Mobile Monday Beijing 28

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Web Site:Web Site: www.newporttechnologies.bizwww.newporttechnologies.biz

Table of ContentsTable of Contents��Evolution of Global Handset IndustryEvolution of Global Handset Industry��Globalization of Technology Globalization of Technology –– Three phases Three phases ��What is a Shan What is a Shan ZhaiZhai JiJi Phone?Phone?��China Market handset statisticsChina Market handset statistics��Shan Shan ZhaiZhai -- Bandit Handset characteristicsBandit Handset characteristics��Shan Shan ZhaiZhai JiJi examples in the grey marketexamples in the grey market��Greater China Integration Greater China Integration StratetyStratety –– ““Taiwan InsideTaiwan Inside””

with Shan with Shan ZhaiZhai JiJi, for competitive advantage , for competitive advantage ��The rise of The rise of MediaTekMediaTek MTK and their Blue Ocean MTK and their Blue Ocean

Strategy in Greater China, emerging marketsStrategy in Greater China, emerging markets��Disruptive Innovation from a Silicon Chip (Disruptive Innovation from a Silicon Chip (SoCSoC))��Birth from Shan Birth from Shan ZhaiZhai JiJi to global brand to global brand –– it can happen!it can happen!��ConclusionConclusion

Q: How did Shan Zhai Ji phenomenon start, why is it occurring now?A: Greater China is the global supply chain center for outsourced of R&D, design, assembly and manufacturing in the cell phone industry!

Evolution of Global Handset IndustryEvolution of Global Handset Industry

History of Mobile Handsets in ChinaHistory of Mobile Handsets in China

Chinese government cancelled production certificate system in October, leading to the prosperity of Shan Zhai Jihandsets

TianYu Lantongbecame the first domestic company to create their own-brand, private handset using Mediatek MTK chip

Chinese Government enforced production certification system, 40 handset vendors obtained permits to produce mobile handsets, any phones produced without these permits were illegal, lend to bubbling phenomenon of market

China NingBo Bird and DBTel (Taiwan) became most popular local brands, initiated prosperity of the domestic mobile phone market

Handset industry in China begins, Motorola and Nokia occupy top handset sales positions

2007�2006�2005�2003�2000�

Major Tier #1 handset vendors sales plummet, much concern in the industry that Shan Zhai Jiare unstoppable and certainly difficult to fully enforce. Many local handset vendors spin out handset biz altogether, Moto, Sony-Ericsson in a world of hurt.

Lenovo China sells their mobile phone business at a loss in January, During Beijing Olympic games, Digital TV is formally broadcast leading to hot sales of Mobile TV phones

2009�2008�

Greater China integration strategyGreater China integration strategy•“Greater China” is leading in technology for the mobile device market.

•Taiwan - source for R&D and finances.

• China – assembly & distribution

•2/3rds of all cell phones assembled in China

•Prior to 2008, 50% of all cell phones designed in Taiwan

Globalization of Technology Globalization of Technology Three PhasesThree Phases

Globalization: First Wave 1415-1914�Portugal - seeking way to obtain wealth from the Sea, controlled Straits of Hormez on Persian Gulf, made Goa, India its possession�Columbus was also looking for a route to India, instead found US.�Portuguese the first to claim Formosa, but settled in Macao in 1500s.�Dutch, French, English and Spanish came to Asia (USA & Japan also involved) in search of wealth, natural resources for the next 400 years�Dutch East India Company, Jardine Mathison, Hutchison Whompoa, colonization of India, Opium War in China, British licensed Hong Kong


• Globalization: Second Wave 1947-2000– America led the second wave with Western Democracy,

philosophy.– Objective was to rebuild a new generation in Asia/Europe after

WWII– Constructed trading system, discarded protectionism,

mercantilism of the past, eventually created GATT, then WTO, opened up markets

– Marshell plan for Europe, Dodge plan for Japan, focus to set production in motion, created an export orient system from new factories

– Golden age for the USA 1950-1973 in terms of growth– Gold standard set, in 1971 exchange of Gold halted in favor of

US $


– Dollar system set up, all other currencies would float or be adjusted or fixed against the US Dollar

– U.S. long term competitiveness started to slide in the 1980s, trade deficit with Japan, then others, eventually China as U.S. economy moved from manufacturing to service industry.

– The Internet helped in 1990s build the U.S. back into an innovation society, but then the bubble burst in 2001

• Globalization: Third Wave– In the third wave, China has re-emerging after 600 years!– The rise of the microcomputer industry is leading the way, then

broadband communications, technology converges, globalizes– The innovation that drove the Industrial Revolution was based

in England, and for years the British Government maintained strict export controls on technology and people to prevent the movement of capital out of the U.K. – It failed, however, to stop the outward flow!

IT Innovation moves WestwardIT Innovation moves Westward� The knowledge and experts escaped, moving the center of

innovation into the United States by the early 1900s, with its large local market and freedom to pursue new opportunities.

� With a strong investment in education, a high degree of economic freedom and strong intellectual property protection, the U.S. remained the world capital of innovation and technology.

� The next great wave of technology advances began just a few miles away as New England was building the first industrializedfactories in the U.S. Years later the computer industry emergedin and around Boston, Massachusetts, along the corridor defined by Route 128, where Digital Equipment, Data General, Lotus Development and dozens of world-class innovators thrived.

IT Innovation moves WestwardIT Innovation moves Westward

� As the Personal computer took over the business world, the center of innovation moved westward to Silicon Valley in California andSilicon Forest in Redmond, WA with the likes of Intel, Microsoft, HP, Palm, and Oracle.

� Another shift has been underway since the mid-1990s as the semiconductor and electronics manufacturing has moved off shore to Greater China and the new center is China with Shan Zhai Ji simply a direct reflection of the roots of creativity and innovation, transferred from the high-tech hallways of Silicon valley to the back alley’s of Shenzhen.

OneOne--minute Chinese minute Chinese Language LessionLanguage Lession

•�= Shan - Mountain

•�= Zhai - Fortress, hideout

•�= Ji - mobile phone

Which one is the realWhich one is the realApple Apple iPhoneiPhone-- Can you tell?Can you tell?

� Early Shan Zhai mobile phones were inferior brands that where unknown. They put on the label “CECT”on the mobile phones and paid CECT company a certain amount of cash to use its brand name. Later on, there came out a variety of new brands. Some are named as Sunyericcsun, NCKIA or SAMSING, leading customers to mistaking them as the famous brands.��

� You can find anything printed outside the package, except for the address of the real manufacturer.

� Extremely powerful functions with extremely low price. Extremely fancy appearance with extremely unreliable quality.

� During recent years, Shan Zhai mobile phones have shown pretty impressive innovation in terms of technology, appearance and manufacturability which find no parallels. A lot of unusual technologies and designs are combined together. These combinations brings out a wild variety of functions, though most infringe on the original manufacutrer in some way.

� Now, Shan Zhai mobile phones have become part of the non-mainstream culture. It increasingly attracts more and more people with the so-called Shan Zhai spirit, - wild ambition, innovation and endless catering to the need of customers.

What is a Shan What is a Shan ZhaiZhai Mobile phone?Mobile phone?

How about a How about a shave with shave with that call?that call?

Shan Shan ZhaiZhaiCombo Shaver Combo Shaver and cell phoneand cell phone

Shan Shan ZhaiZhai SpiritSpirit�Be extremely creative, brave, and not pay too much

attention about the low profit. Make everything possible. Try super hard to satisfy Customer demand

�Create new demand even if it didn’t exist before.�Nothing is impossible to a willing mind!�The biggest problem is the quality.

�Multilevel and diversified markets in China, worldwide�Mobile phones became an everyday consumption.�Includes any functions that the customers could

imagine

Shan Shan Zhai'sZhai's way to way to ““successsuccess””

“We are witnessing the rise of the hacker-entrepreneurs, it is a classic Silicon Valley legend brought to the back alleys of Shenzhen”.Karl J. Weaver, Shenzhen – January, 2009

HighHigh--Tech Golden Egg with Tech Golden Egg with ““Taiwan InsideTaiwan Inside””

�China - largest handset market – More than 620 million cell phone users.

�Every month, China adds another 8.52 million new mobile phone users.

�Since 2007, there has been a new wave of self-branded or unbranded "white-box“ handsets, known locally as "bandit cell phones“ 90% using MediatTek chips.

�Cheap 'bandit cell phones' have carved out a massive niche for themselves in China's burgeoning handset market, with Taiwan's Chips, LED, PC Board and panel makers playing key roles in the process.

�China’s 900 million rural dwellers are set to become the next engine of rapid growth for the country’s handset industry.

�Over 250 million Shan Zhai Handsets were produced in 2008

Annual Handset Output Annual Handset Output Volumes in ChinaVolumes in China

ChinaChina’’s Handset Market, Q4 s Handset Market, Q4 -- 20082008

Source: CCID Consulting, Dec. 2008

Chinese Handset vendors use the Mediatek SoCsolution include Gionee, Lenovo, TianYu, Haier and Shan Zhai Ji also use MTK - Mediatek chips to gain important time-to-market results. TianYu and Lenovo use MTK chips in all phones – they are growing.

Sales Situation of China's Mobile Sales Situation of China's Mobile Phone Market, 2006Phone Market, 2006--20082008

China's domestic mobile phone manufacturers are on the edge of tough existance and survival under attack from foreign brands and Shan Zhai Handsets. The rise of “Shan Zhai" handsets, has impacted traditional players – Many players are spinning off their handset business.


Mobile Phone Retail Channels in ChinaMobile Phone Retail Channels in ChinaMobile Phone Retail Channels in China

Other 1.4%

Supermarket &Shopping Malls 6%

Online Shopping0.3%

TVShopping

4.5%

Mobile Phone Countersin Computer Stores 1%

BusinessHalls 15%

Mobile PhoneChain Stores

27.1%

ProfessionalMobile Phone

Stores 45%

Mobile Phone Chain Stores

Business Halls

Supermarkets & ShoppingMallsMobile Phone Counters inComputer StoresTV shopping

Online Shopping

Other

Professional Mobile PhoneStores


Bandit Phone Characteristics, usage appealBandit Phone Characteristics, usage appeal

� Targeted for China’s rural markets� They can be very cool looking,

imagine Spiderman cell phones� They are very cheap, feature-to-

feature compared to name brands� Constant style and design changes

are assured in a short time frame –the sky is the limit!

� Provides innovative solutions to previously tough technical challenges

��

What type of handsets can we expect?What type of handsets can we expect?� 7 speaker cell phones for rural farmers,

who need to hear ringing from a distance� Students use same speakers to

reproduce� Dance floor or boom box music environs� 4 bright LED lights to server as a dual

Cell phone and powerful flashlight.� For Senior citizens, big sounds, big

displays and big key caps� For people who work outside in the

Fields, an extended battery life handset� For senior citizens to listen to various

Broadcasts, FM radio, local TV tunner� Religious handsets and software Money

authenticity readers� Sports venue branding (2008 Beijing

Olympic “Fuwa” phone)� Consistently support two SIM card slots Budda Mobile

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This is an ordinary This is an ordinary ShanzhaiShanzhai mobile phone mobile phone with straight silvery appearance not as wild as its name. with straight silvery appearance not as wild as its name.

However, it includes a Super vibrating lowHowever, it includes a Super vibrating low--pitched woofer in the back of the handsetpitched woofer in the back of the handset

Two amplifiers bring out the effect of vibrating low-pitched woofers playing ear-splitting music. Make sure that you can't miss any call even in a noisy train station.

Includes: 2 Includes: 2 simsim card slots, and an card slots, and an extraordinarily long standby timeextraordinarily long standby time

The Claim: Extraordinarily long standby time of 366 days

Specific Hot selling Specific Hot selling ShanzhaiShanzhai mobile phonesmobile phones

� 1) Cigarette? Mobile phone? Or a mixture of both?� 2) My Ferrari consumes no patrol.� 3) Big Thunder phones.� 4) Fierce Shanzhai, big cannon “paparazzo” mobile phone.� 5) Ouch, a hidden mobile phone camera!� 6) Watch-like mobile phone with hidden camera� 7) Orange: HiPhone� 8) Transformation� 9) 800RMB Vertu mobile phone� 10) PSP mobile phone� 11) Shanzhai mobile phone welcomes the Beijng Olympics� 12) Buddha preserve me - mobile phone blessed by eminent monks.� 13) Shanzhai's little brother

Cigarette? Mobile phone? Or a mixture of Cigarette? Mobile phone? Or a mixture of both? both? –– A real converged device.A real converged device.

This is the Perfect combination of mobile phone and a cigarette pack, for those infectious smokers on the go.

Cigarette? Mobile phone? Or a Cigarette? Mobile phone? Or a mixuremixure of both?of both?

The most incredible one can be put in at most 7 cigarattes of various brands such as Baisha, Marlboro or Zhongnanhai. If you are a heavy smoker or simply want to be very cool, now listen to me, you really need this.

CigeratteCigeratte? Mobile phone? Or ? Mobile phone? Or a mixture of both?a mixture of both?

Chonghwa, Panda, Marlbara, 555, Yuxi, Furongwang, any famous brands that you can think of. All of them are produced-with honor, by a sound “China Communication Facilityies Co., Ltd.”whose location still unknown.

My Ferrari consumes no GasolineMy Ferrari consumes no Gasoline

Actually a Ferrari mobile phoneActually a Ferrari mobile phone.

When you Open the battery chamber...Even the shape of the battery resembles an engine.

My Ferrari consumes no GasolineMy Ferrari consumes no Gasoline

Shan Zhai products are just for Ferrari, Porsche, BMW, Hummer, Cougar, Benz... Also, in fact any brand names that you can call out.

The soThe so--called Big Thunder phone!called Big Thunder phone!

Looks just like a normal phone... Double SIM cards and can be used simultaneously? That's not unusual for any Shanzhai mobile phone.

Big Thunder phonesBig Thunder phones

However, when it turns around...The unique aura hits you in a sudden.

The Big Thunder Phone The Big Thunder Phone -- is is a Boom Blastera Boom Blaster

��Eight amplifiers!!!Eight amplifiers!!!��For the volumeFor the volume--��Level 1: already Level 1: already powerful. Level 2: Feels powerful. Level 2: Feels noisy and ears noisy and ears uncomfortable. Level 3: uncomfortable. Level 3: Can be heard from every Can be heard from every corner of the room, corner of the room, sharply penetrating. sharply penetrating. Above Level 3, I believe Above Level 3, I believe everyone around would everyone around would get very get very veryvery annoyed. I annoyed. I tried only once and dare tried only once and dare not try it again.not try it again.

Fierce Fierce ShanzhaiShanzhai,,-- big cannon big cannon ““paparazzopaparazzo””mobile phonemobile phone

Open the packaging and... now you see it...

Before we fix on the “big cannon” lens, let's take a look at the impressive design of this wild mobile phone. Above the low-pitched woofer is a 1.3 megapixel camera. Around the lens is a specificly designed flute to insert the “big cannon” lens.

Easy steps - put the lens in the slot and lock it by rotating clockwisely.

Fierce Fierce ShanzhaiShanzhai, big cannon , big cannon ““paparazzopaparazzo”” mobile phonemobile phone

Rotate 3 rounds, and here we make the first mobile phone camera with a 6* optical zoom lens. With it, even the little bird standing on the wire can be captured clearly!

From side, it looks pretty much like a professional long lens camera with the “big cannon” lens.

In a nutshell, this is a universal mobile phone which is featured with 3 inchs touchscreen, Chinese handwriting, double SIM cards, additional MicroSD slot, bluetooth, MP3 player, 6+1 super big loudspeaker and megapixel camera. Anything you can think of. That's the unique philosophy of Shanzhai!

Fierce Fierce ShanzhaiShanzhai,,-- big big cannoncannon““paparazzopaparazzo””mobile phonemobile phone

Try its performance with 6 times telescopic effect. We focus on the clothes store on the other side of the street. On the left is the preview without the lens, just like taken by an averge mobile phone camera.You are not able to tell the store name and the street is unecessary. On the right is the performance of “big cannon”. It's much closer now and you can even see the pretty storekeeper preparing for the store opening, and of course the words on the poster. The big cannon does deserve the reputations it enjoys.

Fierce Fierce ShanzhaiShanzhai, big cannon , big cannon ““paparazzopaparazzo”” mobile phonemobile phone

Shan Zhai handsets are famous for surprises. In spite of 6.1 soundtrack, 6* telescope effect, we have even another function that you would never imagine.

The intrigue hides simply on the seemingly ordinary battery compartment. As you press this long button, the light on the left will radiate purple beam. However, it's neither a flashlight nor additional flash for camera.

It’s a money authentication reader

Ouch, a hidden mobile phone camera!Ouch, a hidden mobile phone camera!In this technologically highly developing era, walls not only have ears, but also pinhole cameras, and also SD999- the king of secret peering . It can easily expose your secrets to the sunlight!

Inserted inside is a radio wave reciever. Together with a monitoring video camera, it can send videos recorded through air. The effect distance is 10-30 metres.

For those who want to monitor their house but have no professional equipment, this is like a stove fire in snow. To mothers cooking in the kitchen that worries about their babies playing in the living room, this will make it possible that they can cook and take good care of the babies at the same time. And of course, this is also the best choice for those who enjoy peeping on others' secrets.”

Ouch, a hidden mobile phone camera!Ouch, a hidden mobile phone camera!

SD999 works as a remote monitor in such way: it need no wires, no 3G, no transmission fee. From the screen of mobile phone, you are capable to see anything within 10 metres. Taken off this video function, SD999 is just a normal Shanzhai- touchscreen, stereo loudspeaker, NES, 1.3 megapixel camera, microSD card slot... All nothing special for a Shanzhai in Shenzhen.

Dick Tracy Watch mobile phone Dick Tracy Watch mobile phone with hidden camerawith hidden camera

On the watchband is actually a keybroad on which you can simply dial phone numbers

This “watch phone” has a tiny 0.3 megapixel camera on it, hidden in a secret part, Perfect for candid camera. You can pretend to be checking out the time while actuall take a picture of the hot girl in front. This watch phone is a favourite for many people.

This watch would look very geekish for a female to wear.

Some more wildly Some more wildly innovative Watch phonesinnovative Watch phones

Orange: Orange: HiPhoneHiPhone

At the first sight, you simply won't believe this is a Shanzhaimobile phone. It's more than 90% looks like an iPhone!

Like an iphone, with a gravity inductor inside, it can also rotate screen automatically.

HiPhone provides acceleration games, caculator, WAP webpage browser, memo, MP3 play that can copy songs and play simultaneously, MP4 player, calender, graphic operation interface like Multitouch, selecting songs by shaking, audio recorder, TXT e-book reader, inside bluetooth. Some functions are even superior to iphone!

Chinese Orange only costs ¼ of the price of Apple iPhone. You can even buy it at RMB 999

Transformation Shan Transformation Shan ZhaiZhai handsetshandsetsLooks just like nothing but an ordinary Shanzhaimobile phone

It can slide out like this.But it's common.

And can slide like this.Hmm, a little interesting.

And like this....And like this....Have you ever Have you ever imginedimgined that?that?

800RMB 800RMB VertuVertu Luxury mobile phoneLuxury mobile phoneVertu in Latin language means “high quality, unique”. A Vertumobile phone costs 100,000 to 150,000 RMB. It is made by hand by those craftmen who makes Rolls-Royce motor cars. A variety of jewelleries and expensive metal are used in producing a Vertu, selling in limit quantity. There are two types of shells- gold and platinum. The screen is made of blue crystal, never gets a scratch on. Under every button, there's a ruby, to make sure of touch exactness.

800 RMB? A Vertu? Yes, your ears are hearing correct. However, this Vertu is not the one larvished with diamonds and gold, but a ShanzhaiVertu. The Shanzhai Vertu copies almost every detail of a real one- shining shell and special V-shaped buttons. Those who have a real Vertu must get mad if they know the price of this one.

Play Station Portable (Mobile phone)Play Station Portable (Mobile phone)

Shanzhai started to promote PSP mobile phone even earlier than Sony.

Expert in multimedia, entertainment and games, it has inserted Nintendo game emulators, with classic games including Super Mary, Contra, Bomberman, Salamander, etc.

Whether the buttons in the front, or the loudspeaker at back, the special metal ring by the side of the lens, all looks 90% the same with the original. Only difference is this one is half the size of a real PSP mobile phone, much more exquisite.

Shan Shan ZhaiZhai mobile phones mobile phones welcome welcome BeijngBeijng OlympicsOlympics

Catching the atomsphere of Beijing Olympic, a new set inspired by FuwaHuanhuan came out.

This handset is specifically for Beijing Olympic Games. Apart from its very Chinese design, together in the package also includes a Chinese knot.

Buddha preserve me Buddha preserve me -- mobile mobile phone blessed by eminent monksphone blessed by eminent monks

•• It is blessed It is blessed by eminent by eminent monks and monks and even has a even has a certification certification for proof.for proof.

•• A perfect A perfect combinatiocombination of religion n of religion and highand high--tech.tech.

This mobile phone is called Buddha heart and karma. It has a sounding background which is not to be taken lightly.

Shan Shan Zhai'sZhai's little brotherlittle brother

It looks like just a pari of sunglassesIn fact, it's both a

pair of sunglasses and MP3 player.Looks like the “FBI”in hollywood films?

This is a sunglasses MP3 This is a sunglasses MP3 player with 1GB storage. player with 1GB storage. Those three buttons are Those three buttons are shortcut keys. shortcut keys. There are multiple colors There are multiple colors of them. The earpieces can of them. The earpieces can be adjusted and fit you be adjusted and fit you perfectly.perfectly.

They are copied from They are copied from OakleyOakley’’s designs design

Bandits' Secret Weapon: Bandits' Secret Weapon: Taiwanese TechnologyTaiwanese Technology

• Handset chips are the most critical component to design a cellPhone–MediaTek rules this market!• In Shan Zhai land, MTK –Mediatek inside is true brandingpower – deeply rooted in ChineseConsumers minds – “MTK inside”• Mediatek has launched a Revolution in China’s handset Industry, which has helped “Made in China” cell phones narrow theGap with international brands.

�90% share of China’s mobile phone chipset market

�160 million chipsets for cell phones shipped in 2007, that is 60% of its total revenues, 95% of those orders cames from China customer

�MTK system-on-a chip is creating a disruptive innovation revolution, rewriting the rules in a 1.2 billion a year handset industry.

�SoC (system on a chip) integrates software of the phones complex functions onto a single chip, the software includes a menu for simply adding hundreds of function, giving it the ability to tailor to specific vendor product design requirements.

�The guts of these 250 million China-made handsets rely on major components and major assemblies by Taiwanese vendors

ChinaChina’’s Domestic Mobile Handset Industry s Domestic Mobile Handset Industry integrates with Taiwanintegrates with Taiwan’’s ICT Supplys ICT Supply--ChainChain

• Giantplus Technologies, small/medium sized TFT display panels, PlotechTechnology’s printed circuit boards, HarvatekInc’s LEDs and ElanMicroelectronics Corp’s chips to Premier images and Altek Corp’s camera modules, WPG Holdings Electronics component services and Foxconn’sFinished phone assembly (EMS) services, Taiwanese companies have built the world’s biggest handset industry in China.

Final Assembly, QCFoxconn

TFT, LED displays

Software

Camera modules

Silicon chips

Printed Circuit Boards

Crystals, LEDs, Resistors

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Disruptive Innovation from a Disruptive Innovation from a Silicon Chip (Silicon Chip (SoCSoC))

� Combining Taiwan’s handset technology with China’s huge handset market and manufacturing environment, has created an emerging market trend of good quality, fair priced Shan Zhai ji.

� MediaTek is the original catalyst of “Bandit phones”, however, calling these phones low value is unfair.

� China’s handset vendors possess strong capabilities in industrial and mechanical design, also network and inventory management, they can get products to market and expand scale

� Originally, Tier #1 handset brands controlled design/manufacturing of cell phones from start-to-finish, monopolized the setting of handset specs and standards, dictated OS and chipset design core of each phone, controlling supply chain, chipsets were limited to Qualcomm, TI or Infineon OS platforms.

� Taiwan ODMs served big OEMs, could not gain critical mass for a long time, then MTK had a technology breakthrough, launched disruptive innovation and helped bridge the chasm between handset manufacturers and handset chipset makers. Innovation through differentiation!

Shan Shan ZhaiZhai JiJi by any by any other name!other name!

Breaking the Mobile Phone Breaking the Mobile Phone Chipset MonopolyChipset Monopoly

� The development process of a new cell phone, from R&D and circuit and mechanical design to tooling and mass production, takes 9 months.

� MTK’s handset chipset platform integrates complex technical devices (digital camera, video camera, MP3s, RF radio, PDA, PIM functions) all on one chip, has customized 100 different modules for customer differentiation. After checking off functions needed, a price is quoted to each customer, then Customization of the chip and software takes just a few days to be ready! Now, it takes only 1-3 months for a new phone

� MTK chips help strengthen handset vendor’s strengths in software integration capabilities, thereby allowing them to concentrate resources on developing new Applications/functions.

� Handset vendors are able to streamline product design process and this allowed many new handset design houses to pop up for the past 3-4 years in Shenzhen, Beijing and Shanghai. Now orders for as low as 20K~30K can be delivered in 45 days.

Complete TurnComplete Turn--Key Operating ModelKey Operating Model

� MTK has focused the energies of Bandit Handset troops, now able to challenge established armies of Nokia and other big branded multinational handset players

MTK has transformed itself into a customer service-oriented software company

Bridging Global Shan Bridging Global Shan ZhaiZhai JiJi MarketsMarkets� Taiwan’s ICT sector is helping China’s phone vendors

develop presences in emerging markets around the world, to penetrate lower end markets that multinational brands have ignored.

�MTK has set up branches in India, is acting as a match-maker to introduce other Chinese handset customers, helping telecom operators in many countries connect with mobile phone vendors in China.

�China’s mobile phones have essentially replaced MP3 players, FM radios, telephones, digital cameras and TVs, all this now going to emerging markets.

�Shan Zhai Ji handset vendors have adopted a “Blue Ocean”strategy of selling into emerging markets where price is very sensitive and quality not expected to last forever – they sell well and are undercutting Western brands in these markets, just like they have in the China market.

From birth as Shan From birth as Shan ZhaiZhai JiJi to global brandto global brandThe chance to grow into Shan Zhai Ji, to produce handsets with, no-name, no brand, no service, no guarantee, no manual, not sold in operator-sponsored retail chains, many designs started to use MediaTek SoC chips.

Possible partnership with China mobile for “Xin Ji” ��

handset customization projects

Possible Network access license verification and approval means operators will begin welcome them into their networks

China’s Handset industry starts to rise

2001

Today’s Shan Zhai handset vendors have a real chance to move from back alley’s to boardrooms – the possibility exists to create a global brand

2007 2008

2009

Domestic License requirement to produce handsets waved to stir on competition

2005

ShanzhaiShanzhai mobile phone's Blue Ocean mobile phone's Blue Ocean strategy graph and coordinate systemstrategy graph and coordinate system

pricequality Target customer group

performancelow

high

individuation

Shanzhai mobile phone

Intellectual property

license

Eliminate licensing ofEliminate licensing ofIntellectual propertyIntellectual property

Add various outstanding Add various outstanding Functions @ Extremely Functions @ Extremely low priceslow prices

Decrease Quality Decrease Quality ��lowlow--cost chip, manufacturingcost chip, manufacturing��service marketingservice marketingTarget customer groupTarget customer group

Create Distinctive feature Create Distinctive feature characteristiccharacteristic

Standard mobile phone

marketing service

•Mobile phone have become “everyday consumption”•Lowest cost gives it a competition advantage•Mainly focus on rural and middle and low level markets•Distinctive characteristics

Blue Ocean Strategy is a way to make the competition irrelevant by creating a leap in value for both the company and its customers.

ConclusionConclusion�The Globalization of Technology has caused the global

supply chain shift to Greater China for the entire handset ecosystem, technology continues to migrate Westward.

� The Local Chinese and Shan Zhai handset market vendors are a very important growing handset market channel, set into motion by MTK – MediaTek’s Blue Ocean strategy with destructive innovation results in the handset industry the last two years.

�We are witnessing the emergence of a new Hacker-entrepreneur class of vendors able to create new brand adoption.

� � �

Mobile Monday Beijing 28

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