Alibaba moves into smartphones with US$590m investment in Meizu

9 Feb 2015

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With money to burn, Alibaba is now looking to move into smartphones by spending US$590m to garner minority control of Meizu, one of China’s up-and-coming smartphone manufacturers.

Compared with some other Chinese manufacturers in the market, Meizu is considered one of the smaller manufacturers given that it holds little more than 2pc of China’s ferociously competitive marketplace.

According to figures from the IDC, China currently has 1bn mobile phone users, out of a population of 1.3bn, 40pc of which use smartphones which indicates the importance of tapping into its vast resources.

For this reason, with the help of one of the largest and fastest-growing e-commerce companies in the world, Meizu are aiming to use it as a platform for future expansion while taking away from the likes of the much larger national manufacturers Xiaomi, Huawei and Lenovo, not to mention the other Asian giants of HTC and Samsung.

In return, Alibaba are not looking to piggyback off their mobile phone technology to follow a similar path to its American competitor, Amazon, but rather sees Meizu’s phones as a platform for the roll-out of its own operating system and software.

Testing the marketplace

Last year, Meizu released its largest number of phones in a bid to get its products more noticeable on the market but despite some pretty favourable reviews, the company still needs to achieve more if it is to bring its market standing at more than 2pc.

For this reason some industry analysts, according to Reuters, see Alibaba's move as something akin to an experiment.

Speaking to the news agency, Michael Clendenin, managing director of Shanghai-based RedTech Advisors said, “You could say they're spending $590 million to experiment a bit and see what happens – it's an expensive experiment, right?

"My concern is that some internet players are confusing being able to just spend a couple hundred million dollars to buy a piece of hardware that looks pretty cool but is essentially a copy of what Apple has done and what Xiaomi has done."

Alibaba image via Shutterstock

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Colm Gorey is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com