Alibaba to invest US$590m in China smartphone maker

Hong Kong

ALIBABA Group Holding has agreed to invest US$590 million in smartphone maker Meizu Technology Co, boosting the e-commerce company's push to get its mobile operating system on millions of handsets in China.

Asia's largest Internet company will hold a minority stake in Meizu and integrate the smartphone's hardware with Alibaba's YunOS software, Alibaba said in an e-mailed statement on Monday. Meizu, which last year released the MX4 and Meizu Blue Charm, didn't rank among China's top five smartphone manufacturers as of the September quarter, according to researcher Canalys.

Alibaba is counting on YunOS to help it grow beyond selling clothes and gadgets into the entertainment and health-care fields as it tries to capture a greater share of China's 557 million smartphone users. With a market value of US$211 billion, Alibaba has struggled to expand the software's reach in China, where more than nine out of 10 mobile devices run Google's Android software.

"Alibaba wants to promote its operating system and fight for mobile access points," Li Yujie, an analyst at RHB Research Institute in Hong Kong, said by phone. "Meizu is one of the better homegrown mobile-phone makers in China, so it makes sense for Alibaba to work with them." Alibaba vice chairman Joseph Tsai said in November that the Hangzhou, China-based company's long-term goal was to get YunOS on tens of millions of smartphones. That aim dovetails with the Chinese government's goals of reducing dependence on Android and promoting national technology champions to rival US giants Google and Apple Inc.

"The investment in Meizu represents a significant expansion of the Alibaba Group ecosystem and an important step in our overall mobile strategy," Wang Jian, Alibaba's chief technology officer, said in the statement. The size of Alibaba's share of the company wasn't disclosed.

Zhuhai-based Meizu sold 1.5 million smartphones last month, chairman Jack Wong said in a Weibo posting on Feb 5. The company's phones use chips from MediaTek Inc, displays from Sharp Corp and camera sensors from Sony Corp, according to the company's website.

"This strategic collaboration with Alibaba Group will enable Meizu to further develop our smartphone business and our smart devices ecosystem," said Meizu's Chief Executive Officer, Yongxiang Bai.

Some smaller manufacturers have adopted YunOS before. Shenzhen Sang Fei Consumer Communications Co makes phones running the operating system under the Philips brand.

"This isn't too big an investment," said Mr Li of RHB. "It's possible that Alibaba will make similar investments in other smartphone makers in the future, as well." BLOOMBERG