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Chinese smartphone makers sacrificing profit margins for quad-core upgrades

Ascend-D1In pursuing more customer satisfaction in the form of upgrading to quad-core chips, Chinese mobile phone manufacturers are trading off bigger margins by offering their phones at lower prices in today’s largest smartphone market.

Most of the current smartphones are running on single and dual-core chips, but Chinese phone makers are planning huge by equipping their phones with quad-core chips as more and more customers are demanding for more features like faster screen swipes, quicker download speeds, uploading photos through WeChat messaging tool, or even sealing an online purchase from Taobao online mall.

In a report, Lisa Soh, an analyst with Macquarie, said: “The Chinese handset vendors have now extended their reach and low-price strategy to the quad-core phone segment. This hurts the hope that the Chinese handset makers can improve margins through moving up product segments.”

Phone manufacturers like ZTE Corp, Lenovo Group Ltd, Xiaomi Technology, and Huawei Technologies Co Ltd have already introduced quad-core phones running on Google Inc’s Android OS. The chips they are using are supplied by Nvidia, Qualcomm, and Samsung.

Many industry executives expect more smartphones equipped with quad-core chips next year as chipmakers like Mediatek and Qualcomm is looking forward to introducing customized processors that will work with Chinese applications, a move that will make easier, cheaper, and quicker phones.

Taiwan-based Mediatek Inc and US company Qualcomm have both unveiled faster chips with designs that will allow Chinese phone makers release smartphones in a lower cost and a shorter time.

Already, Mediatek Inc, Taiwan’s largest chipmaker that sells more than 80 percent of its processors to China, introduced its quad-core chip. It expects that its Chinese vendors will be able to unveil their handsets early next year.

Chinese smartphone market is booming, with over 1 billion subscribers overall. It is expected that sales will from 78 million last year to 165-178 million units this year, according to research firm Gartner.

Samsung is currently the number one smartphone vendor in China, though local vendors are fast gaining traction. According to IDC, China’s Lenovo, Coolpad, and Huawei are now ranked second, third, and fifth respectively in the growing Chinese market.

CFO of Mediatek, David Ku, said: “The only gap between the smartphone versus the consumer in emerging countries is the price.”

senior vice president for Qualcomm’s product management, Jeff Lorbeck said earlier this month that quad-core phones will most likely sell below 1,000 yuan ($160).

“I like to use my phone to buy things online, update my status on Renren (a social networking site) and read what friends are up to on weibo microblogs,” Liu Liang, a 24-year-old financial executive living in Beijing and using a quad-core Samsung Galaxy Note II, said.

“I haven’t bought a Chinese smartphone. But if my friends start recommending me good models and Chinese smartphones step up in their branding, I’ll definitely consider one.”

source: yahoo