How China Will Change the Smartphone Industry Predicting Winners and Losers
Back in 2012, if you compared a budget phone to a premium phone, you'd likely see a spec/features breakdown like this, , The comparison was simple Twice the money bought you a phone that was, statistically speaking, twice as good. But with Chinese manufacturer Xiaomi's ascendance, the following type of comparison is becoming increasingly common, , The Xiaomi Mi 3 is less than half the cost of a Galaxy S5, yet boasts nearly identical specifications, even edging out Samsung's flagship phone in a few categories, including display sharpness and standby time. For the money at least based on the raw data the Mi 3 is the clear choice. But what about the fluffy stuff, like build quality, interface and overall user experience? Surely that's where the Galaxy S5 earns its higher price tag. Not necessarily. CNET calls the Mi 3 "quite the looker," complementing the phone's "aluminum-magnesium chassis andbeautiful face." Meanwhile, TechRadar praises the "polished and comprehensive MIUI interface," awarding the phone four out of five stars in both design and usability. Compare those accolades to the same experts' opinions on the S5's hardware CNET "at the end of the day, the Galaxy flagship feelslike plastic" TechRadar "the S5 doesn't look like a cutting edge smartphone". So Samsung might actually be in trouble, and the first warning signs are already here. Just last quarter, Xiaomi leap-frogged Samsung to become China's 1 smartphone seller, usurping a spot Samsung had owned for over two years. What's more, Xiaomi is just getting going, with its new flagship, the Mi 4, all set for launch. , The catch for Americans, of course, is that the highly-affordable, surprisingly-capable Mi line won't be available in the U.S. for the foreseeable future. Until Xiaomi decides to brave the fierce, patent-infested waters of the American electronics market, U.S. citizens will be stuck paying 650 for unlocked, top-shelf handsets. Still, Xiaomi's ascendance will likely shake up the mobile industry for years to come, as rival smartphone makers are forced to respond to top specs at low prices. So with that in mind, let's speculate as to who will win and lose as a result of China's maturing budget phone industry. The biggest winners here are Chinese handset makersand not just Xiaomi. Originally the market followers, China's gadget manufacturers are now positioned to be market leaders, with an opportunity to shape pricing, features and development trends around the world. If rival Chinese makers like Lenovo, Huawei and Yulong can match Xiaomi's quality, they'll be able to fight over Samsung's old throne for the next several years. Best of all, they've got a giant pie made up of 1.5 billion customers. Naturally, phone choice is only getting better in China, as manufacturers offer better and better phones at the same mid-to-low price points. It won't be long before Americans are jealous of the latest Chinese-only hita 180 degree turn from five years ago. Rival smartphone makers in Korea and Japan have the most to lose hereover time, they will have tremendous trouble competing with their Chinese counterparts on price. In order to survive, each company will need to find new ways to differentiate its offeringsand it has to be something other than specs and price. On paper, consumers in developed markets should benefit from China's new army of low-cost, high-quality handsets. Once Xiaomi and co. finally enter the U.S. market, the inexpensive products will theoretically drive down prices from the likes of Apple, Sony, and Samsung. But how long will this take? Will Apple sue Xiaomi for infringing on patents to stall the threat? Will American manufacturers start making lower-quality phones to compete with China on price? And will any of this help solve America's biggest smartphone problem namely, the appalling, worst-in-the-world contracts forced upon us by big carriers? There may be a tech revolution going on in China, but the U.S. benefits could take years to unfold. It's tempting to call Apple a loser here. After all, the company has always rejected the low-cost phone, and here Xiaomi seems to be proving its success. At the same time, however, Apple might just be positioned to sit above the fray as Samsung, LG and Sony fight for Xiaomi's crumbs. Consider that Apple has never played the spec game, having ceded the spec-sheet war to Samsung years ago. Apple doesn't sell handsets on the strength of megapixels or CPUs, but rather, great design and the Apple mystique. Perhaps the company was right to avoid the low-cost market all along, a territory that a Chinese company like Xiaomi was bound to win eventually. Maybe people will finally abandon Apple once they can buy a phone with similar specs, for a third of the price. Or maybe the same group of geeks, Apple apologists and design nerds will just keep buying iPhones, Mi or no Mi. Time will tell.