So, you thought China's mobile phone industry specialised in low-cost look-alike phones? Think again. On the left, we have the catchily named E2831 from the equally catchily named E28, a small manufacturer based in Shanghai.

Despite its obvious good looks, the E2831 would have probably passed unnoticed among the countless others on display at last week's 3GSM trade show in Barcelona if it wasn't for the fact that its a dual-mode Linux-based phone.

Dual-mode, in this case, means that the phone will work on GSM networks -- all four frequency bands -- just like any other phone. But if you are in range of Wi-Fi hotspot, the phone magically converts into an IP phone so your phone calls go free of charge via the internet rather than over the mobile network

There has been a lot of talk in the industry about the prospects for this concept of fixed-mobile convergence (FMC) and a few operators, such as BT in the UK, have actually launched commercial FMC services.

But most FMC handsets that EngagingChina has seen tend to be clunky and unappealing, and have limitations compared to a regular cellphone. E28's phone, by contrast, is as stylish as a high-end cellphone and has similar ease of use, talk time, size and weight.

The only drawback is the device's cost -- around $250. E28's CEO Roger Kung (pictured right) told EngagingChina he thought the relatively steep price was justified because the handset is in effect two devices in one: a fully-featured smartphone combined with a device that that can be used to surf the internet or make VoIP calls on Wi-Fi networks.

The most obvious market is the business traveller who can use the VoIP capabilities to make calls via WiFi networks in airport lounge, cafes and the like and so avoid paying sky-high roaming fees. Other potential users include exchange students, migrant workers and other who regularly use their mobile phone outside their home country.

EngagingChina remains to be convinced that there is a substantial market for FMC devices like this. However, Kung believes the time is ripe and says interest is growing all the time.

There are three clear markets: VoIP service providers, ISPs who want to offer an FMC service, and mobile operators --- we have already signed Taiwan Mobile. But when we look closer at this device, we see that it can support five or six new business models. "

Can a small company like E28 really compete with the giants of the phone industry? Kung argues it can if it sticks to niche opportunities and keeps costs down. All E28's phones are Linux-based, a factor that has "given us a lot of advantages" as it lowers software development costs.

The company employs around 250 people and the manufacturing is done by Taiwan's Inventec, which has a minority stake in E28.

Kung is an interesting guy, passionate about Linux yet with extensive experience in the mainstream mobile phone industry, mostly at Motorola where in the 1990s he helped transform of China into a global manufacturing centre for the US firm. He then retired from Motorola and founded E28 in 2002.

Technorati : E28, Motorola, VoIP, cellular, china, competition