Asia emerges as battlefield for growth-hungry tech firms

HONG KONG Thu Oct 20, 2011 1:27pm EDT

An office workers checks his mobile phone as he walks past an advertisement outside HSBC headquarters in Hong Kong October 18, 2011. REUTERS/Bobby Yip

An office workers checks his mobile phone as he walks past an advertisement outside HSBC headquarters in Hong Kong October 18, 2011.

Credit: Reuters/Bobby Yip

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HONG KONG (Reuters) - When Google Inc unveiled its latest version of Android, the operating platform powering 50 percent of the global smartphone market, it picked Hong Kong as the destination to show off the new software on Wednesday.

The event in Hong Kong, where a population of 7 million has a mobile penetration of 200 percent, highlights Asia's importance as a market Google is keen to win in its high stakes war with Apple Inc.

In the process, the search giant is deepening ties with Asian electronics powerhouse Samsung Electronics, the largest Android seller, which is also set to overtake Apple as the world's biggest smartphone vendor in the third quarter.

"The Asian market is very important. Especially some of the countries are really emerging with smartphones and we are very excited about the opportunity," Won-pyo Hong, executive vice president for Samsung's global product strategy, said on the sidelines at the All Things D technology conference in Hong Kong.

The three-day event hosts senior executives from Google, Microsoft, Yahoo, Alibaba Group, Sony Corp, Twitter and other companies.

South Korea's Samsung, cross-town rival LG Electronics Inc and Taiwan's HTC Corp are already leading the Android charge, with some of these vendors also supporting Microsoft's software.

Samsung's Galaxy Nexus, which sports both the Samsung and Google logos, will be the first device running the new Android system named 'Ice Cream Sandwich', aimed to unify the software used in tablets and smartphones.

The release comes after Apple began sales of the iPhone 4S, which boasts a voice-recognition technology dubbed 'Siri'.

"This will be our strategic product for the year-end holiday season, as (Apple's) iPhone 4S just came into the market," said JK Shin, president and head of Samsung's mobile communications business. The product will be launched in November.

Asia-Pacific, already bustling with smartphone users, will drive further growth in feature phones and smartphones over the next few years, while European and U.S. markets stagnate, analysts say.

Microsoft said on Thursday it will launch Mango-powered handsets from mobile makers including Nokia Oyj, Samsung and HTC over the next few weeks.

"As the price comes down, emerging markets do become a huge opportunity, but also the existing markets in western Europe and the U.S., because as the price point comes down, more people will get into the smartphone market," Andrew Lees, president of Microsoft's Windows phone division, told Reuters in an interview on Thursday.

Android software, which Google licenses free to manufacturers, is the most popular smartphone software globally, ranking ahead of Apple's iOS as well as software by Microsoft and Research in Motion Ltd.

Android runs on 190 million devices, up from 135 million in mid-July. As of the second quarter of this year, shipments of iPhones totaled around 129 million units, while that of iPads totaled 29 million, IDC figures show.

Smartphones now create 25 percent of all phone market volumes, and the majority of the profits.

Jerry Yang, Yahoo's co-founder highlighted Asia as a "very important and growing" consumption market for Yahoo.

"Southeast Asia and India, in the next three years, there will be 100 million users coming online," Yang said, pointing to the proliferation of $50 feature phones.

APPLE BETS ON CHINA

This week, Apple's Chief Executive Tim Cook highlighted Greater China as its next big growth opportunity, saying "the sky's the limit there," even as the company missed street estimates for profit for the first time in 10 years.

Cook told analysts that Greater China -- mainland China, Hong Kong and Taiwan -- was becoming an all-important region for Apple as it has "become No. 2 on our list of top revenue countries very, very quickly." Revenue from the region increased four-fold to $4.5 billion during the quarter.

China and India, the largest and fastest growing mobile markets, with about 1.8 billion mobile phone subscribers, still have a smartphone penetration rate of less than 5 percent and this is where the top players are likely to boost investments and jostle to stitch deals with telco operators.

"For 2011 and 2012 we expect Apple to build a viable mid-range smartphone business and to pressure Android vendors with a reliance on the mid-range, while heavily pressurizing others such as RIM," analysts at Nomura said last week in a report on the global mobile phone industry.

Apple lags rivals in smartphone markets, such as India and China, where buyers mostly choose handsets based on prices unlike the trend in matured markets.

Huawei Technologies and smaller rival ZTE Corp Ltd, are also aggressively muscling in on mobile devices.

This month, Apple launched its first store in Hong Kong, which joined its five other China stores as those with the highest traffic and among its highest revenue stores in the world.

(Additional reporting by Huang Yuntao; Writing by Anshuman Daga; Editing by Muralikumar Anantharaman)

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