Google Tests Out China Hardware Market

By newsdoug on May 5, 2014

Four years after its high-profile withdrawal from China’s online search market over censorship issues, global Internet giant Google (Nasdaq: GOOG) is showing growing signs that it’s gearing up for a new play at the country’s lucrative and less controversial hardware market. Media are reporting the world’s largest online search company has formed a new tie-up that will see it exhibit its cutting-edge glasses product, Google Glass, in partnership with Suning (Shenzhen: 002024), one of China’s leading electronics retailers.

This news sends the latest signal that Google is planning a major return to China after its high-profile spat with Beijing in 2010 over Internet censorship. That conflict saw Google move its main Chinese Internet search service to Hong Kong, and also shutter a number of its other China-based web services. At the same time, the company remained a major player in the market through its popular free Android mobile operating system, which is now used by most of China’s smartphone manufacturers.

Google has entered the global hardware market over the last few years through the roll-out of its own-brand Nexus smartphones, and also through its flashier but more experimental Google Glass product that is worn like regular glasses. Those products are officially unavailable in China, though both are for sale through gray market vendors on various e-commerce websites.

Now media are reporting that the new tie-up between Google and Suning will see the latter display Google Glass at its stores in 10 major Chinese cities in the near future. (English article; Chinese article) Customers will be allowed to try out the glasses but won’t be able to buy them, according to a source in Suning’s marketing department. One report says the wearable device, which allows functions like web browsing and email, has already passed Chinese customs inspection and will be available at onsite “wearable device experience centers” being set up in Suning’s stores.

Word of this latest move comes just a half year after Google Chairman Eric Schmidt made a low-key visit to China late last year, fueling speculation that the company was planning a return to the market. (previous post) That trip didn’t get much attention from traditional media, but it was well chronicled in the microblogging realm after Schmidt was sighted visiting an electronics shopping mall to check out the local gadget market. Observers also noted that his entourage included former high-level Google executives Lin Bin and Hugo Barra, both of whom defected from the company to joint fast-rising Chinese smartphone maker Xiaomi.

So, what does all this mean about Google’s future ambitions in the China gadget market? It seems clear from Schmidt’s visit last year and now this Suning promotion that Google is still clearly interested in China as a market for its fast-growing hardware division. Such a move looks smart, since hardware is far less controversial than Internet website operation, which is subject to strict censorship regulation from Beijing.

What’s more, Google still has a relatively positive image in China, and is considered a “cool” brand in a similar league with Apple (Nasdaq: AAPL). The widespread free availability of Android to Chinese cellphone makers has also undoubtedly earned Google some goodwill from Beijing. That availability of such a good operating system for free has allowed Chinese smartphone makers to rapidly emerge over the last 2 years as the world’s premier makers of low-cost smartphone models selling for as little as $100 or less.

Based on all of these factors, I would expect this new campaign by Suning to become a test for a formal launch of Google Glass in China later this year. Suning would be the obvious partner for such a launch, but I wouldn’t rule out other partnerships with equally aggressive firms like JD.com or even e-commerce leader Alibaba. Meantime, we may also see some movement on the smartphone front that could see Google’s own smartphones come to China, either through a Nexus launch or a tie-up with Xiaomi. Either way, the year ahead looks like an exciting time for Google fans in China, as local gadget fanatics finally get official access to some of the company’s hottest products.

Bottom line: Google will launch its Google Glass product in China later this year after a new tie-up with Suning, and could also enter the China smartphone market by itself or through a tie-up with Xiaomi.