Huawei, ZTE Embrace Firefox OS
I wrote earlier this week about how the free Firefox mobile operating system (OS) could intensify the already fierce competition in China’s smartphone market, and now we’re getting word that such a development could come quite soon with the release of new Firefox models from local leaders Huawei and ZTE (HKEx: 763; Shenzhen: 000063). It’s no coincidence that all this news is coming out around the same time, since all the major smartphone and mobile chip makers are currently showcasing their latest wares this week at the Mobile World Congress, the industry’s biggest show held each February in Barcelona.
Low-end smartphone chip maker Spreadtrum (Nasdaq: SPRD) was the first out of the gate with Firefox news early in the week, when it unveiled a new Firefox-based smartphone chipset costing just $25. (previous post) Such chipsets lie at the core of each mobile phone and are easily the costliest component, leading me to predict we could see a new stream of ultra-cheap new smartphones costing $50 or less hit the market later in the year.
Now ZTE and Huawei have both unveiled their own fist Firefox models, adding further pressure to the low end of an operating system market now dominated by Apple’s (Nasdaq: AAPL) iOS and Google’s (Nasdaq: GOOG) highly popular Android. Apple doesn’t let other companies use iOS, and thus the system is exclusive to the company’s own premium iPhones. Android is technically free and is easily the top choice of lower-end smartphone makers. But Google also places strict requirements on companies that use Android, leading some to complain that the system isn’t as open as Google likes to say.
I can’t comment on how open and user-friendly the Firefox OS is, since I haven’t personally used it and it’s still quite new in mobile circles. But I do use Firefox as my main desktop Internet browser, and am impressed with its flexibility, open nature, and the regular stream of useful new features continually added by its virtual community of global developers.
If the Firefox mobile OS gains as much traction as the web browser, we could easily see ZTE, Huawei and others quickly embrace this new system as a viable alternative to Android. In that vein, ZTE has announced its first 2 Firefox smartphone models in Barcelona, with a relatively aggressive target of shipping over 1 million handsets this year. (company announcement) One model has a 3.5-inch screen and the other a 4-inch. ZTE added it will roll out a third 4.5-inch model by next year. There’s no word on how these phones will be priced, but the announcement indicates they will be aimed at more cost-sensitive developing markets like Venezuela and Uruguay.
Meantime, Huawei has also unveiled its own first Firefox phone, which comes with a 4-inch screen. (English article) An online review of the phone was broadly positive and said the model is also likely to be aimed at developing markets, with a release likely in the next couple of months. China’s other major globally minded smartphone maker, PC giant Lenovo (HKEx: 992), hasn’t announced any Firefox models to date, though it could quickly jump on the bandwagon if the Huawei and ZTE models do well.
We’ll have to see how these new low-end models are received before we can say whether they will really shake up the market later this year. But based on my knowledge of Firefox and the inherent cost-sensitive nature of developing markets, I would give these new Firefox models a better than 50 percent chance of success. That means we could easily see other low-end manufacturers enter the market during the year, and I wouldn’t be surprised to see global Firefox smartphone sales top 5 units for all of 2014.
Bottom line: Chinese smartphone makers are likely to embrace the Firefox mobile OS as the year progresses, adding more pressure to the low end of the market.
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