Yoshida in China: Vendors caught napping on smartphones

A sudden switch from feature phones to smartphones in China is catching everyone off guard – including China’s domestic handset vendors.

The growing smartphone trend in China isn’t the usual China hype. This isn’t just some aspirational free-market trend, either. It’s happening, right now.

China’s insatiable appetite for smartphones is coming on fast and furious. What appears to be almost an abrupt switch to smartphones is forcing feature phone OEMs and ODMs in China to scramble looking for total turnkey smartphone solutions. They need to design, build and deliver today -- not six months from now.

MediaTek appears to be the biggest beneficiary of this new trend.

In a recent investors’ meeting, MediaTek president C.J. Hsieh revised his estimate for the company’s own smartphone chipset sales in 2012 from 75 million units to 95 million units. Earlier this year, MediaTek’s own projection for smartphone chipsets was 50 million.

The demand is real, and it’s proving a pleasant surprise, even for MediaTek.

In the 2G market, MediaTek became very successful by offering innovative turnkey solutions to help cell phone makers reduce design cycle and costs. With smartphone demand rising, feature phone OEMs/ODMs are turning to MediaTek and asking for the miracle all over again: “Do what you did for us [with feature phones], now for smartphones.”  

Industry watchers point to MediaTek’s record. The case in point is Lenovo’s A60 smartphone that got widely popular in 2011. Using MediaTek’s first 3G smartphone platform launched in May, 2011, Lenovo delivered the company’s first smartphone in retail stores in August, 2011. Without leveraging MediaTek’s hallmark strength – intimate knowledge on its customers’ abilities and wants -- the quick turnaround from chip to system design to product launch wouldn’t have been possible.

While some may say that Android has leveled the playing field for handset OEMs/ODMs, making it easy for them to design smartphones, the reality might be more complicated. Feature phone OEMs and ODMs need to learn everything from hardware to software to make smartphones sing. Shoving a Qualcomm snapdragon apps processor down their throats is a dubious approach.


Urban-rural income gap gets bigger

Income inequality between those who live in cities and those in the rural areas is expanding in China.  
Quoting “The Urban Blue Book: China City Development Report No. 5,” released by the Chinese Academy of Social Sciences on Tuesday (Aug. 14th), Xinhua, China’s state-controlled media agency, reported that China's per capita urban income last year was about 5.2 times that of the countryside.

This makes the income gap about 26 percent higher than that of 1997 and 68 percent higher than 1985, the report said, adding “it far exceeded figures of the same kind in many foreign countries.”

The Urban Blue Book also noted that the number of urbanites has surpassed the number of rural residents in China, with the urbanization rate reaching 51.27 percent. This significant change in the country's social structure almost inevitably ushers in the "city-based society" that occurred in the West with the Industrial Revolution, more than a century ago.

However, Xinhua reported that there is still a long way to go for China to become truly city-based. “The majority of migrant workers and farmers-turned-city dwellers find it hard to blend into urban life, and most Chinese cities lack distinguished features and cultures,” the Urban Blue Book said.


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