There has not been a definitive study done in the market share of so-called China phones, but a conservative estimate has put the number at 8 percent – still small, but is a growing threat.

In the next few years, this number is expected to shoot up as more consumers pick up these cheap units that mimic the functionalities of high-end phones. In fact, these China phones even have features that are not present in branded models.

For instance, a report by research firm Gfk Philippines noted that China phone makers continue to shake the local market by introducing cheap phone models with TV tuners that can pick-up network channels.

This growth of China phones in the country is expected to adversely affect the market share of major phone makers, particularly in the entry-level segment where price plays a major factor.

Mark Sergio, country manager of the local office of Taiwan-based HTC, said the while influx of China phones has clearly eroded the profits of phone firms.

However, Sergio said this development has somehow benefited smart phone makers like HTC since China phones are targeted at the mass market while smart phones are aimed at the high-end segment.

“Since smart phones are software driven, they are not affected very much unlike ordinary phones which can be replicated by hardware makers in China,” said Sergio during a recent opening of the company’s concept store at a mall in Quezon City.

The battleground, he said, has now shifted to the smartphone segment where applications and operating system are crucial ingredients for commercial success.

“Unlike hardware which can be easily commoditized, it takes a lot of high-level knowledge to create software for the mobile sector,” Sergio said.

While the overall revenue of phone makers are expected to slow down because of the invasion China phones and the lingering effects of the financial crisis, the smartphone segment is being regarded as a major source of growth.

Sergio said the mobile OS is a crucial factor that could determine the fate of China phones in the market. “So far, Microsoft and Google have been very strict in licensing their products (Windows Mobile and Android) since their names are on the line,” he said.

The HTC executive said the company will soon rollout two new Android phones in the country, bringing to three its total number of Android-based models. The rest of its phones, of course, is based on Windows Mobile.