Impact of China's Growing Mobile Phone Industry

An article by Greg Lindsay on Fast Company (see here) argues that the increasing penetration of mobile phones designed in China into other countries has had a wide range of impact, including aiding the recent revolutions in the Middle East.

While the Middle East claim is intriguing, I'd like to see more evidence.  For example, it would be helpful to know the penetration of Chinese-designed phones in Egypt and what the consumers would have done had the phones not been available.  Regardless, in making his case Lindsay raises several issues related to some earlier posts here.

He discusses how the making of mobile phones in China became far more practical due to the availability of a cheap way to design them:

"In 2004, a Taiwanese electronics firm named MediaTek unveiled its latest product--a cell-phone-in-a-box aimed at manufacturers, equipped with everything they needed to make the guts of a working phone on one chipset. Write some software, add features, and snap a plastic case on the front and you've produced a new model. It was an immediate hit with China’s notorious counterfeiters, the shanzhai.

In 2004, MediaTek sold 3 million of its chips; six years later, its sales had soared to 500 million, more than a third of the worldwide market. Nearly half of those went to shanzhai. The sudden ability to design, manufacture, and ship millions of dirt-cheap handsets in total secrecy led to an explosion in Internet-enabled devices in China. “Five years ago, there were no counterfeit phones,” the sales manager at a Chinese component manufacturer told The New York Times in 2009. “You needed a design house. You needed software guys. You needed hardware design. But now, a company with five guys can do it.”"

I believe that the increased numbers of people making mobile phones in China relates to another issue I've raised here and here -- that while copying remains relatively common in China, innovation is also occurring.  Relevant to this point, Lindsay writes:

"The key to the cheap phones was the combination of MediaTek’s chipsets and the vast component bazaars of Shenzhen. While MediaTek’s engineers focused on adding software features such as touchscreen recognition and instant messaging to their chips, shanzhaitricked out basic models with speakers, telescopic photo lenses, and flashlight-strength LEDs. Before long, “Nckias” and “Blockberrys” began appearing across Shenzhen and Shanghai.

With their tiny production runs, shanzhai could manufacture a thousand phones, seed the local markets, see if they caught on, and then crank out some more. Established players like Nokia were soon crying foul, even as they scrambled to keep up. Development cycles collapsed from 9 to 12 months to as little as three months. Instead of knockoffs, the counterfeiters were churning out innovation and forcing large companies to play catch up."

Lindsay also points out that the cheap Chinese-brand mobile phone manufactures are expanding their sales to regions where such phones may be strongly desired, such as India:

"India, with its low PC penetration, high fixed-broadband costs, and proximity to China, was a natural fit. In 2009, shanzhai phones began flooding the market, offering “good functionality at a fraction of the cost of established brands,” according to BCG."

As shared in a reader's comments here not only may Chinese-brand mobile be appealing in other countries for their lower cost, but also for the functionality they may offer, such as dual SIM card support.

Finally, in his article Lindsay refers to the Chinese phones as "shanzhai" -- a term usually reserved for mobile phones made in China that copy established brands.  In part due to the innovation that Lindsay himself notes and that there are Chinese brands of mobile phones that appear to be making an effort to distinguish themselves from better known brands, I don't think the term is always appropriate when discussing mobile phones designed in China.  Scroll though the many photos included here (all of my posts on mobile phones) and see what you think based just on looking at the many examples of Chinese designed phones.  Should Oppo and BBK really be classified with Nckia and Blockberry?  There's of course more to this than looking at a few photos, but I think they help make a point.

I'm not sure how Lindsay was using the term but in general the way the term "shanzhai" is sometimes used can gloss over some very key distinctions about mobile phones designed in China.  More on this topic later.  For now, I'll just add that when you see the term "shanzhai" you may want to consider how the word is being used.

Mobile Phones in China: Chengdu's Mobile Phone Street

In two earlier posts here and here I shared some examples of mobile phones available in Zhaotong, Yunnan and Zigong, Sichuan.  To further emphasize the immense variety of mobile phones available in China I'll now share some examples from the much larger city of Chengdu, the capital of Sichuan province and a key economic center of Southwest China.

While mobile phones are sold in many locations around Chengdu, I'll focus on the area including Tidu Street and Taisheng South Road in the downtown district as it is known for its large number of mobile phone stores.

Several larger stores, such as this one:

Xunjie Communication City

sell a variety of brands and do not sell any obvious fakes, knockoffs, etc.

Two salespeople in the mobile phone store

The selection at Xunjie included several of the Chinese brands I've mentioned before

The U Like Oppo phone

and also foreign brands such a Nokia and iPhone.  In fact, it was at Xunjie that I noticed the BlackBerry's and the promotion including Barack Obama I wrote about earlier (see here).

There were also many stores in the area that sold a particular brand of phone.  Here are a few of them:

LG store

Meizu store

Nokia store

Samsung store

A little about Meizu since it may be particularly unfamiliar to those outside of China...  It's a Chinese brand and its earlier M8 mobile phone ran on a version of Microsoft Windows CE 6 while its newer M9 version is based on Android.  Production of the M8 was shut down due to an intellectual property dispute raised by Apple (more here).  If you look at Meizu's web site for the M8 here you may find yourself sympathizing with Apple.

In addition to the larger stores and the brand specific stores, there were also many smaller stores along the street.

Many smaller mobile phone stores

It's at places such as these that one can often find the most variety.  Take a look:

Any favorites?

Just looking at the visual design alone makes it apparent that there are phones potentially appealing to a wide range of tastes.

As in the selection seen at the smaller stores in Zhaotong there are a number of phones that seem to have trademark infringement issues.  Examples in the above photos include Scny Ecirsscn (Sony Ericsson), Anycoll (Anycall), TPhone (iPhone), iPhome (iPhone), etc.  It is also questionable whether the Hello Kitty and Winnie the Pooh phones have been properly licensed.

In contrast to Zhaotong, there are some smaller stores selling genuine (I think...) high end smart phones, including those running Windows Mobile 7 and Android.

So, to sum it all up briefly: Chengdu is similar to Zhaotong and Zigong in terms of having a wide range of mobile phones.  However, Chengdu appears to offer much more in terms of higher end smart phones.

That's all for now -- just some more perspective & color on the variety of mobile phones sold in China.

BlackBerry and Obama in China

After seeing some of the variety of mobile phones I've shared (see here and here) a reader and self-admitted BlackBerry fan, Pete, asked about BlackBerry's presence in China.

Recently, I saw BlackBerry's for sale at a large mobile phone store in Chengdu, Sichuan.

BlackBerry mobile phones for sale in Chengdu

Although it was just one small display amongst many others, it caught my eye since I hadn't seen BlackBerry's for sale in other cities I've recently featured, including Zhaotong and Zigong.  I can't provide any statistics but it's been very uncommon for me to see anyone using a BlackBerry (or other higher end phones, such as iPhone) in similar cities -- whether in my formal research (which I should note has focused on Chinese youth) or what I've seen being used in public.

The appearance of some Blackberry's in Chengdu is likely due to it being a relatively prosperous city, especially for Southwest China.

What most caught my attention, though, was how the phones were being promoted.  On the left side was this set of photos:

You may recognize a couple of the photos, including Michael Jordan and Kobe Bryant.  Neither of them are too surprising given the NBA's popularity in China.  Kobe certainly has many ardent fans here and has been part of a number of marketing campaigns, including those for Nike.  That BlackBerry is using sports figures in its promotions may suggest something about how they are trying to position their products.

Regardless, on the right side were a few photos that you may find more intriguing.

Yes, that is Barack Obama giving a speech in one photo and apparently using a BlackBerry in another.  The views many Chinese have of Obama are likely more complex than those they may have of Kobe.  What is most important to note, though, is that it is very conceivable that the use of Obama's image would benefit BlackBerry's aims in China.

This isn't the first time for Obama (or a lookalike) to make an appearance in ads in China.

For example, I saw this ad in a shopping center in Shijiazhuang, Hebei.  Maybe it's not intended to be Obama but... well, you decide.

Look like Obama to you?

There was also an advertisement by KFC that involved Obama.  Although, apparently it only played in Hong Kong -- a market distinct in many ways from Mainland China.

For more about Obama in Chinese advertisements, including one not for BlackBerry, but BlockBerry, see here.

Now, let's do a thought experiment.

Would it be effective for BlackBerry's US sales to promote its products using this man?

Hu Jintao (source)

Would most Americans even recognize this photo as Hu Jintao and/or know that he is China's current leader?

If they did, would knowing he used a BlackBerry in any way impact their likelihood of buying a BlackBerry?  For the positive?

Even if Hu Jintao regularly used a BlackBerry I don't think his image will be appearing in any marketing campaigns in the US.  If BlackBerry decided otherwise, they may face the same fate as a failed PR campaign by China in the US half a year ago (see here).  Part of the problem was that the ads highlighted many "famous" Chinese who were complete unknowns in the US.

The familiarity Chinese have with a number of US figures and how they view such people is not a trivial issue and a sign of the United States' soft power in China.  The very different state of China's soft power in the US is very striking.  In a later post, I will discuss more about how this soft power may impact Chinese in the future, particularly in which online services they use.

Mobile Phones in China: More on Variety

In a recent post, I discussed the great variety of mobile phones available in China and shared some examples from stores in Zhaotong, Yunnan (see here).  A reader, Jendy, had this to say about the post:

"I wrote a paper on the cellular industry in China during my MBA program, after having spent 2 weeks in there with my class. I remember a factory owner saying that the Chinese see cell phones as a status symbol, much like cars or houses in other countries. He said that some of his factory workers would prioritize having the best and most technological cell phone over new clothes, eating a good dinner, etc."

I made some related points when I discussed the role of fashion and image in people's choice of mobile phones in an earlier post "Mobile Phones in China: Local Rates, Fashion, and Fakes":

"Many are willing to spend a large proportion of their income to purchase a mobile phone, sometimes saving up at least several months of their full salary, out of concerns related to fashion and image. For many people in China, their mobile phone will be the most expensive and openly visible item that can be with them many places they go -- like a car for many people in the US. While hanging a mobile phone around ones neck isn't as common in China as it used to be, there remain many opportunities for it to be visible."

Fashion, image, and status can be very intertwined.  For now, I'll avoid getting into a deep discussion on these issues, but suffice it to say they all can play a role in many mobile phone purchases in China.

Jendy continued with a claim connecting the role of a mobile phone as a status symbol and the diversity of mobile phones in China:

"So, it's not really surprising that there is more variety in China when there is a large population of people who prioritize cell phones over many other things."

Jendy also provided some anecdotal evidence for the impact Chinese brand mobile phones are already having globally:

"On a side note, I have friends in Chile who order Chinese phones over the web because there is so much more variety and phones with more features than you can't find here (dual sim phones for example)."

As Jendy's example shows, by developing localized designs for Chinese consumers Chinese mobile phone manufacturers are also likely creating devices that meet needs in other markets.  There are reports that exports of Chinese brand mobile phones are rapidly growing (I'm still looking for a source I feel OK about linking to, though).  It will be fascinating to see how the industry develops.

To further highlight the variety of mobile phones available from China I'll share some photos from a store you may have heard of in Zigong, a city in Sichuan province that is a six hour bus ride from Zhaotong.  In a previous post about Mother's Day in Zigong I shared some photos of a fashion show at Mall-mart and commented that the store was similar to Walmart in many ways.  I later discovered that Zigong's first actual Walmart had opened only a few months prior to my visit.

Zigong's first Walmart

As typical for Walmarts in China, it had an electronics section including mobile phones.  Like the department store in Zhaotong it had a wide array of Chinese brand phones in addition to more globally familiar brands such as Nokia.  However, many of the Chinese brands were different from those I had seen in the Zhaotong store.  Here are some photos of the selection available at Walmart (thanks to the Walmart staff for permission):

Quejaz mobile phones

Hedy and Gionee mobile phones

"Great" mobile phones

Lenovo mobile phone with transparent screen.

Nokia mobile phones 

Konka and Dim mobile phones

Dim and Opsson mobile phones

There were other brands as well.  The Walmart in Zigong and the stores in Zhaotong are of course just a handful of stores, but they are representative in many ways and provide a hint of the diversity of mobile phones available in China.

More on mobile phones in China later.

Mobile Phones in China: A Main Gateway to the Internet

In a recent post I wrote about the immense variety of mobile phones available in China and shared some examples of the selection that can be found in stores in Zhaotong, Yunnan.

Here are some mobiles phones actually being used by one college couple in Zhaotong:

Nokia and Sunlight Mobile Phones

One had a Nokia and the other had a Sunlight, one of the many Chinese brands of mobile phones.

What most caught my attention about this couple wasn't their choice of mobile phones but how they used them.  Despite neither of them having advanced phones by today's standards, they primarily accessed the Internet through their phones.

College Dormitory Room

Going to an internet cafe was seen as an unnecessary expense and inconvenience.  Purchasing a computer was definitely out of the question, neither of their families could afford one.  Even if there had been money available they would have faced the problems that there was no wired Internet access in their college dormitory rooms and that electricity wasn't available at all times.

Instead, both students took advantage of what they considered to be a cheap plan that enabled them to regularly access the Internet from their phones.

If you want to guess the one piece of technology owned by any college student in China, a mobile phone is a safe choice.  It was clear the couple used their phones to access the Internet not mainly because they were mobile phones but instead because the phones were a relatively cheap piece of technology which fulfilled a variety of other needs as well (such as phone calls and text messaging).

Especially in China, "mobile" isn't always about mobility.

It was also fascinating to see how they used their mobile phones for a variety of purposes, whether it was browsing news sites or interacting on social networking sites.  They were not inhibited to complete what could be considered complex tasks due to using relatively basic mobile devices.

These two students certainly aren't alone in China in how they use their phones.  I've observed that for many Chinese a mobile phone is their primary gateway to the Internet.  Surveys conducted by The Nielsen Company during the past year have found similar results:

"For many people in China, the mobile Web is the only one they need. When they think of the World Wide Web, they don’t think of tethering themselves to a desktop PC and the accessories of mice, keyboards, mouse pads, printers and monitors.  Not only don’t many homes in China have (or need) landlines for voice communications, they also don’t require hardwired Internet access for their fix of the Web.  And with mobile phones, everything they needs is in the palm of their hands.

In a short amount of time, mobile consumers in China have surpassed their American counterparts when it comes to using the devices to access the Internet (38% of Chinese mobile subscribers compared to 27% of American mobile subscribers), despite less advanced networks."

Furthermore, Nielsen'a research shows that mobile internet use in China is particularly pronounced in youth:

"Youth in China and the US lead the way among young mobile subscribers who use advanced data. Eighty-four percent of Chinese youth use their phones beyond voice and text compared to 47 percent of Chinese adults. Eighty-three percent of US youth use advanced data, 32 percent higher than US adults.

At 70 percent, young Chinese advanced data users have a significantly higher mobile internet usage rate than the rest of the world."

The ramifications of all the above for companies with online services is readily apparent.  If they desire to reach a broad range of Chinese youth it could be critical for the design of the services to take into account that for many youth a mobile phone will be the typical device used to access the Internet, even when mobility is not a primary concern and the phone is relatively limited.

From a research perspective, this is why at times I don't want to be always using the latest and greatest mobile phone, even though I work in the technology industry.  It helps me better appreciate the experiences of many of the consumers I'm trying to understand and reach.

Mobile Phones in China: A Variety of Options

[Note:  Originally posted on May 12, 2011.  I have reposted because the original piece was removed by Blogger in response to an incident around May 13, 2011 and has since not reappeared.  Thanks again to readers who wrote in to say that a saved copy of the post could be retrieved from some RSS readers.]

A previous post covered the topics of local rates, fashion, and fakes for mobile phones in China. Like before, what I'll share in this post is intended to be a high level overview, this time about the variety of mobile phones available in China.

In the "tier 1" cities such as Shanghai many stores selling mobile phones, especially in downtown areas, will have a selection that includes most of the major globally dominant brands. However, in many other cities the typical selection of mobile phones noticeably changes. While Western brands may still be available, there will often be a larger number of Chinese brands.

To provide a small taste of the options in a non-major Chinese city, I'll share some photos (all taken with permission) from two different stores in Zhaotong, Yunnan -- as regular readers of this blog will likely know by now a city in a very rural area of Southwest China.

Here are just some of the phones being sold in one of Zhaotong's larger department stores:

And here is a small part of the selection in one of the many small mobile phone stores one can find in Zhaotong:

Some assorted points:

• While there are some foreign brands sold in the department store such as Nokia and LG, there are a significant number of Chinese brands, including BBK, Gionee, Jugate, K-Touch, Oppo, Sunup, and more.
• Some phones in both stores show obvious attempts to be visually appealing for Chinese tastes.
• The Sunop phones with an apple on them arguably may be a trademark issue, but the overall design is not just simply copying Apple .
• In the smaller store, trademark issues are more apparent -- especially in the names of phones such as Anycoll (Anycall, a Samsung brand sold in China), Nckla (Nokia), iPheon (iPhone), Mctcrcla (Motorola), and Cppc (Oppo, a Chinese brand). As you can see, this issue is not just limited to foreign brands.

There is much more one could comment on regarding the above photos. And these are just showing a sampling of the phones in two stores out of many in Zhaotong, yet alone in China. However, they're representative enough to make a key point: there is a great variety of mobile phones available in China. There are two reasons why this point is critical to understanding the mobile phone market in China that particularly interest me.

      1) Many consumers have a very wide range of mobiles phones to choose from.

This raises a host of fascinating issues to explore. For example, what impact, if any, does the greater variety have on how people choose their mobile phone in comparison to places with less variety?

      2) It indicates there is a lot of "experimentation" occurring in China.

It's easy to criticize the mobile phone industry in China for the immense about of amount copying that occurs. It's definitely an issue but don't be fooled. There is also a significant amount of design that could be considered creative or innovative. Some of the resulting products may prove to be significantly successful or provide inspiration for better designs -- not only for the Chinese market but others as well.

I'll explore the issues of creativity and innovation in China more in later posts. I don't think they're as clear cut as some portray them to be. For now I'll just close with a claim that may come as a surprise to those who are not very familiar with China: The diversity of mobile phones available in stores in "communist" China is greater, not less, than what can be found in the US.

I'd be very interested to hear you think about that.

[UPDATE:  Follow-up post with a reader's comments and more examples of mobile phones in China here:  Mobile Phones in China: More on Variety]

Mobile Phones in China: Local Rates, Fashion, and Fakes

I've done a significant amount of research into mobile phone use in China -- to improve existing mobile products & services, to innovate new ones, and to find ways to better market them to potential users.  In this post, I'll introduce at a general level some of the key themes in what I've discovered during my independent explorations across China by highlighting several illustrative examples.  What I'll share in this post is just the tip of the iceberg for a host of interesting topics to delve into, is focused on Chinese youth, and is not intended to be all encompassing.  I'll share more themes, examples, and thoughts on this topic in later posts as well.

To begin, what I learned about a female student in Jilin, Jilin Province (see here for some scenes from Jilin) highlighted at least two key aspects of how mobiles phones are used and chosen by some in China.

If you look closely at the photo of the student above, you'll notice she has two mobile phones -- one in her hand that she is using at the moment and another hanging from her neck.

Why two mobile phones?  One reason is that she grew up in Hunan Province, far away from where she was going to school in Jilin.  She considered the roaming fees for using her Hunan phone number in Jilin to be too high but but she still wanted to keep her Hunan number since she didn't want to lose contact with people and would be returning there regularly.  Therefore, she needed two different phones numbers, meaning two different SIM cards, so she could get local rates whether she was at home or at school.  One of her phones had a Hunan phone number, the other a Jilin phone number.  Using multiple SIM cards to get local rates is common in China and it is not unusual to find locally designed phones with the capability to hold multiple SIM cards (note: getting local rates is not the only reason some in China desire multiple SIM cards).  However, in this case the girl's older mobile phone didn't have that capability and neither did her newer phone.

Did the savings of not having to pay roaming fees more than offset the cost of an additional phone?  Well, that calculation may not have been entirely critical since there was also another important reason she had two phones.

Her older phone's paint and camera were chipped prior to her departing Hunan for college:

It was still functional in most ways, but to her it was unacceptable in large part due to a key concern.

As seen on her "Fashion Chic" shoes, fashion was very important to her.  Her scratched up phone was simply unacceptable from this standpoint.  So, while she was still in Hunan she bought a shiny new phone made by the Chinese company Oppo:

In China, it is common for many youth (and others as well) to get prepaid SIM cards and purchasing them is a simple process -- no sign up or name registration required for regular usage.  So, when she arrived in Jilin she bought a new SIM card with a local number and put it in her old phone since the new phone already had the SIM card for her Hunan number in it.  Despite the fact that she uses the old phone far more often while at school, it is the new Oppo phone that she hangs from neck.  Hanging the phone from her neck is about fashion, not functionality.

While fashion can play an important role in many countries around the world, its impact in China is particularly striking in the mobile phone domain.  Many are willing to spend a large proportion of their income to purchase a mobile phone, sometimes saving up at least several months of their full salary, out of concerns related to fashion and image.  For many people in China, their mobile phone will be the most expensive and openly visible item that can be with them many places they go -- like a car for many people in the US.  While hanging a mobile phone around ones neck isn't as common in China as it used to be, there remain many opportunities for it to be visible.

Fashion and image aren't only important for many female youth in China but many males as well.  For example, this student at a university in Wenzhou, Zhejiang was also concerned about fashion and image:

And he was willing to spend a lot of money for his BlackBerry phone:

This isn't to say that fashion and image are the only factors that go into choosing a mobile phone for such people, just that they can be primary factors in the choice.

However, there are many more youth in China that can't afford genuine fashionable foreign brand phones, even if they want one.  While some of them choose a local brand, others choose another common option in China: fakes.

For example, at this store in Chongzuo, Guangxi which sold mobile phones that were (supposedly) genuine:

Mobile phone store in Chongzuo, Guangxi

Many of its employees had obvious fakes such as this one:

"Snoy Eriosscn" mobile phone

Some fakes aren't as obvious as the one above -- there are a range of "qualities".  Regardless, the usual motivation to buy a fake is the lower price.  But why not buy an equally priced Chinese brand phone?  For an example capturing one of the key reasons, here is a girl in Shuolong, Guangxi, a small village a few hours away from Chongzuo:

She too made a variety of fashion choices:

But fashion wasn't a concern in her previous choice of a mobile phone:

Nor was it for the new phone she soon planned to purchase.  Her dream phone was a Nokia.  Not because of any concerns regarding fashion but because she believed it would be very reliable and rugged.  However, a real Nokia phone was not a possibility given their relatively high price so she wanted to get a fake Nokia phone since it would be cheaper.

Unlike many other examples I've seen of purchasing fake products, her choice of a fake Nokia versus other relatively inexpensive options did not appear to be driven by how others around her would perceive the product.  It was about her own internal expectations for what the product could provide to her based on its name - even though it would be a fake.  This distinction is critical in gaining a deeper understanding about how brands and fake products are perceived by some in China.  I'll share more in later posts about this and other issues regarding fake products.

These are just some of the highlights of what I've found.  I'd be curious to hear any of your thoughts on the above examples -- they certainly provide more to discuss than I am able to cover in this single post.  Again, more on these and related topics later.