Is China dumping smartphones on world+dog?

We're the landfill


Analysis We’ve heard much this week about China dumping steel, but less so about China dumping smartphones onto the rest of the world. But the latter accusation is actually far closer to truth.

For years, the leading phone brands like Samsung, Sony and HTC have spent huge amounts in the hope of gaining the windfall profits that follow from a hit flagship. But the wheels have come off: Samsung alone makes a profit on its smartphone business, and even that’s declining.

That’s only to be expected in a maturing, commoditised market. The £600 Android isn’t twice as good as the £300 Android, and you can now pick up excellent deals for £250.

There has been a revolution in component packaging, resulting in a glut of what I call “Shenzhen Generics”: low cost, high quality flagship alternatives. Integrating components used to take years, now they come ready-rolled.

As Ben Wood at CCS Insight points out, you don’t even need to be in Shenzhen. UK startup Wiley Fox has a small team in London, but it’s leveraging the quality and low costs of the packaging and manufacturing Shenzhen industrial powerhouse.

“Even a small agile player like Wiley Fox, with few staff, can button up a phone and do quite well with it,” said Wood.

The ASP (Average Selling Price) for smartphones will peak this year and decline at a rate of 4.6 per each year “before reaching $236.38 in 2019," IDC predicted last month.

Huawei can’t be accused of dumping – defined as selling at or below cost – and it refuses to do so. But the picture is different with Xiaomi and OnePlus, both of which have acknowledged they sell at cost.

OnePlus Two

Like Xiaomi, OnePlus sells at cost

“None are aiming to lose money - they all sell at or just above the Bill of Materials (BoM) cost”.

Xiaomi, the world’s No.4 phone manufacturer by volume, justifies the strategy by arguing that it’s building out a platform for its services. It’s also building a brand, and brand awareness of peripherals, which include everything from routers and webcams, wearables and power strips and even an air purifier.

Wood compares Xiaomi’s strategy to Amazon selling the Kindle at rock bottom prices, to increase interest in eBooks, and its other services.

But Xiaomi’s actual “services” offering is threadbare. There’s an IM client … and not much else. OnePlus, which sells at cost, is even vaguer about how it plans to make money in the future. Both resemble the Underpants Gnome’s business strategy.

“Companies that do that indefinitely do that aren’t going to survive,” Wood thinks.

As for steel, the picture is more subtle. US manufacturers in July lodged a complaint against China’s exports of cold-rolled flat steel. But the complaint also lists the UK as a “dumper”.

In reality, Europe designed its industrial policy to drive out heavy manufacturing, so member states could achieve their carbon dioxide emission targets. Forty per cent of the cost of producing steel is energy. Shifting manufacturing doesn’t reduce overall CO2 emissions, but merely moves those emissions to China.

The UK then decided to go even further, and introduce a “carbon floor price”, ensuring the price of energy was much higher even than Europe’s. Britain pays six times as much per tonne of CO2 emissions than Europe.

Even the utopian FT, a strong supporter of climate mitigation policies, admits that: “Higher energy bills are the direct result of government policy, which obliges customers to source a portion of their electricity from renewable technologies.”

Both steel and smartphones are a consequence of overcapacity as the world’s leading industrial country seeks to stimulate demand abroad to make up for weaker demand at home. In smartphones, it was hard to envisage high cost manufacturers like Sony and HTC turning in loss after loss for years: some consolidation was inevitable. But for Britain’s steel, it isn’t a murder, it’s a suicide. ®

Broader topics


Other stories you might like

  • Will this be one of the world's first RISC-V laptops?
    A sneak peek at a notebook that could be revealed this year

    Pic As Apple and Qualcomm push for more Arm adoption in the notebook space, we have come across a photo of what could become one of the world's first laptops to use the open-source RISC-V instruction set architecture.

    In an interview with The Register, Calista Redmond, CEO of RISC-V International, signaled we will see a RISC-V laptop revealed sometime this year as the ISA's governing body works to garner more financial and development support from large companies.

    It turns out Philipp Tomsich, chair of RISC-V International's software committee, dangled a photo of what could likely be the laptop in question earlier this month in front of RISC-V Week attendees in Paris.

    Continue reading
  • Did ID.me hoodwink Americans with IRS facial-recognition tech, senators ask
    Biz tells us: Won't someone please think of the ... fraud we've stopped

    Democrat senators want the FTC to investigate "evidence of deceptive statements" made by ID.me regarding the facial-recognition technology it controversially built for Uncle Sam.

    ID.me made headlines this year when the IRS said US taxpayers would have to enroll in the startup's facial-recognition system to access their tax records in the future. After a public backlash, the IRS reconsidered its plans, and said taxpayers could choose non-biometric methods to verify their identity with the agency online.

    Just before the IRS controversy, ID.me said it uses one-to-one face comparisons. "Our one-to-one face match is comparable to taking a selfie to unlock a smartphone. ID.me does not use one-to-many facial recognition, which is more complex and problematic. Further, privacy is core to our mission and we do not sell the personal information of our users," it said in January.

    Continue reading
  • Meet Wizard Spider, the multimillion-dollar gang behind Conti, Ryuk malware
    Russia-linked crime-as-a-service crew is rich, professional – and investing in R&D

    Analysis Wizard Spider, the Russia-linked crew behind high-profile malware Conti, Ryuk and Trickbot, has grown over the past five years into a multimillion-dollar organization that has built a corporate-like operating model, a year-long study has found.

    In a technical report this week, the folks at Prodaft, which has been tracking the cybercrime gang since 2021, outlined its own findings on Wizard Spider, supplemented by info that leaked about the Conti operation in February after the crooks publicly sided with Russia during the illegal invasion of Ukraine.

    What Prodaft found was a gang sitting on assets worth hundreds of millions of dollars funneled from multiple sophisticated malware variants. Wizard Spider, we're told, runs as a business with a complex network of subgroups and teams that target specific types of software, and has associations with other well-known miscreants, including those behind REvil and Qbot (also known as Qakbot or Pinkslipbot).

    Continue reading

Biting the hand that feeds IT © 1998–2022