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February 2, 2010

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Home » Business » IT

Phone sellers await Google moves

IT'S still uncertain whether Google will exit China or not as a result of its dispute with the Chinese government over filtered search results, but the issue has become a hot topic among netizens, politicians and dot-com industry officials.

The issue is critical for mobile phone vendors that have adopted the Google-developed mobile system Android, but the business impact may not be as widespread as some are predicting.

Phone vendors Motorola Inc and HTC Corp have gradually transferred to Android. If Google were to leave China, both those companies stand to lose market opportunities or at least time in the world's biggest mobile phone market, which has more than 700 million users.

"We are concerned about the issue," said Paul Hsu, chief operating officer of Dopod, HTC's domestic brand. "It may be trouble if Google really leaves China."

David Drummond, Google's corporate development and chief legal officer, posted a statement on January 12 on the company's official blog, saying it was "reviewing the feasibility of business operations in China."

Android system

According to the statement, disputes with the Chinese government on Internet regulation and major cyber attacks on the company allegedly originating from China had forced Google to reconsider its future in China.

China said last Wednesday that its mobile phone carriers can use Google's Android operating system so long as the new system complies with regulations.

"As long as it fulfills Chinese laws and regulations and has good communication with telecom operators, I think its application should not have restrictions," said Zhu Hongren, a spokesman for the Ministry of Industry and Information Technology, when asked at a news briefing whether China would permit the use of Android.

Google's localized services, like Google Maps, Google Pinyin and Chinese language search, won't be available in Android phones sold in China if Google quits the domestic market, experts said.

China Unicom, the country's No. 2 mobile carrier, delayed a press conference last week that was to launch two Android phones made by Motorola and Samsung in China. The delay followed Google's statement.

Motorola's public relations agency, based in Beijing, confirmed the media launch was delayed, without giving further details.

The Google flap may decrease Motorola's Android phone sales to 1.5 million units from a planned 2 million units in the first quarter, which would result in a US$160 million loss for the US-based handset maker in that period, according to a report released by the investment bank Morgan Stanley.

Google's Android system has gained attention and market share, thanks to open sourcing and a low-cost platform for handset vendors, analysts said.

In 2013, Android is forecast to become the world's No. 2 mobile system, just behind Nokia's Symbian. At present, Symbian leads the market, followed by BlackBerry's RIM system and Apple's iPhone system, according to International Data Corp.

In the first half, at least 10 new Android phones will debut, according to IDC, a US information technology research firm.

This year Dopod will focus on phones for Google's Android system. Half of all new models will be for Android, said Hsu.

But Hsu declined to comment on whether Dopod would change its strategy if Google exits China. Instead, Hsu said he is "cautiously optimistic" about business here, while admitting there are "uncertain policies."

Meanwhile, Dopod is introducing a new mobile platform of Qualcomm's Brew in the China market, starting this year.

Google's own-brand phone - Nexus One, which was launched last month, is also expected to delay its entry into the Chinese market, media reported.

China also said recently that the Google issue should not be "over-interpreted" or linked to Sino-US relations, according to the Vice Foreign Minister He Yafei.

Last week, Google China posted a blog entry saying that the 700 employees in its Beijing offices were working "as usual."

Local services

It will take time for both sides to resolve the stand-off, industry officials said.

At the same time, they said they don't expect the fracas to hit handset vendors as heavily as they initially expected.

The Android system can still work even if Google were to leave China because it is a basic platform with open code sources, which allows third-party developers to make applications on it, according to Wei Zhong, a handset editor for a local IT magazine.

The phone vendors can seek other third-party application partners to provide users with localized services, a usual way for overseas firms to penetrate into China.

Motorola has signed an agreement with Inc, China's No. 1 online search service provider. That means Motorola's Android phone will be integrated with a built-in Baidu search engine service.

Meanwhile, China Mobile, the world's biggest mobile carrier, has developed its own interface called Ophone on the platform of Android in some models.

"Chinese consumers don't care much if they can use Google-developed applications like Google Maps or other overseas applications like Facebook," said Sun Lei, who operates a handset store near Shanghai Railway Station.

"They care about the localized services and easily find substitutes like Baidu and Kaixin001, a similar online social tool to Facebook," he said.

Applications popular in overseas markets, such as Facebook, YouTube and Twitter, are blocked in China now.

The current price of Android phones has been relatively stable or even risen since Google's threat to quit China, Sun added.



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