Baidu (NASDAQ:BIDU) has been working on its own smartphone OS – Baidu Yi – for months. We have already seen a couple of phones which run its OS, and now Baidu is planning to make a bigger play. It recently launched a ROM of its OS for the Nexus S, which enables users to install its OS on their phone and switches out Google’s services with Baidu’s. This is a great move, as Baidu could easily target a large user base of existing Android devices and get a free ride off Google’s efforts to push Android devices. 
Apparently, Baidu is also planning to launch more devices powered by Baidu’s cloud powered Android based OS. It is in talks with more than 20 handset manufacturers about making devices powered by Baidu’s localised platform. Baidu aims to target the low end of the market with phones priced below $150. With this, Baidu will compete with the likes of Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) in the Chinese smartphone market. By launching its own platform targeted specifically at the Chinese demographic, and integrating it with all of its online services, Baidu is hoping to expand its user base by leveraging the growing smartphone penetration and eventually monetize it through mobile advertising or something else.
If Baidu’s platform takes off, it could drive significant mobile search volume for Baidu, and further increase its search market share in China, just as we project. You can check out any impact in its online search market share using the chart above.
We currently have a $127 Trefis price estimate for Baidu, which stands around 4% above its market price. Search advertising accounts for a significant portion of its overall value.Notes: