2006 Annual Report on the Software and Application of China's Smart Phone

Findings and Recommendations Analysys' Findings

Industry environment

The increase of smart phone users provides precondition for the expanding of its applications market. According to Analysys’ statistics, the sales of smart phone reached 5.27 million in 2005 and will keep an average growth rate of over 50% in the next three years arriving at 17.64 million in 2008.

As customers know better about it and form a habit of using it, the market share of smart phone will increase remarkably from aound 6% today to above 20% in the next five years. Along with this will come huge business opportunities on each link of the industry chain of smart phone.

One notable feature of smart phone is the embedded operation system which can run applications, and its functions can be extended after installed different applications. Therefore, the development of applications for smart phone is a new business opportunity with huge market.

Industry status quo

There are four kinds of operation system for smart phone, namely Symbian, Windows Mobile, Linux and Palm, accounting for 46%, 14%, 36% and 3% respectively.

Generally applications of smart phone are developed based on specific operation system, and often require certain mobile phone models.

The industry of smart phone applications is large and jumbled. There are traditional mobile software developers, traditional PC software vendors, mobile brand manufacturers, as well as new entrants, even work groups and individuals specializing in development of certain smart phone applications.

User scale and market size

New users of Symbian, Windows Mobile, Linux and Palm operation system in 2005 are 2.42 million, 7.4 hundred thousand, 1.90 million and 1.6 hundred thousand respectively.

Market size of China’s smart phone applications from 2005 to 2008 is 10, 20.86, 38.6 and 51 hundread million RMB respectively.

Characteristics of users

There are three kinds of end users of smart phone applications, namely business users, entertainment users and business-entertainment users.

73% of the users of smart phone applications are between 20 and 30, 16% between 30 and 39, 3% above 40 and 8% below 20.

According to the survey, 92% of the users do not be accustomed to paying mode.

Market opportunities

There will be application needs at enterprise level with huge market potential. It consists of two parts. The first part is communication and office application, such as checking e-mail with Outlook, using office software like Word and PowerPoint, and browsing information online. The second part is different application for different industry.

With the rising of mobile game and mobile search markets, free software and value added service will become customer’s new needs.

There are over 100 kinds of mobile virus. Mobile security market has received attention from vendors. As more users will browse the Internet, play Internet games and search the Internet with mobile, there’s increasing danger to be affected by virus. The needs in mobile security market will grow remarkably.

More and more consumers will prefer green software which can be copied and use without installation. Applications that work well with PC will be welcomed by users, as they can transfer data and solutions easily between PC and smart phone.

Business model

There are various applications of smart phone, plenty of free resources and different business modes. Applications of smart phone share some common features with traditional PC software as well as differences. Therefore, it is important to establish a successful business mode.

According to Analysys’ research, mobile software developer is the most important KSF for all the business modes of China’s smart phone applications.

Analysys lists six major business modes of China’s smart phone applications as well as KSF analysis and cases.

Analysys' Recommendations

Operation system market relatively mature

The market share of Symbian will not have big change with the support from major vendors like Nokia and SonyEricsson, but may drop a little.

Windows Mobile is born out of familiar PC interface and has good compatibility with PC software. Its market share will expand gradually from 14% in 2005 to 23% in 2008 with the update of software and promotion by Microsoft.

Linux will enjoy a steady market share with Motorola’s favor of its cost advantage and support from chip vendors like TI.

Palm operation system was originally designed for PDA, so it has poor extensibility and will shrink gradually.

Analysys believes that according to the successful business roadmap of this area, at lease four steps are needed in order to turn the business opportunity of China’s smart phone applications into successful business operation.

STEP1 Choose promising market segmentation of applications.

STEP2 Choose proper business mode.

STEP3 Choose potential support products fit for that business mode.

STEP4 Focus on the key issues, the solution and implementation of business mode KSF.

Mobile games and mobile search markets will be new hotspot

Generally these applications are free or charge a small sum of money. Basically they collect service charge with cooperation with operators.

The key of this business mode lies in the creation of needs of user stickiness and make profits from services.

Industry application at enterprise level will have a huge market

Vendor of applications should actively explore enterprise users and maintain a good relationship with them.

They also need to reach an agreement with operators on benefit mechanism and business.

A series of comprehensive solutions for smart phone provided by cooperation of hardware and software vendors will be welcomed by mobile brand vendors

The hardware should cooperate well with the software.

Smart phone has a short life cycle. Many brand vendors with poor or without developing strength would like to add popular applications or potential ones according to their needs with the support of upper stream technical professionals in order to publish their products in time. Therefore solutions at different levels are needed.