What happens when the people making your products decide they’re going to start doing it for themselves? And what happens when those factories and manufacturers start producing products which are not only equal to your fancy brand name devices, but actually better? One word. Market decimation. No wait…two words.
This brutal reality is about to hit the mobile phone market head on, and soon, if the reports coming out of China are anything to go by. The current economic downturn has focused the country’s mobile manufacturers on two things – a) dominating the domestic market using off the shelf components and the free and open source Android operating system and b) rolling out ever more powerful domestic brand products into the international market to pick up business at the budget value end of the chain.
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The result is a growing range of products which are proving to be the match of the traditional big brands in just about every way. Chinese brands such as Xiaomi, Oppo, Meizu and CEIEC are producing products which not only hit the traditional cheap handset sweet spot, but can also compete head to head with the best that Apple, Samsung and HTC have to offer. All of which is must be very frustrating to companies like Apple, which find themselves struggling to gain ground in the domestic Chinese market or indeed HTC, which saw profits fall by nearly 80% last quarter.
In some cases these Chinese incumbents are offering high end specification products for literally a fraction of the usual price. The CEIEC S1280 for example is on offer at a mind-blowing $70 in volume, which takes the price pressure equation to new levels. This is a dual SIM, 1Ghz, 4GB ROM handset with GPS, WiFi, Android 4.0, 5 megapixel camera and a 4 inch touchscreen.
This is only the start of the battle, and we should expect more sophisticated and determined attacks on the Western mobile markets once smartphone pricing starts to reach commodity levels, and people discover alternative purchasing routes away from conventional high street chains. For example, a quick search of eBay, Amazon and other online retail outlets reveals a selection of direct to consumer smartphones with impressive specifications at rock bottom prices.
* eBay: Unlocked N710 – 5 inch, Android 4.0, dual core: $186.90
* Amazon: Phecda 9300 – 5 inch, Android 4.1.1, dual core: $173.00
* Chinavasion: HDMIDroid – 4.3 inch, Android 4.0, dual core: $185.81
* DracoTek: Hapai X720D – 4.7 inch, Android 4.1.1, dual core: $205.99
China is expected to overtake the US this year as the largest smartphone market in the world, with a 26 percent share, after which no doubt we will see even more evidence of their global ambitions in the longer term. Watch this space!