Blackberry Vs Redberry: Who Will Win in China (RIMM, PALM, MOT, NOK)

by: David Wolf posted on: April 21, 2006 | about stocks: MOT / NOK / PALM / RIMM

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Over the past weekend there was a slew of media coverage about how Research In Motion's (RIMM) Blackberry is squaring-off against locally developed Redberry in China. Pundits are taking sides, handicapping either RIM (proven business model, software, and service) or Redberry (home-grown, cheaper). Blackberry cheerleaders are drooling over the thought of making their favorite device-cum-addiction the modern, technological equivalent of opium for China's millions of urban yuppies, professionals, and tai-tais.

This is yet another example of how the media are getting China wrong. In the end, the Berry Wars are going to be a tiny blip on the radar in China, and inevitably a big disappointment to RIM, Redberry, and the two carriers.

Blackberry and Redberry both rely on input systems based on small versions of the standard typewriter/computer keyboard. This system is generally referred to by the industry as the "QWERTY" system (for those of you who don't get why, check the upper left-hand corner of your keyboard. We'll wait.) This is an obvious problem in a region (the PRC, Taiwan, Hong Kong, Macau, Japan, and Korea) where the alphabets exceed the size of the keyboard by a factor of about 100.

Decades of work have gone into developing software kludges that will make up for the inadequacies of the computer keyboard in East Asian countries. They are much better than they used to be, but they are still designed for keyboards that you can get both hands onto. Adapting those kludges to the far different environment of thumb-based computing is going to be difficult, and it's not clear whether the result is going to be entirely satisfactory. Typing in romanized Chinese, then selecting a character by scrolling up and down with an arrow key means a lot of keystrokes. Carpal Tunnel, anyone?

This issue will bedevil the two Berrys, and will thus create pressure against uptake. Don't believe me? Ask the folks at Palm (PALM) and other companies who have sold QWERTY devices in China.

Then go and ask companies like Motorola (MOT), Nokia (NOK), and Dupod what kind of smartphone/PDA devices sell, and despite their sworn enmity I guarantee they will agree that the answer is "pen-based character input."

That's right. A competitive war to develop the best Chinese language handwriting-recognition system has resulted in a host of devices whose functionality for Chinese far outstrips that of any thumb-keyboard. The approach meshes brilliantly with the Chinese culture and education system, which emphasize penmanship to the point of calligraphy, and where merely writing characters is considered a demonstration of one's culture.

Makes a miniature typewriter seem crude, doesn't it?

This approach has appealed to the pride Chinese feel in their culture, and has had the extra side benefit of making the devices smaller - a great virtue among phone buyers. (Chinese people laugh at my Treo because the thing is just so huge.)

If all of that sounds like a lot of rationalizing, take a look at the market. The PDA/smartphone market in China is estimated to be between 9 and 10 million devices, the vast majority of which are pen-based. QWERTY makes up a tiny, tiny portion of the market (mostly native or daily English speakers and foreign devils like me.) Motorola - a company that ONLY sells handwriting-based PDAs in China, holds half of the PDA/smartphone market. And they have no plans to sell their much-anticipated "Q" QWERTY phone in Greater China, choosing instead to introduce MING, a handwriting-based PDA phone developed exclusively for this region.

None of this is to say that there will be no market for Redberry and Blackberry in China. There are enough people here - and a diverse enough customer base - that there is a market for nearly everything. Whether that market will be large enough to justify the development effort and marketing dollars, or whether frustration with using a western input system for eastern characters will drive even more users to handwriting-based PDAs and smartphones remains to be seen.

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