Smartphones Open the Web to More Chinese

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2011 will be another big year for smartphones in China, putting access to the Internet in the hands of more Chinese and making mobile computing widespread among those who can't afford a laptop.

China has more than 842 million mobile users, but until recently smartphone growth had been relatively sluggish. Only 21 million smartphones were sold in 2009, but the number almost tripled this year to 62 million. In 2011 it will jump again, to an estimated 95 million, according to Beijing-based research firm Analysys International.

Analysts credit the rise in sales to China's 3G services, which were launched in 2009 but promoted more heavily by telecom operators in 2010. More devices at different price ranges have also entered the market, with the cost of some smartphones as low as 1000 yuan (US$150).

In the coming years prices will drop even further, said Kai-Fu Lee, the former head of Google's China operations who is now CEO of business incubator Innovation Works, which has been funding Chinese startups focused on the mobile Internet.

Starting next year, cheap Chinese smartphones will be available that approach the quality of Apple's iPhone, Lee said. In late 2012 they will become even less expensive, with devices on sale for around 500 yuan ($75).

Once prices reach 500 yuan, a broad swath of Chinese consumers, including blue-collar workers and farmers, will have access to smartphones.

"For them, this would be potentially their primary and only Internet device," Lee said. "This phase will double the Internet population in China."

China's Internet population is already estimated to have reached more than 420 million. Many of those connect to the Internet via PCs, but it is also estimated that 300 million use their phones to connect to the Web, according to recent statements from the Internet Society of China.

Android-based smartphones are expected to do particularly well in China. In the third quarter this year the number of Android smartphones there reached 8.6 million, up from less than a million six months earlier, Analysys International said.

Handset makers like Samsung and Motorola have been using the mobile OS to give their smartphones a better user experience, said Lu Libin, an analyst with Analysys. Gradually, the OS will be used on more lower-end devices, which will further boost Android sales, he added.

Smartphones account for about 27 percent of all cell phone sales in China, and in two to three years the devices will make up about half of all handset sales, Lu said.

The growth has been good for handset makers like Motorola. The U.S.-based company says its smartphone sales in China have increased about 50 percent from 2009, and those sales are only expected to rise, said Bin Shen, the general manager of product development in Asia for Motorola Mobility.

"Smartphones are starting to reach the mass-market pricing level," he said.

With the growing popularity of smartphones, Chinese operators and Internet companies have been working hard to tap the full potential of the country's mobile Internet market. One result is that more mobile applications have begun to take off, said Mark Natkin, managing director for Beijing-based Marbridge Consulting.

All three of China's big telecom operators have established app stores to support their devices. Entertainment-related downloads such as books and games have been the most popular, along with social networking clients and mobile video applications.

But in the future, smartphones might become the main tool Chinese people use for daily needs like buying goods. Users could even come to rely on their mobile phones to buy big-ticket items like furniture or cars, the chief executive of China Mobile, the country's largest mobile carrier, said in a speech last month.

"I think you will start to see more and more processes that are done offline being done online," Natkin said. "It's because you will see more and more people who might not be able to afford a laptop, but who can afford a mobile phone."

The need to connect to the Internet was one reason Guo Jianwei, a 20-year-old Chinese college student, bought his Nokia smartphone. "It's very convenient. When I'm bored I can still go on the Internet," he said.

Buying a smartphone is definitely becoming more popular among Chinese people, he said. "They are becoming cheaper," Guo said. "People's lives are moving faster and everyone has become dependent on the Internet."

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