SMARTPHONES: Google Ties With Lenovo, Makes Rare China Comment

Bottom line: Google’s new alliance with Lenovo and its rare response to rumors Chinese media rumors are the latest signals of its plans to launch an app store and sell its Nexus smartphones in China later this year.

Google Tangos with Lenovo

Google (Nasdaq: GOOG) has been in the China headlines twice these last few days, announcing a new tie-up with local PC giant Lenovo (HKEx: 992) and issuing a rare response to the latest rumors on its slow march back to the world’s biggest Internet market. These latest signals seem to show that a return to China is almost inevitable for Google, which wants to avoid a negative publicity backlash that will inevitably come when it announces the move later this year.

Google abruptly shuttered its China search service nearly 6 years ago, after Beijing refused the company’s demands to ease strict Chinese rules that require all Internet sites to self-police themselves for politically sensitive content. The closure and acrimony that followed carried a healthy dose of self-righteousness by Google, and thus a return to a market it once scorned might seem just a tad hypocritical.

But these days no one seems bold enough to write off the China market completely, perhaps because it’s the world’s biggest for both wired and wireless Internet use. That fact certainly hasn’t escaped the attention of Google, which has sent a steady stream of signals that it wants to open a Chinese version of its Google Play app store and sell its signature Nexus phones in the market by the end of this year. (previous post)

Let’s begin with the new tie-up, which will see Google and Lenovo collaborate to make smartphones as part of a Google project called Tango. (English article; Chinese article) Details about the tie-up are quite vague, probably because the 2 sides rushed to finalize the announcement in time for the world’s biggest consumer electronics show CES that took place in Las Vegas last week.

Tango is the name for Google’s program for a new generation of smartphones with 3 dimensional capabilities. There’s no word on when Lenovo’s Tango smartphones will come out, or whether Google might choose other partners. This new smartphone tie-up comes just months after Google announced that Chinese telecoms giant Huawei would produce one of its latest Nexus smartphone models, the 6P. (previous post)

I’ve previously called the Huawei tie-up a bit of brown-nosing by Google, since Beijing is probably pleased by the move that gives the Google stamp of approval to one of China’s leading tech firms. But if the Huawei move was partly done to curry favor with Beijing, this latest tie-up with Lenovo looks like a complete snow job to win over Chinese leaders.

That’s because Lenovo is known for its cheap, low-quality smartphones that break easily, which isn’t really the kind of image Google would normally choose. By comparison, Huawei really is known as an experienced maker of high-quality products that are a cut above the cheaper fare now produced by many Chinese smartphone makers.  Thus this new partnership looks like good publicity for Lenovo, but less advantageous for Google unless the Internet giant is trying to brown nose Beijing.

Squashing Rumors

Next there’s the rare Google comment, which came after Chinese media noticed the company was hiring some 60 locally-based workers and said the move could be a prelude to its China homecoming. Normally Google would ignore such speculation. But in this case it took the unusual step of issuing a brief statement saying its current wave of hiring was similar to patterns from the last 3 years. (Chinese article) And to make sure no one’s feeling would get hurt, it even thanked the media for their interest in the story.

The truth is that Google really never did leave China, and maintains a staff of hundreds to assist in its various activities in the country. One of the biggest of those is support for developers of apps that operate on Google’s Android operating system, which powers most smartphones used by Chinese consumers. Google also maintains its original China search address at google.cn, though the site is mostly a placeholder that re-directs users to its Chinese language search service based in nearby Hong Kong where mainland censorship rules don’t apply. 

As a longtime watcher of Google in China, I can say with a good degree of confidence that each of these latest moves would look somewhat unusual in normal circumstances, since they aren’t really consistent with Google’s general business practices. But the moves make much more sense in the context of plans for a major new push into China, and I do expect that Google will formally announce such a move later this year.

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