If you ever wondered why many people say the US and Europe are irrelevant targets for new and existing technology companies compared to China, just watch this Le Web interview with Hugo Barra – who recently left Google’s Android team to join Chinese device maker Xiaomi. In it, he compares China’s most popular internet services with their western counterparts – and ‘our’ services pale in comparison to China’s.
The most impressive number? China now has 500 million smartphone users. Six months ago, it was ‘only’ 250 million. That’s the scale and growth we’re talking about here. I often hear people say “yeah, but China is mostly poor people with a few rich ones on top” – well, these figures prove otherwise. And the growth is far, far from over.
That’s why I always chuckle whenever a major western company only highlights US figures. It just means they missed that huge, fat, Chinese boat.
I have never been that excited about the SMART TV concept but looking at this is changing my mind:
http://www.xiaomi.com/en/mitv
Wi-Fi Direct, AirPlay, Miracast, DLNA, and perhaps even SMB support sound like it would be pretty easy to stream content to this thing from pretty much wherever you want. I have an iPhone (AirPlay), a Blackberry Z30 (Miracast) and a SMB-capable NAS full of video. I had not expected to see a device that could receive content natively from all of them.
My kids have Android tablets. Being able to play their games (via Bluetooth) directly on the TV would just be a nice bonus.
Edited 2013-12-30 18:48 UTC
What if a smart tv cost 530 and a dumb tv cost 500. And an Android tablet that makes you dumb tv a smart tv cost 100. What would you choose?
You can get Android HDMI dongles that cost far less than $100. Pair it with a bluetooth air-mouse+keyboard to transform your old TV into a smart TV with a familiar interface and apps (if you’re already using android, that is).
You are missing the point.
Yes, probably. But then, I didn’t really attempt to argue with you. I just think the fact that you can upgrade any old TV to a TV smarter than any smart TV you can actually buy (at least until quite recently) is pretty cool.
I did just that a few months ago, and I’m still in love with it. That’s probably the reason why i can’t shut up about it
It does everything a smart TV does, its upgradeable, it’s got the Google Play store, I can program it if i want to. It takes an SD card and has a USB port. Whats not to love? Best of all, planned obsolescence is not part of the business model. You just know, any TV brand will release newer models, with upgraded software, which will not be available for your model.
Sorry if i derailed your argument. What was your point again?
I meant a few things by my comment:
1 – While I have never wanted to pay for my TV to have computer (or tablet) like capabilities, I am not against it if the incremental cost is low enough.
2 – While I still do not care about using my TV as a web browser or anything like that, getting something like an Android gaming system almost for free would be a nice bonus. I would pay a bit more for that.
3 – What really sounds nice is a TV that can accept input from so many streaming sources such as Miracast, Airplay, DLNA, and even SMB.
Of course, the actual monitor (TV) itself has not changed while the list of sources and features has. In some ways, that is a real argument for putting all the brains in an AppleTV sized box and just letting the TV do what a TV does best. If they were separate, I bet I would upgrade the box far more often than the screen.
I would not choose a smart tv. I want my TV to be a dumb as rocks display. I would actually pay more for the dumb tv. I want expand-ability and upgrade-ability of my viewing experience. Right now I have a Roku, Next year I might have a Chromecast, in the future, maybe something else. I don’t understand why anyone would want the intelligence baked in, given the rapid advance of technology.
No it doesn’t, actually. I would not be surprised if a lot of them were bought on credit. Being Chinese myself, I know the mind of those Chinese who bought them. It’s about status through conspicuous consumption. You only have to look at other Chinese industries, like the cosmetic surgery to give Chinese people rounder eyes and longer legs to know that it’s largely superficial and desperation.
Growth is nothing. What is the growth based on, and it seems more and more that the growth is based on confidence rather than actual productivity. That’s not to say it’s not in the interests of phone companies to get a share of the Chinese market and get the money out of there as fast as possible before the inevitable downturn.
And the 500 million figure – that’s almost half of the population of China. Whatever economic success you want to credit the CCP’s policies, there is no way it has lifted so many people out of poverty and into the middle class to be able to afford such phones to ensure the prolonged growth of the phone market.
Edited 2013-12-30 19:52 UTC
I think the trick is that almost any new phone now fits into the “smart phone” category. It is certainly is cool that almost anyone on the planet is starting to have a small computer in their pocket.
Only catch is that by the end of the day they are still consumer devices.
” It’s about status through conspicuous consumption. You only have to look at other Chinese industries, like the cosmetic surgery to give Chinese people rounder eyes and longer legs to know that it’s largely superficial and desperation.”
That sounds like “ka-ching” to me.
“That’s not to say it’s not in the interests of phone companies to get a share of the Chinese market and get the money out of there as fast as possible before the inevitable downturn.”
You seem to think China is on a bubble, while it still has so much growth left on a per capita basis. when a nation work and save as much as they do but still only makes 1/8th of average americans per day. i would say there are lots of room left.
Edited 2013-12-31 01:36 UTC
I didn’t say there wasn’t a profit to be had. It doesn’t mean it’s sustainable.
No, you’re confusing potential for growth with ability to grow. There’s a lot more room to grow. But do you REALLY think 500 million people in China can actually afford the phones they have now, especially since you admit most of them still makes 1/8th of the average American?
Growth is nothing, when will people learn? You still need to answer what’s BACKING the growth to begin with. Economic progress isn’t something that happens just because there is room to grow. That’s like arguing an 8L engine car won’t have problems even when you have 1L of fuel left in the tank.
American families were buying cars 100 years ago when they had a lower per capita income (adjusted for inflation) than China does now. A car costs vastly more to purchase and operate than any smartphone.
In 1956 we got TV in Australia. A basic black and white TV cost the equivalent of 6-12 months salary. Yet most middle class families owned a TV by the early 1960s. Nearly all these TV were purchased on credit.
A cheap smartphone costs about $50. That represents one days salary for an urban middle class Chinese person.
To claim that wealthiest 30% of Chinese can’t afford smartphones is absolute nonsense.
Yeah, and growth was always positive in the intervening years. We never had any market crashes at all since cars and TV.
Nonsense indeed.
And didn’t I just say I think a lot of the smartphones in China are ALSO on credit? Here’s a hint: if something is bought on credit, it basically means they can’t really afford it.
I really can’t believe how little time it takes for people to suddenly forget that debt is not money, and you have the gall to say my point was nonsense.
You know another crash is coming when people start looking at growth as guaranteed (as if growth itself is enough to drive further growth) and credit as real money. People like you are responsible for continuation of the unsustainable spending culture that continually destabilizes economies.
Thats how our system works. Its the foundation the US of A are build up on and continue to run beyond teaparty-showdown.
‘since’ does not mean ‘because of’.
Edited 2013-12-31 10:02 UTC
No it’s not. If that’s how it actually works, there wouldn’t be any crashes. Why do I need to teach this to people. People would LIKE the system to work that way, doesn’t mean it’s the best and only way.
And neither did I argue “because of”.
And didn’t I just say I think a lot of the smartphones in China are ALSO on credit? Here’s a hint: if something is bought on credit, it basically means they can’t really afford it
You have absolutely no idea of basic economics. The idea that people only buy things on credit because they can’t afford them is A Grade bullshit.
In Australia prepaid calls cost about 10x as much per minute as postpaid plans. Most prepaid phones are purchased by low income earners. Most wealthy people buy a high end phone on 24 month plan.
People buy things on credit for many reasons:
– interest may be tax deductible for business use.
– credit may improve cash flow
– people don’t need to sell income generating assets to purchase goods
– credit may be provided at little or no interest cost
In Australia the interest on a luxury car loan is less than the interest you can earn on a bank deposit. You would have to be insane to pay cash for a car when it is cheaper to finance it. [In fact dealers want the buyers finance the car rather than pay cash because they get paid a commission for selling finance.]
I buy everything on my credit card because I get bonus gifts and increase my credit rating. I pay my credit bill every month and have never paid a cent fees or interest.
China is an extremely corrupt corporatist state with barely two decades of exposure to market economics. With respect I doubt you have any real understanding of how economics or markets actually work.
Weird. I buy nothing on credit (well, except for stuff on Steam, but that’s not much). Everything else is paid for up-front.
As my grandmother always said, you can’t spend money you don’t have.
Tough — but not impossible — strategy if you want to buy a house, a new car, or similar big ticket item.
Obviously stick with whatever works with you, but there is a useful purpose to debt. It is not a universal bad.
It is also worth pointing out — to the larger conversation — that while most cell phone’s in the US are technically purchased on credit, it isn’t exactly the same as the rest of our debt. The price is subsidised in exchanged for (typically) two years of service.
But it isn’t like most carriers give you a discount when not on contract or you bring your own device. All getting a subsidised phone gives you is a temporary loss of portability.
People still can use credit to spend money they do have, as crazy as that seems.
I don’t mean to imply that you didn’t understand the previous post, but if others didn’t here’s how it works.
Lets go back to the 90’s when interest rates were above zero for simplicity’s sake:
I have 50,000 in a money market account earning 5% interest. I want to buy a car that costs around 50,000. I qualify for a 1% interest loan. If I just take out the loan, then I get 5% interest on 50,000, and pay 1%. I’m still earning 4% interest in affect on that 50,000 in the bank. If I sold it, I would be earning 0% on that 50,000.
That’s why rich people still buy things on credit.
And 500 million smartphone users HAPPEN to be in the income bracket that allows them to pay for credit even though they have the cash?
You and unclefester seem to be thinking I don’t understand why “rich” people still buy things on credit. I do it myself (even though I’m far from rich) because Australian interest rates are quite good.
But the income spread in China is not the same. As others have noted, their income is way down. It is statistically unlikely that the 500 million smartphone users happen to be above a certain level of affluency. It’s more likely to have a spread of income that somewhat mirrors the national spread.
No, No, No. I wasn’t at all responding to anything else in this thread. That had zero to do with China or smart phones. Just an elaboration on a non intuitive way people use credit. This is why I used the example of a car, rather than.. a phone.
Sometimes you don’t have a choice.
“Because Australia does things one way, something something China something, you know nothing about economics”.
Yep. Totally makes sense. Thank you, unclefester, for brilliantly explaining to us why the Chinese actually behave like they live in Australia with Australian style finances. Because economics.
Tell me where I said ONLY. The only thing that’s bullshit is your comprehension skills.
Nice bait and switch. You talk about a LUXURY CAR LOAN and then you continue talking as though it applied to all car loans.
You buy everything on credit card, therefore a sizeable proportion of the population of another country must be doing that also.
Yep. That makes SO much sense as well.
“You know another crash is coming when people start looking at growth as guaranteed (as if growth itself is enough to drive further growth) and credit as real money. People like you are responsible for continuation of the unsustainable spending culture that continually destabilizes economies.”
OMG, dude you have no idea what you are talking about… the average chinese household debt is 17% of their income, the average US household debt is 136%!!! if anything, the chinese doesnt borrow enough. They dont borrow because they save too much. and that is why there is so much room for growth. when they start leveraging like americans, thats when a bubble might start forming. but that a long way from now. pls check your facts… pls…
You want to talk AVERAGES about China? You REALLY want to pretend that average is evenly spread?
Again with the “room to grow”. Room to grow does not translate to growth. Things don’t grow just because there’s room.
What are the drivers of growth? I keep asking this question and everyone keeps answering with “because it’s growing” or “there’s room to grow” or “average this average that” blah blah.
Economic indicators don’t drive growth. What is hard about understanding that?
if you really want an economic lesson, fine. demand drives growth, and propensity to spend drives demand. and availability of credit drives the propensity to spend.
but im starting to get tired of this debate… this is not the right forum for it. lets just agree to disagree.
I’m talking about what is it IN CHINA that is driving this growth and is it really there to drive it?
All I keep getting from you is that there’s room to grow. In the population where this room supposedly is, do they have the ability to get credit that you claim drives the propensity to spend? Are Chinese banks and financiers going to be willing to provide credit to them?
Why do people talk about China as though it’s America or Australia?
You maybe Chinese but I doubt you live in China. I live in a poor country and can explain that 500 million figure easily:
1. Cheap brand new smart phones $80-100
2. Secondary market of even cheaper used smart phones.
3. Credit like you said. This isn’t bad. Americans buy all their phones on credit. That’s what a contract phone is.
Is growth the right metric we should be using?
Growth is the rate of economic activity – almost but not quote consumption or production.
The rate of production or consumption is directly related to the depletion of the Earth’s finite resources.
So chasing growth will ultimately be harder and harder to do, and hasten an end-of-earth scenario.
Did I get this wrong? Which bit? Isn’t it short sighted or unimaginative of economists to fetishise ever larger growth?
Perhaps a better metric to print in our daily press might reflect technological innovation which makes life more efficient – ie does more for less resources? I do believe in healthy competition and markets but it seems today’s press, as read by shareholders and caretakers of national economies, just seem to focus on the rate of depletion of the earth’s resources as the central figure to keep chasing.
“The rate of production or consumption is directly related to the depletion of the Earth’s finite resources. “
Thats a rather pessimistic view of the world, isn’t it? I dont disagree with ya. But the same thing can be said about the sun and the cooling of the universe. Everything is depleting and decaying, with or without humans.
If it’s true, who cares if it’s pessimistic or optimistic? When has unreal optimism done anything? Only optimists were caught off guard by the GFC and the recession.
Edited 2013-12-31 04:54 UTC
Only optimists were caught off guard by the GFC and the recession.
I see the leveraging (bubble) and de-leveraging (depression) of economies as the natural ebb and flow of our society. there is nothing evil about it. it is not something to prevent nor is it preventable. credit helps the efficient allocation of capital. it is where people with money and people with need of money meets. it is neither good nor bad.
As far as the depletion of resources goes, resources are simply converted to another form that we dont know how to utilize yet. 100 years ago we thought sand was pretty useless too, until someone invented cmos. what qualifies as resource has been changing throughout history. who knows what is a new resource tomorrow? thats why im not pessimistic about consumption.
Yet people STILL get caught off guard by it. And it’s not that it happens that’s the problem, it’s that people make it worse by pretending growth will happen because the current growth figures are positive. Growth is not the driver of growth.
Theory does not meet practice.
I have spent 2 months visiting the countryside in China on a bicyle this fall. In every single village you can buy mobile phones (that includes a few cheap smartphones even in the poorest areas).
In some places you find villages that don’t have a post office, no grocery store but there are a few phone stores !
Edited 2013-12-31 00:55 UTC
Because post-offices are not used enough while expensive to run and smart-phones open same, better, cheaper (outside of US), more, personalized possibilities?
If every second person in China already owns a smartphone, then yes, the growth is just about over.
China’s population is 1.34 billion so your math is off by a few hundred million souls.
If every second person in China already owns a smartphone, then yes, the growth is just about over.
fair enough, but 500mm only makes less than 40% of ppl there. comparing to american smartphone penetration of 65%, it still has some room to go. the age structure of china also makes them more susceptible to new gadgets. so i wouldn’t say growth is over in china.
To understand the reason why purchases of smartphones are rising, you have to step into the shoes of a Chinaman:
1) The average worker works away from home, living in a company supplied dormitory. As a worker away from home, you’re not going to be buying a desktop computer if you want to use the internet. Now that smartphones can do the job of a computer, people are investing in smartphones.
2) Since workers work away from home and don’t get to return home much, smartphones are moderately priced presents to buy for relatives or family members when they return home.
3) The younger generation grew up with social networks and need the internet to survive. A smartphone fits the bill cheaply.
4) Smartphones come with a breadth of entertaining games and parents find smartphones a cheap way to buy a device to entertain kids young and old.
5) With the rise of online messaging apps on smartphones, people are migrating away from SMS services which cost money. Online messaging apps make communication with old friends cheaper.
Even if smartphones are expensive purchases, they are practical tools that are a necessity.
The thing people often forget, or worse use to dismiss a certain market is to ask “A percentage of what?” — see the idiots saying there are less IE users today because they’ve dropped to anywhere from 29% to 52% share (depending on who’s numbers you use) from their 94% high — naturally ignoring that the pool size has more than tripled over the past decade meaning they’ve lost jack shit. I call these people “percenters” as they use percents without “of what” to justify bad decisions or cover up their own ineptitude.
In this case, I’ve heard a number of folks say “less than 18% of the Chinese population has smartphones” — which was true a few months ago — but 18% of 1.36 billion is 250 million… and now it’s 36% aka 500 million; that number is just going to keep climbing and it’s why using percentage is flawed thinking. It’s easy to dismiss 18% or less, it’s a lot harder to dismiss 250 million!
Of course, a lot of folks in IT dismiss China and India just out of mistrust because “all the evil crackers come from there” — simple fact is those two countries combined is 36% the world population, so it just seems like they come from there more than anyplace else — because so does everyone else! The next most populace country – the U.S. — is only 4% the world pop! It gets ugly from there.
Historically the percentage of a population using technology only rises and never drops… population usually rises and in China’s case has never dropped. (Unlike say, Japan which is facing a population implosion). In terms of population alone china grows half a percent a year… again the “percenters” would dismiss that as “well it’s only half a percent” — half a percent of 1.36 billion is somewhere around 6 million people, a lot harder a number to dismiss…
I’d not be shocked to see probably a 50% more growth the next six months, with a final figure of around 80% penetration by end of 2014, at which point the growth will slow much as it has in other markets at that level… and the reason is far, far too simple.
COST. In the first world we like to think our massive pay and prices are normal, but the fact is … well, take my little CuBot phone that cost me $150 USD off DealExtreme — Quad Core, 1.5ghz, 4 gigs RAM, 8 gigs Flash, 1280×600 display, Android 4.2.2 — sucks because it’s GSM only in US frequencies, but I use it only with Skype since I’m rarely anyplace I can’t get Wireless anyhow.
Thing is, if I walked into a Chinese tech market, I could walk out with the same or at the very least equivalent Phone for around $30 to $40 bucks, the price of a cheap burner where I live here in the colonies.
… and that’s for a decent smartphone, imagine how little the typical ~$50 dual core cheapo phones goes for domestically there… and that’s without talking about the really cheap ones tossed in with a cheap GSM plan for free.
I also think some folks hear “smartphone” and assume everyone is running around with the idiotic $600+ Apple or Samsung offerings… which is only a fraction of the market… especially when $50 bucks today will buy you more phone than either of those companies offered six years ago!
Edited 2014-01-02 11:09 UTC