China Internet Giants Advance Mobile Aspirations

China Internet giants Tencent and Baidu have signed secretive cooperative agreements with Taiwanese cell phone chipmaker MediaTek, according to Chinese media reports Tuesday. Tencent has already put together a team of several hundred to develop middleware for handsets that are based on MediaTek's chipset.

This follows recent reports that Baidu is working on a Linux-based mobile operating system to rival Google's Android OS. Baidu has already poached several of Google China's former employees following Google's decision to run its search engine out of Hong Kong to avoid self-censorship rules in mainland China

Chinese blogs suggest the deal must have state funding in order to succeed and that this may be interpreted as a move against Google, trying to kick Android out of the China market.

Baidu CEO Robin Li has been keen to get into the mobile market for some time. In fact he revealed that Baidu was working on a Linux-based mobile platform last year in an interview with the Wall Street Journal.

Nonetheless, both Tencent and Baidu are expected to launch applications for the Android OS and it seems that these may well be custom software for a MediaTek platform, as the Taiwanese low-cost chipmaker recently announced that it would design chips for Google's open source system.

However Tencent's relationship with MediaTek is not solely based on Android or an as yet unreleased Linux platform like the one suggested by Baidu. The company behind China's most popular instant messaging system has already developed an input method editor, an Internet browser, and a version of its QQ messaging product for non-smartphone platforms based on MediaTek chips. MediaTek is Taiwan's largest fabless design house and the main supplier to the cell phone industry in China, capturing about 70% of the market.

The secretive deals reported today could have huge significance for China's large copycat mobile phone industry, which primarily uses MediaTek chips. Most of the cheap alternatives to high-end smartphones are coming out of Shenzhen and are based on MediaTek's cheaper alternative to costly mobile chipsets.

Tencent has the support of the Shenzhen municipal government and its involvement with MediaTek, together with the open-source Android and Baidu's planned OS, could help to clean up the industry's image, now largely associated with cheap clones and intellectual property theft. With Chinese Internet companies like Baidu and Tencent working with low-cost chip manufacturers using open source platforms, the possibilities for the industry could markedly improve.