The Information had an interesting article going into a bit more depth on what we all already know — China wants to be the future consumer electronics powerhouse.
China’s moment is coming. It seems inevitable. The evolution of major consumer electronics brands started in Japan, then went to Korea, and is now moving to China. This spans everything from appliances, to cars, to computers and all the components inside. This is a country that has built scale businesses with exceptionally low margin. We have to ask ourselves, who is better positioned to leverage that strategy and bring affordable quality consumer electronics to less wealthy parts of the world?
Take smartphones for example. We are in the midst of converting just over 2 billion existing featurephone owners in places like rural India, Africa, less developed parts of China and SE Asia, to get their first pocket computer connected to the internet. I can almost guarantee you it will be Chinese brands that make this happen. These consumers will inevitably play a role in helping their countries develop and thus rise in GDP. As they start to acquire more wealth, they will perhaps buy a TV, or a washer and dryer, maybe an oven. When they do, Chinese brands will be there with quality appliances at rock bottom prices.
It seems Huawei is the forerunner for this brand and they are following (or being influenced by) China’s mandate to own every part of the stack as homegrown Chinese brands expand and begin to grow their presence in all markets. We know the Chinese are spending massive amounts of money to acquire IP and talent to design and manufacture their own semiconductors to power smartphones, cars, PCs, tablets, wearables, and a host of other connected electronics. We have known for some time they want their own proprietary operating system and it now looks like Huawei is beginning to assist in developing that proprietary OS. They are going vertical in every way they can because they know it helps their ambition to have Chinese brands dominate the future of consumer electronics.
I’m fairly confident they will pull this off in the developing parts of the world. I’m less confident they can pull this off in the West but a strong argument can be made they don’t need to win the West to win the world. However, I’m not sure they have convinced themselves of this reality yet.
Like so many foreign brands before them — Sony, Sharp, Casio, Toyota, Hyundai, Samsung, LG, Seiko, and many more who successfully created a brand and loyal set of western customers — this temptation is fully implanted in Chinese brands. I know personally from questions I have gotten about how to enter the US market from many of them that the West is the place they all believe they have to win.
People didn’t believe Toyota or many other foreign car brands stood a chance but now they make up a healthy portion of the US car market. I am not quick to write off the Chinese brands’ chances here in the West. However, they do have to be willing to do what so many foreign brands before them did–spend the money to establish a brand. These brands are starting to be more aggressive. Huawei is spending tons of money in Europe learning how to do this. ZTE is sponsoring sports teams. TCL is starting to branch out and expand their presence. This is only the beginning and, as the Chinese get better at building a brand, it can be argued they will push other foreign brands out of markets they formerly dominated in consumer electronics.
China has taken note of what Japan and Korea did on a global scale. They believe their moment has arrived. They have nearly all the pieces in place. Let’s see if they can pull it off.
China is now making beautiful electronic products of their own (not someone else’s) design.
And although this isn’t a consumer item, China now has a supercomputer that’s way faster than ours – and it uses chips of their own design, which is a first for them.