China’s Smartphone Crown: Who Cares? 看待中国称冠智能手机市场不要太认真
I’m feeling a bit cranky and contrarian today, so I’m going to be somewhat bold and give the following response to yet the latest headlines trumpeting China’s passing the US to become the world’s largest smartphone market: Who cares? I’ll admit that my response to this development is perhaps a bit unfair, since China’s attainment of the world’s smartphone title is certainly an important milestone for a country where even traditional wired telephone service was still rare as recently as 20 years ago.
But my reaction is at least partly due to China’s recent fixation on rankings and titles, which often only tell part of the story and are also very fleeting. That kind of fixation was on prominent display last year when Chinese PC giant Lenovo (HKEx: 992) won the title of the world’s largest PC seller in the third quarter, only to see former leader Hewlett Packard (NYSE: HPQ) retake the crown in the fourth quarter.
So let’s return to the subject of smartphones, which are rapidly replacing traditional cellphones as consumers increasingly use their handsets for data services like watching videos, mobile chatting and reading the news. The latest reports say that China is now just weeks away from grabbing the global title from the US as the biggest market for connected mobile devices like smartphones and tablet PCs. (English article) I’ll admit that part of my “who cares” attitude is at least partly because I’m rapidly tiring of reports on this major milestone, which both Chinese and international media have been writing about since the middle of last year.
This particular milestone looks very similar to another one from several years back when China passed the US to become the world’s largest PC market. While that feat was also impressive, few people looked too closely beyond the headline numbers that showed Chinese buying more PCs than US consumers. Those figures focused almost exclusively on quantity, and didn’t really talk too much about the quality of what was being purchased. I suspect that a closer look at the numbers would have revealed that the US was still way ahead of China in terms of revenues from PC sales, since a big portion of the Chinese sales were for cheap, low-end computers.
In the case of smartphones, China’s rapid rise has been fueled in large part by a similarly rapid rise of companies that do what China does best: making popular products cheaply, often with technology developed overseas. In this case, big domestic companies including Huawei, ZTE (HKEx: 763), Lenovo and Coolpad have all developed relatively cheap smartphones and tablet PCs for the domestic market, most of those based on Google’s (Nasdaq: GOOG) popular free Android operating system.
Many of those smartphones sell for $150 or less, or a fraction of the price of the fancier Apple (Nasdaq: AAPL), Samsung (Seoul: 005930) and HTC (Taipei: 2498) smartphones that are the most popular in the US and other western markets. Thus I would say that even though China may pass the US in terms of the number of smartphones sold, it will still probably be at least 5-10 years before it takes the smartphone title in revenue terms. Then there’s the other small but overlooked fact that China is also 4 times more populous than the US. That means just one-quarter of China’s 1 billion mobile subscribers would need to buy smartphones to automatically pass the US just on the basis of population.
I’ll end this commentary by once again admitting I’m deliberately feeling a bit contrarian today, and that China’s rapid rise to become the world’s largest smartphone market is certainly a commendable accomplishment. But at the same time, I do think the country needs to stop fixating on this kind of title so much and focus on more important issues like becoming an industry innovator rather than follower. When that happens, it may finally achieve some global titles that are truly worth bragging about.
Bottom line: China’s winning of the global smartphone crown is an important milestone, but the country needs to stop fixating on such titles and focus on quality over quantity.
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