Android Branding to Boost Vendors

June 10, 2009

Andy Rubin’s comments at the recent Google I/O conference regarding the three varieties of Android highlights why the operating system is great news for Chinese and Taiwanese handset vendors and no doubt leaves competitors searching for answers on how to deal with what is potentially a long-term threat.

To summarize, the three Android options are as follows:

• Obligation-free – Device makers can provide access to applications, the only constraint being a restriction on preloading popular Google apps like Gmail and Google Maps.
• Partial obligation – Same as above, but manufacturers sign a distribution agreement to include Google apps on the phone.
• The Google Phone option:
  • Physically distinguishable by a Google logo.
  • Includes a number of Google applications that both operator and handset maker agree not to remove from the phone.
  • Both also agree not to censor access to the Android Market.

The latter option is significant because of the instant brand equity it brings to Chinese and Taiwanese manufacturers. Vendors like ZTE are strong ODM players, but have suffered historically with respect to direct consumer recognition; certainly this has hurt their margins, if not overall volumes.

Certainly being able to save an estimated $5-15 on the bill of materials utilizing a free OS platform is attractive, but the real benefit comes from being allowed to reinvent oneself as, effectively, Google. Clearly, the benefits of the Google phone option to any manufacturer lacking brand equity is profound.

Here in Hong Kong, we are already seeing ads from SmarTone-Vodafone proclaiming the HTC Magic as “Cooooooool,” using Google’s iconic multicolored script – cheeky and chic marketing similar in feel and style to Google’s.

We are forecasting 21% smartphone penetration of new-device sales by 2010 (about 375m devices cumulatively for this year and next). How large a portion the Chinese and Taiwanese can secure of this market is unclear, but certainly their prospects look brighter with Google.

— Charles Moon, Manager, AP

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