Chinese tech companies chip away at foreign rivals

An employee demonstrates a Huawei smart watch with Android Wear OS during a Huawei Technologies Co Ltd's news conference.[Photo/China Daily]

Besides chips, device operating systems are getting Chinese technology firms' attention.

For instance, ZTE Corp said in late 2015 it is planning to develop its own operating system based on Linux. Sources familiar with the company's smartphone project said the Chinese company is also working on a system-on-a-chip processor to fight off overseas providers.

ZTE is pinning hopes on government procurement deals. Some of its devices are already used by the government as gifts for dignitaries. Alibaba Group Holding Ltd, an e-commerce giant, is hopeful that YunOS, its cloud-based mobile operating system, will receive government deals.

YunOS has been already adopted by a number of local firms such as Meizu Telecom Equipment Co Ltd and Ningbo Bird Co Ltd. It has been the only China-made mobile operating system to have successfully cleared a government quality and security test.

In China, only software products that receive government approval can be sold to government bodies and State-owned enterprises.

Huawei moves into top three globally

Huawei Technologies Co. shipped more than 100 million smartphones this year as a drive to attract higher-end customers helped defy an industry slowdown that hit rival Chinese vendors.

China's largest mobile brand boosted shipments by 33 percent and moved into the top three globally, the Shenzhen-based company said in a statement on its website. Samsung Electronics Co and Apple Inc are the world's two biggest producers.

Huawei, which debuted its first Android device in 2009 to complement its main business of making networking equipment, is pushing into markets from the United States to Europe to take on Apple and Samsung. Expanding beyond China, where slowing market growth has hurt Xiaomi Corp and Lenovo Group Ltd, is part of a goal to sell 60 percent of smartphones overseas and generate about $16 billion of revenue from phones in 2015.

The company bets on "the trend among consumers to upgrade to higher-end devices from entry-level smartphones," said John Butler and Matthew Kanterman, analysts with Bloomberg Intelligence. "Huawei is likely to maintain this tack in 2016, as it invests in expanding its mid-range and high-end smartphone product suite."

A third of the smartphones shipped by Huawei in the third quarter cost more than 2,000 yuan ($309) each, the company said.

Growth at Huawei, founded by former Chinese army engineer Ren Zhengfei, comes as IDC forecasts Chinese market growth will slow to the low single-digits in 2015. That has rippled through a domestic industry crowded with brands such as Gionee, OnePlus, Oppo and Meizu, backed by Alibaba Group Holding Ltd.

Xiaomi is in danger of missing its target of selling 80 million smartphones in 2015, people with knowledge of its production plans said earlier last year. The startup founded by Lei Jun saw domestic shipments drop in the third quarter in their first-ever decline, according to researchers at Canalys and IHS. Through the first nine months of 2015, Xiaomi moved about 53 million smartphones.

Lenovo meanwhile is struggling to turn around the Motorola brand it acquired in 2014. The company is taking $900 million of charges to cut costs and restructure the division.

Still, the Chinese market has proven volatile in past years. Xiaomi once led local vendors through viral marketing and crafting a social-media experience for its users. It's now ranked fifth globally, behind Lenovo.

Huawei accounted for 7.5 percent of all phones shipped globally in the third quarter of 2015, behind Apple's 13.5 percent and Samsung's leading 24 percent, according to IDC.

"We hope to be able to sustain our growth in 2016," He Gang, Huawei's smartphone products president, said in the statement.