Not Wanting To Lose, Geely Now Intends To Enter The Smartphone Industry

JAKARTA - The founder and carmaker from China, Zhejiang Geely Holding, plans to make a new venture to produce its first smartphone by 2023. They even want to sell 3 million units of mobile phones in the first year.

According to the memo seen by Reuters, Geely, which also owns Volvo, announced on Tuesday that Company President, Eric Li, also known as Li Shufu, will launch a new company that will make premium smartphones. Geely will take it to a competitive market sector dominated by a handful of giants.

Although Li has made futuristic bets on ventures like flying cars and helicopter taxis, his foray into the phone puts Geely into a highly competitive sector that is no longer growing in China. Even that sector is now dominated by a handful of players including Apple, China Xiaomi Corp, Samsung, and others.

Geely was the first automaker to commit to selling smartphones, although smartphone makers are now also venturing into the electric vehicle market, as Apple has.

"There is a close relationship in technology in the cockpit of smart vehicles and smartphone technology," Li said in a statement. "The main trend for the future is to create a cross-border user ecosystem and provide users with a more comfortable, smarter and seamlessly connected multi-screen experience."

The statement said Li's new company, Hubei Xingji Shidai Technology Co Ltd, had signed an agreement with the Wuhan Economic and Technological Development Zone to set up a headquarters in the central city of Wuhan, where it will develop smart devices including smartphones. Public records show that Li owns 55% of Xingji Shidai's shares.

According to an internal memo seen by Reuters, the project will be funded with an investment of 10 billion yuan (IDR 22 trillion) and also targets revenues of 10 billion yuan in the first year.

It aims to achieve a cumulative revenue of 150 billion yuan (IDR 332 trillion) in eight years. The project will also employ 3.000 people, and eventually be listed on the stock market, the memo also said. Geely declined to comment on the memo.

Handset shipments to China last year fell 11 percent to 330 million units. Globally, consumers are taking longer to upgrade to newer models as performance and feature improvements are incremental.

Will Wong, who tracks the Chinese smartphone market at research firm IDC, said Geely's high brand recognition in China would help it enter the premium market.

"Nevertheless, the focus of Geely's mobile business is likely to further strengthen its ambitions for smart vehicle development, where all automakers are looking for a key differentiator to succeed," said Wong.

Globally, Apple dominates the market for phones priced at over $400, with a 57% market share, according to Counterpoint Research. Samsung followed behind with a 17% share.

Consumer hardware companies have piled up in the smart electric vehicle sector.

In March, Xiaomi founder Lei Jun said his company would officially enter the electric vehicle market and invest USD 10 billion over the next 10 years. Huawei and Foxconn have also entered the sector through partnerships, while Apple has reportedly been doing research and development for its own smart cars.