Both Europe and the U.S. agree that China is a vast and as-yet undeveloped market where roaring growth and profit is possible. It is also a country that is able to aggressively compete by relying on relatively cheap labor and manufacturing, even though this often results in diminishing the quality of electronic products.
More and more money is going to China, when it comes to the new technologies market. Since we are not drawing out enough money from this country by selling our up-to-date and high-quality devices in that market, there is room for rapidly growing companies from China to conquer their home market.
Nearly everyone in the smartphone and tablet industries are also familiar with the rising success of Huawei, which produces cheap but still quality equipment for the construction of mobile networks, as well as smartphones and tablets with rising quality at a low cost. Even ZTE is following in the similar footsteps.
Off On the Road to China
Next week, I will be leaving for a 10-day trip to China where I will visit several telecommunications companies, and research the country’s smartphone market. Among the areas I visit will be Shenzhen, a vast megalopolis in the South of China where Huawei and ZTE are situated. I will take a tour of Huawei R& D laboratories, as well as their manufacturing lines, where company representatives will try to convince me that they are definitely ready for market challenges under the economic circumstances of their own country, as well as the circumstances of much more developed economies of the USA, Europe and the Far East.
European mobile carriers are in the phase of signing a contract with LTE equipment providers for 4G network construction, and Huawei is rated as one of the manufacturers with the best offer. Two biggest competitors, Nokia Siemens Networks and Ericsson, come from the home, European market and this is, understandably, a great advantage compared to the cheaper Chinese brand. They have another advantage — Europeans, just like Americans, do not trust the products which come from China, including those created by Huawei, as much as they do more expensive devices from Scandinavia and Germany.
However, Huawei is a company which has over 100.000 employees in over a hundred branches worldwide, and it seems prepared to change the way we perceive anything “Chinese”. Many other telecommunications companies from China are trying to do the same.
Ironically, their biggest problem will be changing the perception of home customers, given that their image is ruined by small Chinese manufacturers of cheap smartphones and tablets which look like iPhones, iPads and Samsung Galaxies from the outside, but have poor and underdeveloped software and hardware on the inside. Such devices can be purchased on grey markets, especially in Hong Kong — this is why I am definitely planning on trying them. They cannot be purchased in shops in Europe or USA, but many gray market traffickers do their business on eBay and iOffer, which are literally crawling with these devices. Slowly, they are entering our markets by the back door.
At the same time, it will be interesting to see how American and European companies try to win over the Chinese market. Logically, they will start with the centre of administrative power — Beijing, which I also plan on visiting. I expect to see many iPhones, iPads, BlackBerrys and established devices with Android OS or Windows Phone among business users in the Chinese capital. A huge Apple Store has been opened there, and an illegal knock-off of an Apple Store has recently been closed down (it sounded incredible).
An Unexpected Example
Interestingly enough, Finnish company Rovio Entertainment Oy has decided to open its first store in the world in Beijing. The creator of the super popular game Angry Birds has been sold in over 500 million copies so far, which makes it the most popular entertainment software of all time, according to many criteria, while China proved to be the most lucrative market for Rovio. Rovio Entertainment Oy is planning to turnover $100 million in its first year of business in the future store in China. Apart from the game, the shop will be selling stuffed toys in the shape of the characters, seeing how the Finnish are already acquiring between 10 and 20 percent of profit from merchandise alone.
As for the reason for the store opening, Angry Birds creators said that China is their biggest growing market and that they take it very seriously, but they also want to be more Chinese than the Chinese companies.
Can Apple, Google, Microsoft, Nokia, Ericsson, Rovio Entertainment Oy and other companies which USA and Europe take pride in actually be more Chinese than the Chinese companies? Can Huawei, ZTE, Lenovo, China Telecom and other technology companies which China takes pride in actually be more American and European than American and European companies? I am planning to find this out during my stay in Beijing, Shenzhen and Hong Kong, which I will be writing about in my next “View from Abroad” column.
About Dragan Petric
For the last fifteen years, Dragan Petric (www.draganpetric.com) has been working as an IT journalist, editor and analyst, with special interests in telecommunication technologies and services. In addition, he authored five books and published over 2,500 articles in many magazines and newspapers in Europe. He has attended about 30 telecommunications and IT congresses around the world and won several journalists awards for his work.