Alibaba eyes its own OS to run China smartphones

BEIJING — Alibaba Group Holding wants its mobile operating system to run millions of smartphones in China. The fastest solution: Spend some of its cash hoard on a handset maker.

Vice-chairman Joseph Tsai said last month that Alibaba’s homegrown system, YunOS, can knit services together for the company as Asia’s largest e-commerce giant steps beyond clothes and gadgets to entertainment and healthcare. With a market value of US$266 billion (S$351 billion), Alibaba has struggled to push YunOS in China, where more than nine out of 10 mobile devices use Google’s Android.

Alibaba could pursue a possible stake in Xiaomi, China’s largest smartphone seller. Or it could invest in Hong Kong-listed Coolpad Group to guarantee that YunOS is installed on the factory floor. Another option is to target one of the dozens of smaller, closely held manufacturers in China, said research firm Canalys.

“We expect Alibaba to take several attempts at the smartphone market over the next decade,” said Mr Neil Mawston, executive director in the global wireless practice at Strategy Analytics. Mr Bob Christie, a spokesman for Alibaba, declined to comment on whether the company is interested in Xiaomi or Coolpad.

Alibaba runs marketplaces including Taobao, which links individual buyers and sellers, and Tmall.com, which connects retailers and consumers. The company’s mobile operating system is key because China’s online shoppers are migrating from computers to phones and tablets. Alibaba wants YunOS to connect its ever-widening range of services.

Mr Tsai said Alibaba’s long-term goal is to have YunOS in tens of millions of smartphones. That aim dovetails with the government’s push for manufacturers to reduce dependence on Android and its promotion of national champions to rival Google and Apple.

“Local smart devices are heavily reliant on the Android camp,” China’s Ministry of Industry and Information Technology wrote in a report last February. “The development of self-made operating systems is significantly difficult.”

Some smaller manufactures have adopted YunOS. Shenzhen Sang Fei Consumer Communications makes phones running the operating system under the Philips brand and Meizu Technology adopted YunOS this year. Even so, Alibaba does not yet have a backer among the biggest handset vendors in China.

“We always take the long view — 10, 15 years,” Mr Tsai said. “What really matters is that in the long run, a lot of people will be using phones with our OS.”

Android has such a grip in China, the world’s largest smartphone market, that Alibaba needs to do more than just make another mobile operating system, said Ms Vanessa Zeng, an analyst at Forrester Research. A collaboration with Xiaomi is a possibility because Alibaba will struggle to win market share on its own, she said. BLOOMBERG