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Canalys: 40% of Chinese smartphones to be priced below $200 by 2015, Alibaba and Baidu to lead the revolution

June 19, 2012

We’ve talked several times in the past about how the global smartphone market is dominated by China, where pricing and functionality come first, while hardware specs and raw power are often ignored by the regular tech users.

Most recently, we’ve been seeing some interesting movements in the Chinese smartphone market, with Alibaba and Baidu, two relatively unknown names in the Western world, getting in the business and trying to offer their own affordable smartphones to challenge Samsung, HTC, or Apple.

Alibaba + Baidu = victory?

While some market watchers have ignored or even mocked Alibaba and Baidu’s initiatives, a recent Canalys report predicts that strategies like theirs will help drive forward the smartphone market in China.

According to Canalys, a UK-based market research and analysis firm covering the tech world, more than 40% of all Chinese smartphones will be available for less than $200 by 2015. And if you don’t think that’s such a big deal, you should take into consideration the fact that only 25% of the market was covered by such low-priced smartphones in China last year.

Alibaba and Baidu are not the only companies predicted to accelerate the growth of sensibly-priced cell phones in China, with mobile operators and local Internet companies also thought to play a key role in this new “revolution”. China Unicom, for example, the second largest Chinese carrier, has upped its technical requirements for affordable phones and will most likely continue to do so over the next couple of years.

“Price erosion is accelerating” states Nicole Peng, Canalys’ Research Director for China, giving the example of the Lenovo A65, a phone recently released for just $110 (RMB700). A similarly equipped handheld was priced at around $158 (RMB 1,000) last year, so it’s pretty obvious that Chinese tech users are spoiled with considerably snappier devices at lower prices. This “policy” is set to continue in the near future, due mostly to the increasing competition between Apple, Android, and newcomers like Baidu or Alibaba.

What about Samsung, Apple and HTC?

As far as the high-end market niche goes, Canalys doesn’t predict significant changes to happen anytime soon in China. Samsung, Apple and HTC are the current leaders of this niche and, while the high-end segment will no doubt diminish in the near future, the three are expected to rule over the next three or four years.

Moreover, the high-end segment “will still account for almost two-thirds of shipment value in 2016”, if Canalys predictions prove to be accurate, so, all in all, it’s obvious that the Chinese smartphone market is generous and wide enough to allow Baidu or Alibaba to thrive, but also to keep Samsung, Apple and HTC’s status quo.

Interestingly enough, Canalys predicts that Huawei and ZTE, two companies that have threatened to challenge the big guys’ leading positions in the high-end global market, will not even manage to conquer China’s high-end niche. “Huawei and ZTE are diversifying beyond the entry level by launching a number of high-profile, flagship smartphones, but it will require significant marketing and brand investment to deliver a significant return and this will take a long time” stated Canalys analysts in the report.

I don’t think it’s necessary to tell you that the report’s predictions are good news for Chinese tech users, who are expected to pay less and less for more and more powerful devices. Hopefully, things will progress this way in Europe and the US as well, but we’ll probably talk about that some other time.

For now, drop us a comment below and let us know your opinions on today’s research.