Can an ex-Huawei executive help Bytedance crack the tough smartphone market?

This article is co-written by Sarah Dai.

Diehard fans of short video app TikTok – known as Douyin in mainland China – may soon have a new smartphone option tailored to their streaming lifestyle.

Photo credit: Tech in Asia

Seven months after Bytedance acquired patents from Chinese niche phone maker Smartisan, the developer of the ubiquitous TikTok is now one step closer to launching its own smartphone.

A company spokeswoman on Monday confirmed a report in the country’s financial news outlet Caijing about the ongoing development, adding that the new phone is “a continuation” of Smartisan’s planned offering.

The move is seen as bold even for China’s aggressive internet companies, most of which focus on hardware with lower entry barriers such as smart speakers and cable boxes while shunning smartphones, which demand heavier expenditures in research and marketing, according to analysts.

“Gateways that can bring in more users and increase their stickiness are always high priorities for internet companies, and smartphones so far remain the most important access among all,” says James Yan, research director at Hong Kong-based Counterpoint Technology.

“Cashed up, Bytedance wants to probe the possibility and give it a crack,” he says, adding that it would require spending of at least 1 to 5 billion yuan (US$145 million to US$725 million) on an annual marketing campaign alone: a common budget range for the country’s top 10 smartphone vendors.

“The new phone is likely to serve as a test and trial channel for its killer apps, enabling it to develop new applications and receive timely responses,” says Yan. “Bytedance can also adopt next-generation 5G technologies to promote its video applications that it has been good at.”

In a statement on Monday, Bytedance downplayed the foray, saying the development plan was a legacy from Smartisan, aiming to “satisfy demand for existing users.” A company spokeswoman declined to elaborate.

Still, a self-developed smartphone is expected to offer a strong foothold for Bytedance’s fast-expanding universe of internet service offerings, according to Jia Mo, a Shanghai-based analyst at research firm Canalys.

“Development collaboration between the company and Smartisan can extend to vertical sectors like entertainment and education, and open room for niche and bespoke functions,” she said. “Going forward, the smartphone is likely to pave the way for profits from software instead of making money of its own.”

Wu Dezhou, a former executive at Huawei Technologies and Smartisan, currently leads Bytedance’s smartphone efforts, according to the Caijing report.

An automation engineer by training, Wu joined the Shenzhen-based telecommunication giant in 2001 and progressed to research director for Huawei’s smartphone line before Smartisan founder Luo Yonghao poached him in 2016, according to Chinese reports.