Top8 mobile phone predictions for 2009

2009 Top 8 Product Trends of China Mobile Phone Market 2008/12/28 胡洋 [email_address]

Trend #1: Large Screen + Full Touch Screen Screen Size Development Trend in 2008
Small-sized (<2.0’) screen phones coverage are shrinking dramatically in 2008, on the other hand, large-sized (2.5’+) screen phones showed significant increase.
Source: Thinkbank Market Research & Consulting retail tracking, 2008 Large-sized screen (2.5’+), +8% Mid-sized screen (2.0-2.4’), +10% Small-sized screen (<2.0’), -18% 47% 38% 15% 65% 28% 7%

Trend #1: Large Screen + Full Touch Screen
>50% users are going to buy mobile phones featuring with 2.5’ or bigger screens.
The replacement market is more interested in larger-sized screens, in other words, screen size upgrading is a trend worthy of notice.
*Source: Thinkbank Market Research & Consulting, Rretail Tracking Panel ™ , 2008 **Source: Thinkbank mPanel ™ user survey, base=1585, 2008 What’s your request in terms of screen size when you are going to buy a new phone? Screen size Penetration* (2008) Purchase Intention (%)** Change(+/-%) Below 2.0’ 55% 11%  44% 2.0’~2.4 32% 36%  4% 2.5’~2.8’ 8% 31%  23% 3.0’ & above 3% 22%  19% Total 100% 100% /

Trend #1: Large Screen + Full Touch Screen
The pervasive of apple iPhone worldwide is triggering the strong demand for big screen & full touch screen products
Big international brands are rolling out new products featuring big screens
Samsung is collaborating with CMCC bringing 3.2’ big touch panel phone i908E targeting at high end segment. i908E is a big hit at the moment even though it priced above ~6,000RMB. It’s estimated that some 350K units has been sold out during the first 5 months.
More big screen phones are coming from Samsung in 2009.
Nokia & LG all are launching big touch screen products targeting at high end market.
LG Apple Samsung KC910 KS200 2.8’@240*320 3.0’@240*400 3.5’@480*360 3.2’@240*400 LG i908E Nokia 5800XM 3.2’@640*360 iPhone

Trend #2: Growing Demand for Smart Phones
Thinkbank expects smart phone continue to penetrate to lower price segment, ASP drop from 2,197RMB in 2008 to 1,900RMB in 2009.
It’s estimated that smart phone market size will grow by 13% yoy in 2009, to hit 21 mln units.
Source: Thinkbank Retail Tracking Panel ™ Smartphone ASP Development Smartphone M-size Development In RMB In mln units Source: Thinkbank Retail Tracking Panel ™

Consumer survey demonstrates that users in all price tiers showed increased purchasing intention for smart phones.
*Source: Thinkbank Market Research & Consulting, Rretail Tracking Panel ™ , 2008 **Source: Thinkbank mPanel ™ user survey, base=1585, 2008 How likely are you going to buy a smart phone when you want to buy yourself a new mobile phone next time? Price Tier(RMB) Smartphone Penetration*(2008) Purchase Intention (%)** Gap (%) Below 1,000 0.5% 2.5%  2.0% 1,000-1,499 2.6% 14.7%  12.1% 1,500-1,999 26.2% 32.4%  6.2% 2,000-2,499 41.7% 47.8%  6.1% 2,500-2,999 47.3% 54.3%  7.0% Above 3,000 69.4% 77.4%  8.0%

Windows Mobile based smart phones manufactured by Chinese OEMs mostly are exported to overseas market in 2008.
However, as the financial crisis & global economic downturn, they will shift their focus from overseas market to home market in 2009.
Chinese local phone makers are making effort to offer Windows Mobile based products to squeeze in 1000-1499RMB price segment at the moment.
Some Shenzhen phone makers also produce smart phones based on pirated Windows Mobile OS to meet low end market demand.
琦基 i8 ： 1400RMB 琦基 i7 ： 1500RMB

Trend #3: Strong Demand for Mobile App & Services
Consumers are interested & need mobile application & services.
Operators, developers, SP/CP as well as design houses also believe mobile application & services are going to take off gradually in the coming years.
*Source:Thinkbank mPanel ™ user survey, base=1585, 2008 **Source: mobile app & services quarterly in-depth interview, June & October 2008 Top 10 Most Needed Mobile Application & Service / by Category # Mobile app & services Consumer Interest (%)* Expert Rating** 1 Web page browsing 67.5%  2 Instant messaging 65.4%  3 GPS navigation and LBS 63.0%  4 Mobile gaming 50.2%  5 Music, video/TV related services 44.2%  6 Life assistant / healthcare 36.6%  7 Biz & personal productivity 32.8%  8 Security related services 29.7%  9 Mobile payment / shopping 29.0%  10 Social networking service / Blog 19.8% 

Trend #3: Strong Demand for Mobile App & Services
Mobile operators are heavily promoting their mobile application and services
China Mobile includes a dozen of value-added services to its Key Performance Indicator ( KPI )
In Samsung i908E, the latest CMCC customized phone, almost all preloaded services need a access to internet, such as push e-mail, mobile payment, online gaming, location based services, music downloading, mobile security, mobile TV & video, instant massage, etc.
On the other hand, CMCC is integrating service providers and content providers to offer more diversified contents & services for its users.
China Telecom also positions itself as a mobile internet player
China Telecom roll out it’s new brand eSurfing to setup a mobile internet positioning
And some of its customized phones are called “internet phone”, more and more CT customized phone will be internet-enabled products.
Implement CDMA+WiFi strategy. Deployment more access hotpoint in public area, and promote WLAN in offices and homes.

Trend #4: CMMB Mobile TV Phone is Going to Take off Before Other Mobile TV Standards in China
China Mobile Multimedia Broadcasting (CMMB) has strong support from State Administration of Radio, Film, and Television (SARFT).
SARFT is deploying broadcasting network across China and setup provincial operating companies with partners in each province.
CMMB enjoys the most maturity of industry value chain than other mobile TV standards, such as T-MMD, DVB-TH, DAB, and other international mobile TV standard
More than 10 CMMB chipset makers are mass producing, chipset price is going down gradually.
New product solution with CA (conditional access) chipset is now available from IDHs.
~60% of China IDHs are following up CMMB technology, and are promoting their CMMB based PCBA.
~80 of China local phone makers are ready for rolling out CMMB phone with CA.
SARFT is going to launch broadcasting satellite in 2009 according to its previous plan.
The CMMB market is estimated to reach 5 million units in 2009, most of which in 09H2. It’s forecasted that CMMB market will see rapid growth in the next coming years.

~70% of interviewed consumers are interested in mobile TV services.
>55% of interviewed consumers are willing to pay around 1-10RMB as a monthly subscription fee for mobile TV service.
They do NOT care about technology, they care about only image quality and device price.
5-10RMB Like to have. I don’t care Dislike, don’t need it I have no idea Interested in it very much! <5RMB FREE 10-15RMB 15-20RMB >20RMB Source: Thinkbank mPanel ™ user CATI survey, Sep. 2008, base=997 Source: Thinkbank mPanel ™ user CATI survey, Sep. 2008, base=997 Which of the following statement describe your interest to mobile TV services? How much would you like to pay for monthly subscription for mobile TV services?

CMMB mobile TV phone delivers good image quality and nice user experience.
CMMB devices are ready for commercial use.
Tianyu CMMB Mobile TV ZTE CMMB Mobile TV

Trend #5: Phones Specially Designed for Children & Elderly Are in Great Need
Children & elderly people altogether covers 31% of China’s totol pupultion.
144 million elderly people (60yrs+) when China conducted the 5th population census.
20.3% of Chinese are children who are below 15 yrs old.
China Population Distribution by Age Tier Source: China 5th nationwide population census, 2000 Age tier Population (mln) Percentage (%) 1-14 yrs 265 20.3% 15-59 yrs 897 68.7% 60+ yrs 144 11.0% Total 1,306 100.0%

Trend #5: Phones Specially Designed for Children & Elderly Are in Great Need
71% of parents felt it’s difficult to find an appropriate mobile phones for their children.
68% of young people said that it’s difficult to find an appropriate mobile phone for their old parents.
Source: Thinkbank mPanel ™ user survey, base=1585, 2008 How easy / difficult do you feel when you find a mobile phone for your children? How easy / difficult do you feel to when you find a mobile phone for your parents? Source: Thinkbank mPanel ™ user survey, base=1585, 2008 Description Percentage(%) Very difficult to find 49.5% Somehow difficult to find 21.3% Just so so 12.4% Somehow easy to find 9.7% Easy to find 7.1% Total 100% Description Percentage(%) Very difficult to find 54.6% Somehow difficult to find 13.7% Just so so 16.4% Somehow easy to find 9.7% Easy to find 5.6% Total 100%

Trend #5: Phones Specially Designed for Children & Elderly People Are in Great Need
Elderly mobile phone features: “three must-to-have”, “three no-need-to-have” & “three big”
Three must-to-have: handwriting, FM radio & currency detector
Three big: big screen, big font size, big keypad
Three no-need: camera, memory card & Bluetooth
Children mobile phone features: cute ID, functions specially designed for children, such as GPS positioning , one click to call parents, etc.
Av sales: 20K/M units in 08H2 A7711 A7713 Tianyu New Elderly Phone Font size: 32, handwriting, magnifier, big screen, loud RT, FM loudspeaker

Trend #6: Operator Customized Phone to Surge
China market will witness most aggressive operator bundle efforts in 2009 after the reshuffle of telecom operators.
It’s noticeable that China Mobile will focus mid to high end of the market, instead of ultra low end market as it did in the past several years.
Bundle Sales TARGET by Operator Bundle M-size Trend 08 vs. 09 +200% Sum of target Unit: million Unit: million

Trend #7: WiFi-enabled Phones Are in Need
51% of interviewed consumers showed their interest in WiFi phone.
WiFi hotpoints is growing in both offices and homes, as well as public area such as Starbucks and Pizz Hut, etc, which stimulates consumers interest toward built-in WiFi phones.
In addition, most mobile internet service require fast network accessing speed.
Source: Thinkbank mPanel ™ user survey, base=1585, 2008 What is your interest level for built-in WiFi phones? Interest level Percentage(%) Interested in WiFi very much 33.3% It’s better to have WiFi 17.6% I don’t care about WiFi / have no idea 16.7% I don’t need WiFi that much 12.8% I don’t need WiFi at all 19.6% Total 100%

Trend #7: WiFi-enabled Phones Are in Need
Built-in WiFi phones still can not get network access license from MIIT at the moment, however, IDHs are working on an alternative solution.
IDHs are going to roll out PCBA solutions that can make WiFi as a removable part of the phone, therefore, phones can get network access license form MIIT, consumers can buy the removable WiFi module if they need it.
New products based on MTK’s 6235 and above platforms can support removable WiFi module very soon.
The same case probably will happen to CMMB mobile TV phone if CMMB phones can not go through MIIT censor and get the network access license.

Trend #8: Mobile Device Convergence & Functionality Upgrading
Mobile phone has never stopped integrating other consumer electronics, music playback phone has been growing dramatically at the cost of MP3-alone players during the past years. Besides MP3 player & digital camera, many other functions are going to be integrated into mobile phones.
On the other hand, upgrading function performance and users experience is an other effective way to stimulate consumer replacing their old mobile phones.
Convergence & Upgrading Integrate more and more functions of consumer electronics into mobile phone. Mobile phone is becoming the portal for mobile life. Upgrading functions such camera pixels, device portability as well as UX of internet access, music playback, etc. 1 2

2.0M built-in camera phone penetration reached record high in 2008 and is going to decline from 2009 as higher pixel camera phones are growing fast.
Built-in Camera Phone Penetration Rate Trend by Pixel 2.0M and below 3.0M & above Source: Thinkbank Market Research & Consulting, Rretail Tracking Panel ™ , 2008

Survey finds out that consumers like to have more functions integrated into their phones, such as MP3 player, PMP and GPS, etc.
GPS and mobile TV are considered as promising segment in the following years.
What are the functions / service you are looking forward on your mobile phone? GPS penetration trend Mobile TV penetration trend Source: Thinkbank mPanel ™ user survey, base=1585, 2008 Functions / Services Percentage (%) Music player 85.3% GPS navigation device 63.7% TV set 52.9% PMP 46.1% Computer 35.3% Game console 33.3%

Q&A! Thinkbank & Company 博思咨询  新产品研究部北京市朝阳区东四环中路远洋国际中心 C 座 Contact US +86 10 59081096/97/99 +86 10 5908 1095 [email_address]

Top8 mobile phone predictions for 2009

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