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Forget iPhone: 4 Megatrends in China’s Smartphone Market

Tense techno-politics unfolds as Asian suppliers fight over China
8/27/2014 11:45 AM EDT
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lidation
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Smartphone is about user experience
lidation   8/27/2014 12:40:49 PM
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Dude, iPhone's popularity and success is not because it has a large screen with good resolution. I had the experience to mess around with two top Chinese smart phones, the Huawei and the Lenovo. The specs are impressive but it's slow and not very user friendly. If they could improve the user experience that would be a game changer. For now, not so much. 

Sheetal.Pandey
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Re: Smartphone is about user experience
Sheetal.Pandey   8/27/2014 1:26:34 PM
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Durability and customer support is another issue with Chinese smartphones. Locally they may be a hit but globaly people are still reluctant to buy chinese models.

junko.yoshida
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Re: Smartphone is about user experience
junko.yoshida   8/27/2014 2:03:01 PM
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@sheetal.pandey, yes, from the user's perspectives, there may be still a lot to be desired in devices by local Chinese top brands. However, if you ar a component supplier, the four mega trends laid out here illustrates unmistakable facts: Do not ever think you can get away with supplying China's local OEMs and ODMs such devices with the second best spec. They woudn't go near them.

?-??>
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Re: Smartphone is about user experience
?-??>   8/28/2014 5:32:59 AM
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I think user experience is the last thing iPhones have. As you said all specs are below cheaper smartphones.

_hm
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Re: Smartphone is about user experience
_hm   8/28/2014 11:35:38 AM
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Yes, I agree. If you add quality and user experience alongwith cost of ownership, Apple product are pretty low cost!

wilber_xbox
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Re: Smartphone is about user experience
wilber_xbox   8/28/2014 12:17:13 PM
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I agree that Chinese phones and products in general have come a long way from being cheap/flimsy to usable/good and the smartphone brands are competing with popular Korean/Japanese brands. However, comparing them with iPhone just because the specs are better do not make sense. For one, same spec hardware can have large performace difference and second, but most importantly, the software and customer service is the major differentiator between differnt brands.

AZskibum
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Re: Smartphone is about user experience
AZskibum   8/29/2014 1:31:12 AM
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I will go out on a limb with a bold statement: Hardware specs are almost completely irrelevant. The OS, apps & ecosystem are *far* more important -- in China, as in every other country.

junko.yoshida
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Re: Smartphone is about user experience
junko.yoshida   8/31/2014 5:55:14 PM
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No, you aren't going out on a rim to state that. I quite agree. But that doesn't mean a) ordinary consumers won't fall for hardware specs ( and they do because that's the first thing they see); b) parts and component suppliers will take advantage of it.

Sanjib.A
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Re: Smartphone is about user experience
Sanjib.A   8/30/2014 10:44:14 AM
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I have recently seen Xiaomi's Mi3 gaining immense popularity in India...you would need to wait after registering in order to buy the phone. With in minutes the stock gets over. Two main factors: Almost same if not better specs as iPhone and the price, which is almost 1/3 as compared to iPhone's price. As far as the user experience, I guess it is quite satisfactory...and after all now a days we change our phone every two years...hence it makes sense. I had feel of Mi3...I am tempted...thought I would wait for the Mi4.

junko.yoshida
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Re: Smartphone is about user experience
junko.yoshida   8/31/2014 6:02:26 PM
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Xiaomi, which does not sell their phones in retail stores, has truly mastered web-only retail biz, I have been told. They also go out of their way to disclose all the parts and components used in their phones so that they gain "credibility" and "transparency" -- in the eyes of consumers. I'd call it a pretty savvy strategy on their part; but it also feeds into the hardware spec-based feeding frenzy among mobile users.

junko.yoshida
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Re: Smartphone is about user experience
junko.yoshida   8/31/2014 6:11:14 PM
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More on Xiaomi, you can read our exclusive stories at EETimes entitled: 1) Xiaomi Unboxed; 2) Xiaomi Challenged.

chanj0
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Market Position
chanj0   8/27/2014 11:57:16 PM
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The global market position of Apple iPhone will be pretty difficult to shake. First of all, there are enough number of Apple fans that will only buy Apple product and never the others. Secondly, in terms of industry design and the choice of materials, there are no phone come close to what Apple delivers. (In tablet market, I do think MS Surface is beautiful design though.) iPhone user interface is almost unbeatable because of habit.

I do agree the 4 megatrends put certain pressue to other smartphone's makers especially the rise of ODM and the brand to emerging market. Those are the market Apple fails (or reluctant) to penetrate.

junko.yoshida
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Re: Market Position
junko.yoshida   8/28/2014 2:18:50 AM
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@chanj, I agree with you that Apple iPhone's position in the global market is hard to rattle.

But if you are in the business of supplying displays or any other devices to mobile handset vendors (OEMs and ODMs) broadly, these four megatrends are something you need to be actuely aware of.

After all, if you are a chip company or a display company, you don't want your business beholden to just Apple.

chrisnfolsom
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Re: Market Position
chrisnfolsom   8/28/2014 9:02:24 AM
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Eventually the high profit margins and lower technical innovation flexibility will push Apple as you can see now with the superior hardware specs of the Chinese products.  Apple also makes so much profit by controlling the software marketing and channelling and content through itunes which is also reinforcing their overall laptop/ipad and computer sales, but superior spec'd products are availiable on all product lines.


I don't think they will be able to justify their margins for much longer as competitors line up to create parallel solutions on all fronts and will be able to support much lower margins - can Apple survive with the lower margins that will be needed in the newer environment?  I hope Apple can do it, but with the growth of Asia's importantce in the world market will Apple be able to keep innovating enough to justify it's current business model?

wilber_xbox
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Re: Market Position
wilber_xbox   8/28/2014 12:24:48 PM
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@chrisnfolsom, whenever we discuss Apple and its products then we also put some light on the margins that this company has been able to sequeze from its products. And since the start of this century, whatever Apple has come up with has been a trend setter. I do not know for how long they can differentiate their products as uber and cool but one thing that i would wish is that they do not compromise on the quality and customer focus.

docdivakar
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Re: Market Position
docdivakar   8/28/2014 1:36:01 PM
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@chrisnfolsom I think a question to ask here is the inverse of what you posed below (i.e., can Apple survive with the lower margins?) That question would be how long the Apple wannabee's need to play in the market before commanding the same margins as Apple does? I think it is going to be a long time, perhaps a generation!

It is like asking if Hyundai can ever dream about becoming BMW? If a product is perceived as a cheaper yet reliable alternative, there is no hope for bigger margins. Hyndai may stilll get better $$ figures but will need to sell many more! This is what is emblematic of Chinese smart phone companies. When you flood the whole world with cheaper products, the perception of 'cheap' stays in people's minds.

This reminds me of a line from one of my favourite authors, Oliver Wendell Holmes: "A mind that is stretched to a new idea never returns to its original dimensions!"

MP Divakar

chrisnfolsom
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Re: Market Position
chrisnfolsom   8/28/2014 6:06:02 PM
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I don't think the game is to get the margins, but to erode the margins that are there to gain market share.  Every new company initially has to create a cheaper product and flood the market to get initial market share and then start injecting more quality and features hoping to increase their market share of the higher margin products while slowly abandoning the cheapest sector of the market to the newer, hungrier, leaner manufacturers.

 

The "problem" is that with technology there is a comparession of the design cycles and the heavy hitters aren't even making the products anymore and don't even own any of the hardware development - cpu's, display, memory... so there is little to differentiate (insulate them) other then the software and some of the design of course, but that can and will be duplicated as you can see witht he feature creep - and overrun already in China.  Apple has to feel like they have an increasingly large target on their back.

lilzz
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Xiaomi is Non hardcore
lilzz   8/31/2014 6:52:22 PM
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Xiaomi are using foreign suppliers for it key chipset. They will not get approved by the Chinese government purchase 

junko.yoshida
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Re: Xiaomi is Non hardcore
junko.yoshida   8/31/2014 7:59:25 PM
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Ahh, interesting. So, it's OK for Chinese consumer usage (whose number is far larger, I assume), but not OK for the government procurement. 

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