China is a huge market that any OS maker would love to dominate. But China is the type of market that is a very well suited for an operating system like Android, which is free and open source, and can be put from phones in any price range, from $100 to $700.
This gives Android a huge potential for growth in China, and this potential has already turned into reality, at least partially. Android is the main growth factor in China's booming smartphone market, which has now surpassed for the first time the shipments of feature phones. At the same time, Android's expansion into China should hurt Nokia a lot, as the Finns used to have a huge market there with their Symbian feature phones. But Nokia is now almost a non-factor, with its market share dropping to 11% from 18% a few months ago, and from around 40% a year before.
According to a report from China's Sina Tech, 56.9% of all mobile phones sold in the past three months in China were smartphones. This shows a strong trend towards replacing feature phones with smartphones almost completely in the future. I say “almost” because, although hardware prices will continue to drop at a rate of at least 30% per year, and they could eventually reach, say, a $30 price point for the cheapest of the cheapest smartphones, we don't know if that hardware will still be able to run Android 10, or whatever version will Google's OS reach by then.
Smartphones might never take 100% of the phone market, but their price should at least reach the $70 or even $50 price range. And maybe at that point, people would rather pay an extra $40 to get a smartphone instead of a feature phone. Right now, research from Nikko Partners predicts that only 20% of mobile users (200 million) will have a smartphone by the end of this year, in China.
Analysis firm Canalys recently predicted that 40% of all smartphones in China will cost less than $200 by 2015. The smartphone market in China should accelerate in the near future, as cheaper and more powerful processors, such as the Cortex A7, will start shipping in 2013. The arrival of Cortex A7 should enable even sub-$100 smartphones that can run the latest version of Android, with developments such as Project Butter on Jelly Bean.
The domination of China is a major deal for Android, because even now, 55% of all smartphones in China are running Android. Moreover, Android's growth over the latest quarters is even higher, with 70% of all the new smartphones sold running Android.