Apple and Google go head to head in China's mobile phone market

08/06/2009 5:16 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Ladies and gentlemen. In this corner, wearing the Macintosh red trunks, Apple (AAPL) and its partner China Unicom(CHU)

In the other corner, wearing the Chrome trunks, Google (GOOG) and its partner China Mobile (CHL).

That's the lineup that's about to cross gloves in China's smartphone market later this year, according to The Financial Times.

Apple is days, weeks, months away from signing an exclusive, three-year deal with China Unicom, the country's No. 2 wireless operator, for its iPhone.

Google is about to launch a line of smartphones based on its Android operating system with China Mobile, the country's biggest wireless operator.

At stake is not just China's wireless market but momentum in the global battle over smartphones.

You can get a sense of the importance of that battle from these figures from China: The average monthly revenue per user in China is about $8. China Unicom hopes that iPhone users  will run up bills closer to $40 a month.

Both wireless operators intend to subsidize the purchase of the new smartphones. Plans call for China Mobile to offer buyers of its phones a subsidy of about 50%.

As always in China, there's more at stake here than profits. The Chinese government restructured the wireless phone industry in 2008 in an effort to create stronger competitors to China Mobile as the country upgraded its network to the third generation (3G) of wireless technology. In that restructuring Beijing gave the smaller China Unicom and China Telcom (CHA) the rights to license proven W-CDMA and CMDA-2000 from Europe and the United States. China Mobile, the largest wireless operator in the world with 700 million subscribers, was charged with building a network around TD-SCDMA, China's home-grown 3G wireless technology. That technology is still struggling to prove that it's ready for prime time.

And that makes this into not just a faceoff between two Western technology icons but a test of China's ability to build its own wireless technology and set standards that, because of China's huge market size, the rest of the world's handset and network makers would have to take seriously.

If any single company stands to win or lose big from this battle, though, it's Google. Its Android operating system and phones based on it hasn't grabbed anything like the mindshare that Apple earned with its launch of the iPhone.  The T-Mobile wireless division of Deutsche Telekom (DT) reported selling 1 million of its Android-based handsets in the United States during the first six months of sales. That compares to th sale of 1.75 million iPhones during its first six months on the market.

But if China Mobile wins the battle in China, then Google's Android operating system could suddenly leap over Apple and be ready to go for the big prize--first place in the global market for wireless operating systems now dominated by Microsoft (MSFT).

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