Vertu targets China's rich with its Android-powered luxury phones

Taking aim at consumers with deep pockets, Vertu - a former unit of Finland's Nokia Oyj - is among just a few of the companies that have come up with niche handsets with swanky features to help customers stand out from crowds of more plebeian phones.

Vertu, whose phones are said by the media to be popular with celebrities like Madonna and David Beckham, rolled out the leather-clad TI in Hong Kong on Friday.

Costing as much as HK$167,000, the TI - which is cased in titanium - runs Google's Android operating system and has a ruby key for access to concierge services.

"It's not selling a phone. It's selling a lifestyle for Vertu, so there will be people who get hooked to it, especially for people who want to feel privileged," said Teck Zhung Wong, an IDC analyst in Singapore.

With the demand for smartphones rising sharply globally, traditional makers of networking and connectivity equipment have been hoping to bank on the booming market.

Major markets for luxury phones include China, Japan, Russia and the United States, Euromonitor said.

In China, the world's largest mobile phone market, the market size for luxury phones alone is expected to grow to 1.64 billion yuan in 2017, up nearly 60 percent from 1.05 billion yuan in 2012.

The TI joins earlier Vertu offerings, such as a handset created with French jeweler Boucheron that is made from gold and encrusted with precious stones.

While not as heavy on the bling, Russia's Yota Devices will also plunge into the Asian smartphone fray with the YotaPhone, which has an LCD screen on one side and an e-reader display on the other, in the hopes of appealing to readers on the road.

"If you look at the big brands, in the last six years, there was not much innovation in the user experience space," Vlad Martynov, CEO of Yota Devices, told Reuters in Hong Kong.

Yota plans to launch the phone in the third quarter in Russia initially and to global markets after that, with pricing not yet set but likely to run to several hundred U.S. dollars. The target is to sell about one million units in the first 10 months after its global launch.

Vertu and Yota Devices join more established vendors such as the France-based Atelier Haute Communications, which works with TAG Heuer and other luxury firms to create bespoke handsets.

Yet how well the new phones will sell in their target Asian market remains to be seen.

The YotaPhone, for example, may sell well in certain nations, but for China, it could be tough, analysts said.

"I think it might prove a bit more difficult to sell because there are a lot of cheap e-readers around," Wong said. "So I'm not sure whether people want a phone that mimics an e-reader functionality."

© Thomson Reuters 2013