White-box handsets and low-priced Android cell phones to drive a new wave in the market

21 Feb

White-box handsets and low-priced Android cell phones to drive a new wave in the market

Localized white-box cell phones have been in the China market for quite some time, these handsets are quite different from those developed by leading mobile phone manufacturers. Produced by small, independent manufacturers which have their own production plants, white-box cell phones are available in a wide variety of shapes and have different localized functions, and have a wide price range.

SmartMobix indicated that white-box cell phones are not the equivalent of no-name products, they have established a unique segment in the market with their own brands, some manufacturers even began production of some models with an order of only a couple of thousand units, a process similar to the in-home assembly of PCs. In Shenzhen, China, a mobile phone market is established with scale larger than that of Kuanghua Digital Plaza in Taipei – the trading hub is flooded daily with individual buyers and wholesalers, making cash trading transactions in RMB, and then shipping the products to other provinces.

For this very reason, these white-box cell phones, or white-box mobile phones, are sometimes dubbed “Open Phone”, symbolizing the “open” nature of their platform on which it allows many companies to design and build their own mobile phones.

Just as there are industry giants in mobile phone brands such as the U.S. semiconductor giant, Texas Instruments, and Qualcomm, which have a high market share, there is also a leading company for the chips adopted in the white-box cell phones – Taiwan-based MediaTek. White-box cell phone makers purchase chips from MediaTek, along with reference card, cell phone cover, screen, keys, and batteries to build a cell phone. Therefore, white-box cell phones are largely considered a product from Mediatek. Despite that Spreadtrum, a Chinese company which is also developing handset chips, has posed a serious threat to MediaTek, MediaTek has several competitive advantages.

Similar to Texas Instruments, MediaTek focuses on the design of semiconductor chips, while the production of the chips is executed by TSMC and other chip foundries; the wide variety of chips produced are then sold to manufacturers that need them. This has been a successful operation model, and MediaTek has enjoyed success in the 2G segment, though unfortunately, it did not replicate the same successful performance in the 3G mobile phones market.

As MediaTek is facing stiff competition from U.S. chip manufacturing giants in the 3G chip segment, the company is expected to launch 3.5G mobile phone chips in 2011, considered the next star item in the white-box cell phone and Android cell phone market.

Currently, the key markets for MediaTek’s 2.75G mobile phone chips are China, South America, and other regions where 3G is not as prevalent; hence, this business segment did not generate outstanding revenues. However, after the company’s 3G and 3.5G mobile phone chip are launched in the market, the high performance specifications of the 3.5G chip, and the strong purchase intention from hardware vendors, may become the key factors in driving the robust market share of Android mobile phones. The performance and quality of low-cost Android phone will likely be better than similar products available on the market in 2010.

With the successful model which semiconductor manufacturers provide chip, mobile phone manufacturers purchase parts for the assembly, and operating system vendors provide a good operating system (Android) while promoting the platform, the Android market is poised for growth.

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