China Unicom to Offer Android-Based 'Uphone'

| About: China Unicom (CHU)

Second-largest Chinese carrier, China Unicom (NYSE:CHU) is expanding its 3G wireless handset portfolio as the company has officially announced its new cell phone brand called the “Uphone.” The device will run on the company’s proprietary “UniPlus” operating system, which is based on the Google Inc’s (NASDAQ:GOOG) Android platform.

China Unicom is also planning to launch an application store (“UniStore”) that will feature Uphone-based applications. UniStore has been designed to resemble Apple Inc’s (NASDAQ:AAPL) App Store in China. However, China Unicom has yet to release a specific timeline for the commercial launch of Uphone and UniStore, nor has it released details of vendors participating in the project. China Unicom’s Uphone and UniPlus OS platform have recently won support from the Chinese government and are now designated as a major national project.

The government will fund the development of Uphone handsets. China Unicom’s Uphone project will benefit China’s handset design and manufacturing industry as well as boost its position in the international WCDMA technology-based handset market. Leveraging its newly commercialized WCDMA based 3G network, China Unicom unveiled iPhone in mainland China on Oct 1, 2009. The company has sealed a three-year deal with Apple to market its iconic handset in China.

Uphone represents China Unicom’s second biggest opportunity in the domestic 3G handset market and will complement its iPhone venture. The government backed Uphone project represents China Unicom’s attempt to emulate its larger peer China Mobile (NYSE:CHL) which has launched a line of smartphones (called “Ophones”) based on its proprietary TD-SCDMA 3G technology.

Ophone leverages Google’s open-source Android mobile operating system and represents China Mobile’s answer to the emerging threat from iPhones. China Unicom’s other rival. China Telecom (NYSE:CHA), is also pursuing a similar strategy as it is currently developing android-based handsets called the “Cphone.”

As such, the three major Chinese carriers are banking heavily on the booming market for Android-based smartphones to boost market share. However, to compete, they need to develop unique marketing/promotional strategies and differentiated products and services, which remain a challenging task.