Microsoft Says Windows Phone Will Pass Apple in China
Microsoft Corp. (MSFT), the world's largest software maker, said its Windows Phone operating system will propel it past Apple Inc. (AAPL) in China's smartphone market as its partners release devices costing as little as $158.
Context & Ripple Effects
This is the third act of Microsoft's paid campaign to buy relevance in smartphones: after more than half a billion dollars to jump-start Windows Phone 7 in 2010 and the [[a:Nokia accord reported in March 2011|reported $1 billion-plus payment]] that tied Nokia's handset business to the platform, the company is now staking its growth case on China's low end rather than premium hardware.
The mechanism is price: partners are shipping Windows Phone devices as cheap as $158 (confirmed by Microsoft on 2012-03-21), which positions the platform below anything in Apple's lineup and directly against Android's budget tier. Notably, the pickup was unusually broad — eight syndicated outlets including CNET, PC World, The Verge and the Los Angeles Times carried the same-day claim — though it remains a company forecast, not independent market data, sitting alongside an earlier 2011 effort to support higher application prices on the platform.
First-order effects
- Windows Phone enters China's smartphone market through a $158 price floor that Apple's product line cannot match, putting Microsoft's partners in head-to-head competition with Android vendors rather than with the iPhone at the top of the range.
- Microsoft's claim sets a public benchmark against itself: Apple now has a named challenger asserting it will be overtaken in the world's largest growth market, forcing both companies' China strategies into direct comparison.
Second-order effects
- Chinese handset makers gain a licensed OS whose entry cost Microsoft appears willing to subsidize, strengthening their bargaining position against Android licensing terms and giving carriers a third option beyond iOS and Android.
- App developers who had been courted with promises of higher per-application pricing face a split incentive: the volume story runs through $158 devices in emerging markets, while the revenue-per-user story sits with Apple's premium base.
Third-order effects
- If the subsidy-and-cheap-hardware playbook works in China, smartphone OS share in emerging markets will increasingly be decided by how much platform owners pay to lower the device floor — a structure where deep-pocketed incumbents like Microsoft can rent relevance but must keep paying to hold it.
- A Windows Phone win at China's low end would fragment the two-horse iOS/Android framing that developers and component suppliers were standardizing on, raising the cost of supporting a genuine third ecosystem even as it validates one.
The trend: Mobile platform competition is shifting toward subsidized ultra-low-cost hardware in emerging markets, where operating-system owners buy share through device price floors rather than ecosystem gravity.