Chinese cell-phone firms struggle to make a profit

Thanks to the expansion of 3G service coverage and further falls in prices of budget smartphones, the share of the handset market accounted for by smartphones is likely to reach 32 percent, or around 143 million phones this year, according to estimates from Digitimes Research, an online electronics information pool in Taipei.

A more aggressive finding suggests that smartphones and feature phones will achieve similar shipments, data from Analysys International showed.

Li Yanyan, an analyst with the consultancy, said that 77 percent of newly sold handsets in the third quarter are smartphones, adding the trend is likely to be reinforced as the "smartphone wave" penetrates across second- and third-tier cities.

Android is definitely calling the shots in the market, with two-thirds of the cell phones sold in China in 2012 running on the system, according to a recent report from London-based Informa Telecoms & Media, a unit of the research firm Informa UK Ltd.

Analysts agreed that the dual-core processor will prevail in most smartphones in 2013, and the price for quad-core gadgets is likely to drop.

Besides, a larger screen is usually better on phones when it comes to viewing videos, Web surfing and gaming, Li said. While Apple finally upgraded to a 4-inch display for the iPhone 5, high-end Android smart phones had edged above the 4.5-inch mark and beyond.

Another trend observed is the growing role of operator stores as a sales channel for handsets.

Operators will enjoy a 40 percent-plus share of the total mobile handset market by 2014, up from 24 percent in 2008, said Daniel Hui, an associate principal at McKinsey & Co in Hong Kong.

He noticed a growing influence operators have on the mobile retail market, since the release of 3G licenses in 2008.

"Through policies and subsidies, the government is pushing a high subscription target combined with a strong push on 3G technology. This puts Chinese operators in a strong position, and they are using it to expand their presence into other channels, such as by opening counters in consumer electronics stores," he said.

hewei@chinadaily.com.cn

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