In addition, Sina provides a lot of wireless applications and developments. The operator also needs cooperation in other aspects, including advertising and video, among other things. As long as it is mutually beneficial for both parties, we can cooperate, and we are actively exploring this.
Host: You revealed on Weibo that now we are not only promoting 3G smartphones priced at a thousand yuan but also targeting the mid-range between high-end phones and thousand-yuan smartphones, specifically between 1500 to 2000 yuan. Why are we starting to focus on this segment? Can the model of the thousand-yuan 3G smartphone be successfully replicated in terminal phone models?
Host: We warmly welcome Mr. Yu to Sina! This year, 3G has developed particularly fast. Since 2009, when China Unicom started introducing the iPhone 3GS, a man bought a new phone worth 68,000 yuan, which malfunctioned after a few days of use. Last year, the iPhone 4 was introduced, and this year, we began with thousand-yuan 3G smartphones. The terminal strategy has significantly promoted the development of 3G. I wonder what kind of mental journey you have experienced over these three years?
Sina Technology News, November 30 morning message, Yu Yingtao, General Manager of China Unicom Sales Department, said during a visit to Sina's interview room that by the end of this year, the sales volume of China Unicom's thousand-yuan 3G smartphones will exceed ten million units. By the end of the year, an upgraded product redefining the thousand-yuan smartphone will be launched. Next year, the focus will shift to mid-range premium smartphones priced between 1500 to 2000 yuan. Video: Exclusive Interview with Yu Yingtao, General Manager of China Unicom Sales Department Media Source: Sina Technology.
Previously, trendy mobile phones were sold for more than 2000 yuan or even 3000 yuan. Some music phones relied heavily on high advertising investment and hype. Now, these face significant pressure. Our 3.5-inch screen thousand-yuan smartphone is already priced at 999 yuan, offering great value. We aim to enable 63.3% of users to quickly enjoy China's 3G mobile internet lifestyle.
Yu Yingtao: This should be asked to MIIT; I cannot control MIIT's decisions.
In the future, there will be 4G. With further expansion of our mobile bandwidth, operators and the internet are tightly bundled together or integrated, providing content-rich, quick, and convenient applications to a wide range of consumers and all sectors of society. My concept is that operators must embrace the internet and mobile internet companies, while the internet must also embrace operator enterprises, forming an ecosystem.
Based on this background, we jointly launched efforts with manufacturers, which greatly exceeded our expectations after launch. Our initial plan was to sell one million units within a year, but these one million units were sold out in just two months. The Huawei, Coolpad, Amoi, and Lenovo phones we launched were also very successful. It is expected that by the end of this year, from June onwards, sales of thousand-yuan smartphones will exceed ten million units within half a year.
Yu Yingtao: Currently, frankly speaking, due to various costs of international brand manufacturers, including labor and R&D costs, it is very difficult for them to achieve a thousand-yuan smartphone. However, they still have hope for phones priced between one to two thousand yuan, given their brand appeal. Therefore, we want to find some convergence points between 1500 to 2000 yuan, working with international first-class brands and domestic first-class brands to create ultra-high-performance-to-price smartphones. First, it offers opportunities for domestic phone brands to enhance their reputation, while also providing international brands with the chance to extend their product lines downward and expand market share, further enriching China Unicom's product line. In 2012, we will focus on differentiated, characteristic products within the 1500 to 2000 yuan range. This is our overall strategy.
Host: We are still exploring and currently cannot tell you exactly what kind of business model exists.
Yu Yingtao: Thank you to all netizens, thank you!
Frankly speaking, China Unicom and ZTE made every effort possible, officially launching on June 1st. At the time, our idea was to redefine what truly constitutes a good internet experience internet phone.
Yu Yingtao: The entire distribution ratio of phones in China shows that those priced below a thousand yuan account for 63.3%, above 2000 yuan account for 20%, and the middle segment accounts for another 20%, making up a considerable user group between 1000 to 2000 yuan.
Yu Yingtao: Now we collaborate with Sina in many ways. For instance, the exclusive cooperation with Sina in the promotion of ten thousand thousand-yuan smartphones giveaway is exclusively through Sina Weibo. Frankly speaking, Sina Weibo is ranked first in China and is the most well-known Weibo platform. Of course, my Weibo account is also on Sina.
From GFK's statistical report, among China's 900 million mobile phone users, those using phones priced under a thousand yuan account for 63.3%, while those using phones priced over 2000 yuan account for only 15% to 20%. If operators only focus on the iPhone and similar high-end phones, including Nokia, Samsung, Motorola, they can only meet 20% of China's market needs, leaving over 80% of users still using feature phones.
Host: If we only do the iPhone and other high-end phones, the 3G penetration rate would only reach 20%. Currently, the 3G penetration rate is less than 20%, but happily, by October, the number of 3G users has exceeded 100 million. I remember China Unicom had a goal of reaching 25 million net new 3G users by the end of this year. You have publicly committed to this on Weibo. With only two months left, can we achieve this goal?
Host: Do we need to redefine 3G?
Among all devices, mobile phones are the most important because they bridge the communication gap between operators, content providers, and consumers. All mobile internet applications pass through the phone, so I believe mobile phones play the most crucial role in the mobile internet and 3G industry.
Recently, I saw some well-known insiders on Weibo talking about how China Unicom should act, and I came out to refute their views. China Unicom has always regarded the iPhone as its most important strategic product. Our cooperation with Apple is excellent and without issues.
The success of the thousand-yuan smartphone operation mode has reshaped and restructured the entire industry in terms of pricing and channel strategies. The rapid growth of a product and its user base is not only related to the phone and the operator but also involves channel distributors joining the mobile internet feast, accelerating the promotion of phones through their channels to consumers. The launch of the thousand-yuan smartphone completely changed the current state of China's entire mobile phone ecology.
Yu Yingtao: I have been observing how Sina Weibo makes profits and what its profit model is. This model must suit the feelings of ordinary people. If it becomes purely commercial, many people may leave. This is a challenge for Sina. High-level executives of China Unicom have communicated multiple times with Sina’s top management. We hope to explore common ground between operators and Sina Weibo, finding some convergence points to benefit consumers, Sina, and China Unicom. Both Sina and China Unicom are enterprises, and we aim to explore a win-win situation, finding a shared business model.
Recently, our development speed hasn't kept up, causing much speculation. There has been a severe shortage of supply for thousand-yuan smartphones, insufficient chip supplies, and floods in Thailand affecting parts production, leading to an overall shortage of phones. Starting from November, capacity will fully meet demand. Therefore, we expect explosive growth in our net new user numbers in November and December. We will definitely exceed the target of 25 million.
Host: This means achieving over 3 million per month in the remaining two months.
"Initially, we planned to sell one million units in a year, but these one million units were sold out in just two months. The Huawei, Coolpad, Amoi, and Lenovo phones we launched were also very successful. By the end of this year, sales of thousand-yuan smartphones are expected to exceed ten million units," said Yu Yingtao.
We sincerely thank Mr. Yu for visiting Sina's interview room. We hope he will frequently come to inspect and visit us, bringing more and better 3G phones to consumers. Thank you, Mr. Yu.
Host: Is this a bit like a fairy tale?
I remember clearly, in May, there was a set of data showing that the total monthly sales of 3G phones in the entire Chinese market were only 80,000 units. By October this year, the domestic sales of 3G phones had exceeded 12 million units, accounting for 50% of the entire mobile phone market share. This change occurred over a short span of two and a half years, with smartphones already accounting for 35%.
Host: Are you forcing me to ask the next question, which is when will the iPhone 4S be introduced?
Host: And they have explicitly stated that they will not produce thousand-yuan smartphones.
Host: Before, China Unicom focused on iPhones and other high-end phones. This year, in the middle of the year, we redefined the thousand-yuan 3G smartphone, specifying a 3.5-inch screen, a CPU above 600 MHz, and a price below a thousand yuan, aiming to provide users with a good 3G user experience. Suddenly shifting from high-end to thousand-yuan smartphones was hard for many people to accept, questioning why China Unicom's strategy changed suddenly. However, the strategy has proven highly successful, with our phones in high demand. I wonder what considerations led to this strategy and whether any risks were anticipated.
Below is the interview transcript.
App Store has 425,000 applications, with cumulative downloads exceeding 14 billion. Everything imaginable is available, including dining, entertainment, weather, games, social networking, and recently, PM 2.5 monitoring. It educates consumers on what mobile internet is and allows them to enjoy various applications anytime, anywhere.
Simultaneously, we are focusing on mid-range phones priced between 1000 to 2000 yuan, choosing high-performance options from both international and domestic brands to satisfy consumer demands and align with China Unicom's business development. While we focus on thousand-yuan smartphones, high-end phones represented by the iPhone remain our promotion priority, and we will not abandon them.
Host: Let's talk specifics. What did you observe during your visit to Sina? Are there potential areas for closer collaboration in the future?
Yu Yingtao: We continue to promote.
Yu Yingtao: This is a common term or way to refer to the 3G industry.
Host: Previously, China Unicom mainly focused on iPhones and other high-end phones. Mid-year, we redefined the thousand-yuan 3G smartphone, specifying a 3.5-inch screen, a CPU above 600 MHz, and a price below a thousand yuan, aiming to provide users with a good 3G user experience. Shifting suddenly from high-end to thousand-yuan smartphones was hard for many people to accept, questioning why China Unicom's strategy changed suddenly. However, the strategy has proven highly successful, with our phones in high demand. I wonder what considerations led to this strategy and whether any risks were anticipated.
Interview Transcript:
The App Store has 425,000 applications, with cumulative downloads exceeding 14 billion. Everything imaginable is available, including dining, entertainment, weather, games, social networking, and recently, PM 2.5 monitoring. It educates consumers on what mobile internet is and allows them to enjoy various applications anytime, anywhere.
At the same time, Apple is closed. Regardless of the first, second, third, or fourth generation of Apple, soon moving to the iPhone 4S, the screen size remains at 3.5 inches, rectangular in shape. Due to the unchanging format, all applications fit perfectly in the App Store, ensuring excellent compatibility. Why do people love using iPhones?
Yu Yingtao disclosed that China Unicom plans to upgrade the thousand-yuan 3G smartphone strategy, with specific details to be announced by the end of the year.
Yu Yingtao mentioned that besides the thousand-yuan 3G smartphone, mid-range smartphones priced between 1500 to 2000 yuan will become one of the key focuses of China Unicom's 2012 smartphone strategy.
By the end of the year, the sales volume of thousand-yuan smartphones will break through ten million units.
Yu Yingtao recalled that in May 2009, the monthly sales volume of 3G phones in the entire Chinese market was only 80,000 units. By October this year, the domestic sales of 3G phones have exceeded 12 million units, marking significant changes over the past two years.
Regarding the thousand-yuan 3G smartphone strategy launched by China Unicom this year, Yu Yingtao expressed unexpected success.
Yu Yingtao stated that on January 7, 2009, the MIIT issued 3G licenses to the three major operators. After intensive construction, on May 17, 2009, the three major operators successively launched 3G services. Due to the late issuance of the license, all phone manufacturers were not adequately prepared. After the launch of the 3G network, regardless of WCDMA, CDMA2000, or TD, there was a shortage of terminals and limited variety. Thus, in 2009, the development of 3G business was still in its infancy and relatively slow.
This June 1st, all three operators were promoting thousand-yuan smartphones. At that time, the concept of thousand-yuan smartphones was a 2.8-inch screen, resistive screen, requiring a pen for input, feeling very unsmooth and unsatisfactory. Moreover, the price was quite high. We analyzed whether it was possible to bring the good application experience of Apple to a smartphone priced around a thousand yuan.
Host: So quickly?
Yu Yingtao: Everyone sees the data we released in October; our net increase in active users in October was 2.92 million. From January to October, we completed a net increase of 19.09 million users, leaving two months to reach our goal of 25 million users, with 6 million remaining.
Yu Yingtao: This is very clear; once MIIT issues the license for the iPhone 4S, China Unicom will start selling it. It does not depend on us.
Host: Okay, I think I need more intelligence to challenge you. Talking about smartphones with Mr. Yu today enriched my understanding of smartphones. Although I have been following the development of smartphones over the past year and tracking China Unicom's smartphone strategy, my previous understanding was insufficient. Today, Mr. Yu teased a lot, such as the upgrades to the thousand-yuan smartphones by the end of the year, which we couldn't get out of him today, so we can only look forward to the announcement of China Unicom's new smartphone strategy by the end of December.
Host: So Mr. Yu, give us a hint?
Yu Yingtao: We have some business ideas, but they cannot be disclosed here.
Yu Yingtao: I don't entirely agree with your point of view because the composition of consumers is different. Some people like to buy 3000-yuan phones, some prefer 2000-yuan phones, and others like 1500-yuan phones. These happen simultaneously. For China Unicom, managing so many product lines is challenging, but difficulties must be overcome. This is not about whether we should do it but about meeting consumer needs.
Host: In this process, I found that besides cooperating with terminal manufacturers and application developers, especially large internet companies like Sina, there will be more cooperation. Originally, Sina was at the bottom level, like embedding an application. Now, Weibo has obviously moved to the forefront. I noticed that operators and internet companies are getting closer. Do you think this is a trend?
Yu Yingtao: An open market where phone manufacturers or brand manufacturers, based on their understanding of the industry, create phones that attract consumers and meet their needs.
Besides thousand-yuan 3G smartphones, Yu Yingtao indicated that mid-range smartphones priced between 1500 to 2000 yuan would become one of the key focuses of China Unicom's 2012 smartphone strategy.
On June 1st this year, China Unicom announced the redefinition of thousand-yuan 3G smartphones, creating phones with a 3.5-inch screen, a CPU above 600 MHz, and a price below a thousand yuan, providing users with a good 3G internet experience. China Unicom and ZTE launched the V880, ordering one million units.
For the high-end phones like the iPhone that everyone cares about, Yu Yingtao emphasized that China Unicom would never abandon the iPhone. Regarding the launch time of China Unicom's iPhone 4S, he stated, "We have already made all preparations and are just waiting for a license from MIIT." (Xiuqian)
Yu Yingtao recalled that in May 2009, the monthly sales volume of 3G phones in the entire Chinese market was only 80,000 units. By October this year, the domestic sales of 3G phones have exceeded 12 million units, indicating significant changes in the market over the past two years.
Mentioning the thousand-yuan 3G smartphone strategy launched by China Unicom this year, Yu Yingtao expressed unexpected success.
Yu Yingtao: The proposal of thousand-yuan smartphones has a background. Honestly, on October 1, 2009, China Unicom introduced the 3G version of the iPhone 3G, followed by the 3GS. After the iPhone entered the Chinese market, it caused significant changes by educating us on what true mobile internet is. Due to the semi-open nature of the iPhone, allowing any operator, developer, or individual to develop and create such modes, it became popular.
Yu Yingtao: This is clear; once MIIT issues the license for the iPhone 4S, China Unicom will begin selling it. It doesn't depend on us.
Host: Does this mean we are ready?
On May 31st, China Unicom announced the redefinition of thousand-yuan 3G smartphones, creating phones with a 3.5-inch screen, a CPU above 600 MHz, and a price below a thousand yuan, providing users with a good 3G internet experience. China Unicom and ZTE launched the V880, ordering one million units.
Yu Yingtao: Thousand-yuan smartphones emerged due to the progress of technology, raw material introduction, price reduction, and scale-driven guidance. We attempted to make it a reality.
3G phones are beginning to experience explosive growth.
At the same time, Apple is closed. Regardless of the first, second, third, or fourth generation of Apple, soon moving to the iPhone 4S, the screen size remains at 3.5 inches, rectangular in shape. Due to the unchanging format, all applications fit perfectly in the App Store, ensuring excellent compatibility. Why do people love using iPhones?
We are pleased to see the global quarterly data just released, showing that the sales of 3G phones in the domestic market have exceeded 29 million units, surpassing America's 26 million units, making it the world's largest mobile internet market. This is thanks to the entire industrial chain, including phone manufacturers, operators, and numerous application developers, many of whom are individual consumers. The integration of the entire industrial chain indicates that the era of 3G mobile internet explosion has arrived.
Yu Yingtao: We have some commercial ideas but cannot disclose them here.
We chose Sina and Sina Weibo for cooperation because we see the advantages of mobile internet companies in publicity, promotion, and dissemination. Therefore, I believe these collaborations have already begun.
All manufacturers produce phones of various sizes and hardware configurations, but applications are difficult to adapt. Whether a phone runs smoothly and whether consumers use it well depends on the coordination between applications and hardware. However, Apple precisely created such a chain, always having only one model to adapt to countless applications.
Currently, top international high-end brands, such as Nokia, HTC (a Chinese brand), do not offer phones below 2000 yuan.
Yu Yingtao: On May 31st, China Unicom held a significant press conference at Xiangshan, releasing the V880 co-created with ZTE. China Unicom concentrated on purchasing one million units, a large order. ZTE made tremendous efforts, overcoming various costs, almost approaching cost price, to launch the first 3.5-inch screen, 600 MHz main screen touch-screen capacitive phone priced at 999 yuan.
Our smartphones priced between 1000 to 2000 yuan will remain China Unicom's most important work next year. The thousand-yuan smartphone will be upgraded, details of which are inconvenient to disclose now, but by the end of December, there will certainly be a very important product to surprise the broad consumer base. This product will be the upgraded version of the thousand-yuan smartphone, surely giving consumers a huge surprise.
Operators and Internet Companies Must Form an Ecosystem
We are very happy to see the newly published global Q3 data, showing that the sales of 3G phones in the domestic market have surpassed 29 million units, exceeding America's 26 million units, making it the world's largest mobile internet market. This is thanks to the entire industrial chain, including phone manufacturers, operators, and numerous application developers, many of whom are individual consumers. The integration of the entire industrial chain indicates that the era of 3G mobile internet explosion has arrived.
Yu Yingtao: To answer your question regarding the terminology of 3G, it can be called Mobile Internet. Therefore, mobilizing the internet or conversely, the mobile internet, necessarily involves operators, who are originally pipeline providers. People say you shouldn't be operators; operators are pipeline providers like highway companies with many cars running on them. Our operator networks run many applications provided by content developers and providers. Internet companies themselves are content providers and integrators of comprehensive applications. All internet content must run on the mobile internet and 3G networks, the pipelines. Whether we