The Chinese New Year: Mobile Growth, Cheaper Phones, and Better Apps

by Gal Nachshon

ChineseFlagMainWith the new moon of February 2013, much like the rest of the world, we turn our heads eastward – towards China and the emerging Year of the Snake. Starting with the Year of the Dragon (2012), China saw a formidable growth in Internet usage, partly because of global trends, but most specifically due to the proliferation in the smart phone industry as well as China’s increase of broadband reach and speed.

 

The Year of the Dragon:

As China is well on the course of its’ 12th Five-Year Plan (2011-2015), in September 2012, the vice minister of the Ministry of Industry and Information Technology (MIIT) made clear what are China’s goals for the near future. Indicating China’s intentions to increase the broadband Internet access in rural areas and making it available to 95 percent of the country’s administrative villages by the end of 2015 with Internet speed of 4 megabits.

In January 2013, China’s Internet Network Information Center (CNNIC) notified that throughout 2012 there was an increase of 51 million people that now can access to the Internet, bringing it to a total of 564 million users. 74.5% of that, or 420 million users, accessed the Internet through their mobile devices.

Hence, it is not surprising that mobile Internet usage is outgrowing that of desktops, for by the end of 2012 there was a net increase of 104.38 million 3G users in China, with the net increase exceeding the 100 million Mark for the first time. However, Chinese mobile growth isn’t going to stop there, 330 million mobile subscribers are now using smartphones – a 150% increase over last year. Kai-fu Lee, the former lead China researcher at Microsoft and then Google predicts that China will have 500 million smartphones in use by the end of 2013.

 

The Year of the Snake:

Therefore, with this growth rate of mobile Internet use, China Mobile is continuing to push their nationwide TD-LTE, 4G mobile phone standard, to 35 percent of the population for commercial trials by Q2 2013. This ambitious plan is complemented with China Mobile’s employment of a dual path technology that will allow FDD-LTE networks and TD-LTE to operate simultaneously.

As to accommodate the growth of smartphones, China Mobile also announced a low-cost TD-LTE smart phone to emerge in 2015 while working on a global roaming plan for such deceives. With China Mobile’s growth, and further dominance over the Chinese market (of 420 million users accessing the Internet through mobile devices) the western world looks to the east to behold the new moon of the Year of the Snake. For in the mobile age, Apple is rumored to be working on a new iPhone 6 that will work China Mobile. Such motives are clear and supported by Tim Cook as he said to Xinhua News during his recent visit to china: “China is currently our second largest market. I believe it will become our first. I believe strongly that it will.”

 

What’s Next?

As these numbers reflect, alongside China’s determination to spread its mobile network to urban and rural areas alike, we expect to see the following three things in the year 2013:

 
  1. Cheaper Phones – with the increase of demand and reach, more and more mobile companies will seek to take advantage of the proliferating market. Foreign companies such as Apple and Nokia are certain to challenge China Mobile’s cooperation. In a country where the average salary is $730 those companies will have to cut prices. That’s why we are expected to see a cheaper version of the iPhone by the end of the year.
  2. Better Apps – Currently, it pays nothing (or very little, if you are lucky) to develop apps for the Chinese market. This is mainly due to the reluctance of most Chinese to pay for content. However, since the market is growing so rapidly, the Chinese app market may bounce back in a big way. Recent studies showed that music and image apps are now shadowing gaming apps in China. This may suggest that users there are using phone to consume content as well as share content across social networks – two main drivers that may attract more revenue. Finally we should not be surprised, if some good Chinese apps will eventually find their way to other countries.
  3. Chinese Market Boom – As mobile internet surpasses desktop usage, it is not just the mobile industry that will be affected but the Chinese market as a whole. Already at the end of 2012 over 55 million people, a 136.5 percent increase, composed of 23 percent of the nation’s 242 million online shoppers, now shop via their mobile phones and tablets. This increase accumulated $1.87 billion USD in Q2 2012, 488% increase, and it is expected to continue growing in 2013.
 

Looks like the year of the snake is going to be great for doing business in China. If you are not pleased with the hard numbers, just read this prediction. Happy new year, China!

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