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Market Saturation or Greater Competition? Netease to Join the Smartphone Party

As if the market needed any more smartphones. Rumor has it that Netease (NASDAQ:NTES), the Internet giant responsible for 163.com, will be producing its own phone in cooperation with an unannounced “famous” manufacturer.

Though the details are still largely in the dark, the move is likely to take advantage of what is now the world’s largest smartphone market.  Though Apple, Samsung, and other large players have already taken a lion’s share of the worldwide smartphone market, China’s domestic market might see some upheavals in the next few years as Internet companies and new entrants eagerly grab for a piece of the pie.

According to a recent report from Ericsson, approximately 32% of current mobile users (1.02 billion in China) intend to upgrade to a smartphone in the next 29 months. This is an attractive target, as the market is expected to reach a total value of 200-300 billion RMB ($32-48 billion) in the next two years. The Daily Economic News reports that this could mean as many as 278 million new users nationwide by 2014.

Netease has not denied the rumors, and it is said that they already have a prototype of the phone, though the release date has not been determined. With its already established Internet infrastructure, Netease should be well-positioned to bring its existing user base to any potential mobile platform. It is already a major web portal for Chinese users.

If sources are correct, the smartphone will come equipped with a 4.3-inch screen and a 1.5Ghz dual-core processor at a price below 1000RMB ($158). This will bring them into fierce competition with many other players.

This news comes in tandem with a slew of other phone releases. As reported yesterday, Xiaomi has released a Youth Edition and Baidu will release its own “Cloud” smartphone both at budget prices.

Yet other companies have also been gradually entering the market. According to TechinAsia, Shanda, the tech giant responsible for the Bambook e-reader, will release its own smartphone in June. Additionally, Technode reports that Qihoo 360 will be releasing its own smartphone in cooperation with Huawei.

With the seemingly unending series of phone announcements in recent days, it is perhaps unsurprising that Netease is joining the party. This will inevitably create a lot of confusion for consumers, but there is nothing better than a little competition, right?

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