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Smart phones: The only way forward

A person’s mobile phone in China is a reflection of prestige, a mark of stature as it's produced from a pocket or hand bag in buses, trains and elevators. Status can’t necessarily be represented by clothes and accessories which are easily copied. Expensive cars are another way to show it all off but the comfort of plush interiors doesn’t compensate for the inconvenience of nightmarish congestion so the car is often left at home. This leaves the phone. A status symbol carried everywhere, often produced in every super market que, subway train and elevator. There can be a lot of waiting around in China so even more opportunity to get the phone out to pass the time.

Shanzhai phones, the infamous multibillion dollar brand knock offs, have accumulated vast wealth by producing exact aesthetic copies of well know mobile brands, renamed them “Nckia” and “Blockberry” and sold them to China's low end users. They look like the original brand but the simple phones are adapted to appeal to Chinese consumers such as bright, glitzy, accentuated exteriors coupled with actual useful functions like phone lights, key in areas where electricity is temperamental. They were so successful that their business model has been dissected by foreign companies in order to gain knowledge of competing in China, and their phones, sold in the Middle East, ironically could have helped to bring down some Governments during the Arab Spring.  But with sales predicted to peak in 2011 this era could be coming to a stand still. Government restrictions are tightening, entry level smart phones are becoming cheaper and China’s middle class are getting wealthier according to research firm IHS iSuppli. Android phones are falling in price and with the imminent arrival of the iPhone 5 to be offered by China Unicom and China Mobile it means that more and more consumers no longer need to make do with reduced functionality.

An example of smart phone dominance can be observed with the current Nokia debacle. Nokia who were dominating the Chinese market with their affordable, double sim card phones, now have an inventory build up of around 5 million handsets piling up in re seller's shops around China. The company's old Symbian operating system is weighing the them down as is their image.  Chinese consumers now spend more time posting on Weibos and playing Angry Birds (which has grown past 100 million monthly active users, and it has done so faster than any other technology brand in history according to Rovioone) than sleeping. Entry level smart phones are now cheaper than Nokia’s low end Symbian handsets and have far more to play with. And in case you are a budding app developer, recently China mobile offered 100,000RMB ($15,500) to anyone who produced a mobile phone game that they would release.

In contrast, Nokia phones are now deterring Chinese buyers in a not too different fashion to the prole drift that hurt Burberry in UK in the 1990s, where what was marketed at the upper tier became widely associated with lower tier. A similar context is now prevalent in China with Nokia phones being associated with waiters and bus divers leading more and more Chinese to save up for Apples and Androids even though they cost thirty percent more in China than in US.