flexible and changeable APIs (computer function calls), and open source documentation no one truly controls…
or Apple, known for it’s trade secrets, tight controls, and sometimes brutal (by market standards) repression of anything it doesn’t want to see related to its product.
When I was in China in March the buzz for the iphone was insane, in fact there were already many black market iphones being sold that were smuggled over from Hong Kong and the US at rediculous prices. I have a hard time seeing Apple loosing this one, but we shall see!