Motorola Makes China Push

Source: Wall Street Journal by Loretta Chao

After Steady Market-Share Drop, Company Adds Smartphones with Google's Android

BEIJING—Motorola Inc. unveiled a new smartphone version of its handsets that feature a popular Chinese handwriting technology, in hopes that the company can make a comeback in China, where it was once the market leader.

Motorola's Ming handsets were introduced in 2006 as phones designed for Chinese users who prefer to input Chinese characters using a stylus on a touch screen. The phones now have been re-released as third-generation, or higher-speed, smartphones running Google Inc.'s Android operating system.

Motorola said the Ming smartphones will cost up to 5,000 yuan, or $740, without a contract.

The smartphones come in three versions, one for each of China's state-run mobile operators. Two of the phones offer high-definition video cameras and other features to attract the growing number of smartphone users in China's increasingly competitive market, where Apple Inc. and HTC Corp. are preparing to expand. China is the world's largest mobile market by number of subscribers.

Apple, which offers the iPhone 3G and 3GS in China, has said it plans to open 25 stores in China by the end of next year.

Apple partner China Unicom (Hong Kong) Ltd., meanwhile, has said it hopes to release the iPhone 4 in China by year-end. Taiwan handset maker HTC is preparing to unveil its brand and introduce four handsets in China this fall, including three Android phones.

Motorola's market share in China has dropped dramatically. It stood at 2% in the second quarter, down from 23% in the same quarter of 2006, according to research firm IDC. Motorola held a leading market share in China's cellphone market until several years ago.

The handset maker's share of China's nascent smartphone market is significantly higher than Motorola's share of the total market, with 13.6% of sales in the second quarter, according to research firm Analysys International. Motorola ranked third after Nokia Corp., which had a 26.7% share, and Samsung Electronics Co., which had a 17.9% share. Apple and Research In Motion Ltd., had 7.1% and 6% of the market, respectively.

Motorola, based in Schaumburg, Ill., has adjusted its focus in recent years to create high-end devices based on Android. It is pursuing the strategy in China, betting that smartphone penetration will continue to rise quickly. IDC expects 26 million smartphones to be sold in China this year, up 50% from last year.

"The smartphone segment in China is growing very fast," said Frank Meng, president of Greater China for Motorola's mobile-devices business. "Countries like the U.S. are at the front of the curve, but China is catching up quickly."

Mr. Meng said the company is using the new line of Ming phones to introduce smartphone capabilities to existing Ming users and to expand the target audience beyond high-end business users.

He said he expects Android to become the mainstream smartphone platform in China as it has elsewhere, and that Motorola is "100% dedicated to Android." Including the new Ming handsets, Motorola has launched 11 smartphones in China since December, he said.

Mr. Meng estimates that in the first six months of this year, more than half of Android cellphones shipped in China were Motorola phones.

Ming cellphones are one of the most prominent examples of localization by a multinational handset vendor in China. The company estimates there have been roughly five million Ming users since the line was introduced four years ago. The phones have distinctive transparent covers that flip up to provide access to the touch screens.

Motorola is making other attempts to localize its products. It has created a mobile-application store called SHOP4APPS, which accepts widely used Chinese online-payment methods such as Alibaba Group's AliPay and Chinese credit cards, according to Bin Shen , who is in charge of product development in Asia for Motorola Mobility. The company also is working with content providers to package applications that it expects Chinese consumers to use.