We may be witnessing the beginning of the end of cheap Chinese smartphones

We may be witnessing the beginning of the end of cheap Chinese smartphones
Nowadays, as consumers we enjoy a larger diversity of smartphones than ever, and at price points that are racing downhill, spearheaded by Chinese manufacturers hungry to get a piece of the action. Indeed, while Chinese handsets have recently started getting the kind of attention to detail that Western markets are accustomed to, it was still price that moved most of us, including Chinese locals, to choose a comparatively obscure and untested brand over any of the established makers. According to new data from the IDC, however, we may be witnessing the beginning of the end of the downward-spiraling drive for ever lower prices.

The new stats show that the average sales price (ASP) of a smartphone in China has spiked quite significantly, and in just a matter of months. The below graph, courtesy of Bloomberg, exemplifies this — an ASP of $192 in Q3 2014, up to $239 in Q4 2014, and then up again to $263 in Q1 this year. That's not at all a banal jump, especially considering the time frame within which it occurred, and the fact that the Chinese smartphone market contracted for the first time in 6 years! What gives?


Well, according to IDC analyst Bryan Ma, for the most part this change can be attributed to Apple's entry onto the Chinese market. Indeed, so popular have the larger-screened iPhones proved, that Apple sprung to the number one spot in China, becoming the largest manufacturer by sales volume share, leap-frogging local star Xiaomi and archrival Samsung both. The popularity of Apple handset is now considered to be driving prices of competing devices up.

Of course, the Chinese ASP figure still trails the global average (a little over $300), but the gap has been significantly reduced, and is narrower than ever before. Just an example — a year ago, the difference between the local and global averages was around $100. It'll be interesting to see how, or if at all, local players like Xiaomi, Huawei, Lenovo, and others respond to this new reality, and whether they'll follow suit with a raise in their prices, or stick to what they've done so far in hopes of giving potential buyers even more reason to choose their wares.



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35 Comments

1. gaming64 unregistered

In previous news, we witness the beginning of the creation of iPhone copycats.

2. iphonexus

Posts: 130; Member since: Jan 04, 2015

i never understand how xiaomi or huawei make phones cheap with same standard hardware compared to the flagship

3. HugoBarraCyanogenmod

Posts: 1412; Member since: Jul 06, 2014

Instead of heavy advertising, they choose to invest by selling cheap, other companies selling for high margins to cover their ads cost and I think you should know that

8. Simona unregistered

Everything is just one business and how you will load with it it is up to you

11. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

That will change. They had advantage of the start of the boom. Now that competitor sare entering at a faster rate. Meaning their ads will go up and they will need to compensate.

4. Cheezwiz

Posts: 500; Member since: Dec 29, 2014

The logic is unbelievable: "Our competitor charges more and is more successful, therefore we must charge more." and the people fall in line and believe it: "I pay more so it must be better, herrpaderp"

28. TerryTerius unregistered

I don't think is that they believe they HAVE to charge more, it's that they're realizing they CAN. Most companies are going to want to charge as much as they can get away with for their products, that is where their profit margins come from. Besides that, a higher price tag is attached to an aura of exclusivity for a hell of a lot of people. Which is in and of itself a motivating factor to purchase more expensive products.

5. waddup121 unregistered

There will be some cheap phones still. Jiayu, Doogee, Ulephone...LOTS.

6. Simona unregistered

Even ''western markets doing this trick .. where it would be copied from guyyss :DDD everybody who starts doing ANY business and make product starts with lowest price .. IF the product will be successful then OF COURSE the price will go gradually up.. Parena U SHOULD know this LONG time ago ...

12. gaming64 unregistered

That is the most ridiculous pricing I have ever seen. If you make the price higher than it shouldn't be then it would gradually lose a point of interest in a certain group. And one more factor you should consider is what type of people you would want to attract. China has a high percentage of poor people so of course OEMs would rather price their phones to attract people who can afford it. You should have known this for a long time now.

19. Simona unregistered

How can u judge the amount of price??? YOU have NO IDEA how high price is ..! You using crappy element called craple as a scale and u are gu judging only from it .. which makes you completely stupid brainwashed.. And no you not right china has very rich people and china has poor people .. same like USA has poor people ,has rich people.. You talking like not grown child.. Remember DON'T judge when you DON'T know and you have no idea..

25. gaming64 unregistered

I said a high percentage of poor people, and every company os trying to aim for specifics like Apple bring greedy and Xiaomi taking India and China's emerging markets. The only one who is talking like a child here is you.

35. Simona unregistered

u ar child lookaad ur childish avatar..

22. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

Because most phones are priced to get the name out, then they go up because the investors that backed them...want to start making the millions it took to make them name worthy. Not only that, they will have to start more advertising to make sure theirs is sold. They need to expense that too. Most of the reason Samsung is king is because they have ads all the time. Also while china has a high percentage of poor, they also have other millions upon millions middle and upper class. You don't need 1 billion low end 50cent products making you 500million, when you can sell 100 million and make 100/phone on a higher end device giving you 10billion in return. Or....dun dun dun....make both and you cover both ends.

26. gaming64 unregistered

Great reply.

10. dmakun

Posts: 382; Member since: Jun 06, 2011

This pretty much explains why I hate that fruit company. As a consumer I'm sad to see this happening really. To sell devices with such high profit margins is hurting the purchasing power of a lot of people. In the end these manufacturers win and the rest of us end up in these forum arguing like typical fanboys about whose toy is bigger or better.

16. bucky

Posts: 3778; Member since: Sep 30, 2009

unfortunately, every company would love to charge. Apple does it because they have the fan base and now Samsung is just starting to do so as well. The goal of any company is to prize away as much cash from us as possible.

13. SitiNurbaya0

Posts: 153; Member since: May 22, 2015

The fact were explain wrong. In past, no user want expensive 'junk'. only who canot afford expensive phone buy chinese. 10 year ago, samsung is also junk/cheap/bad. now, chinese is good and cheap everyone buy expensive chinese so ASP go up. I own xiaomi mi4i, and i think build quality same as samsung/sony. no feel cheap chinese like 5 years old.

14. ryq24

Posts: 875; Member since: Oct 17, 2011

Cheap phone are here to stay. Most people cannot afford a mid range phone what more a premium one.

15. Ashoaib

Posts: 3276; Member since: Nov 15, 2013

Oh NO, a big NO... please keep the phones cheap so big guys will be forced to lower their prices as well in the future... if chinese will increase the price then apple and the likes will be more obliged to keep their junk higher

18. SitiNurbaya0

Posts: 153; Member since: May 22, 2015

In past everyone buy US$ 70 chinese with mediatek, and hurt the cheap samsung/sony/lg/htc model Now, a lot buy US$300-400 chinese with snapdragon 800s like oneplus and mi4/mi5, zte nubia so the chinese asp up. and hurt not-chinese medium price phone. so, this is good news. with chinese go up in asp. this will make not-chinese (samsung, lg, sony) to fix their middle and flagship pricing.

20. Kruze

Posts: 1285; Member since: Dec 30, 2014

Looks like PA has forgotten the Redmi series from Xiaomi, their Redmi series are always cheap and value for the money. If you're talking about Huawei P8's pricing, you can't say it's overpriced, it's still cheaper than most of the flagships out there, and don't forget that Huawei does advertise their flagship and spend some on R&D. Sure, Chinese flagships are starting to cost more than before, but if it they spend on R&D and innovate, I don't see anything wrong with the pricing.

21. sergiobr

Posts: 718; Member since: Feb 25, 2013

Sure, price rises and the quality ...

23. Tizo101

Posts: 527; Member since: Jun 05, 2015

Lol... so phonearena is this the economic principle of monkey see monkey do? (I can't believe you have actually managed to relate 2 unrelated variables, a more logical explanation would be that manufactures have seen that people just need reasonable pricing not bottom dollar cheap thusly the race to lower price ended)

24. Virage

Posts: 88; Member since: May 25, 2015

What companies like Xiaomi, Huawei, Lenovo have done is build a large customer base. Firstly being keeping current and appealing to prospective consumer,with value for money in mind (not cheap).

29. dimas

Posts: 3347; Member since: Jul 22, 2014

But they still offer 2013 and 2014 technologies in a cheaper price ($50-80 per handset in our country.) Inflation is inevitable and even these Chinese brands pack lots of features in their phones just to woo consumers selecting them over the big boys so this shouldn't be a surprise at all. Technology is always like this and the same principle was applied to the golden age of television and oven toasters.

30. Chuck007

Posts: 1410; Member since: Mar 02, 2014

These couple of weeks have been nothing but bad news for China. Stocks taking a dive, lowered export+GDP forecasts, and technology firms showing signs of losing momentum, What gives? Hope they get more innovative soon. Their future will depend on it.

33. p51d007

Posts: 704; Member since: Nov 24, 2013

So, in certain ways, the Chinese, are like a lot of the Western consumers...purchasing something as a "fashion trend" rather than how good something is or its value? Consumerism hits the fabled communist country I guess. Once that genie is out of the bottle, look out. They'll be hanging onto their iphones 24/7 in one hand and starbucks coffee cups with the brown paper towel wrapped around it, while wearing their beats headphones.

34. TheOracle1

Posts: 2222; Member since: May 04, 2015

Perfect response. LOL. I use a Zenfone 2 4gb and was asked by a Note 4 user the other day what it was. When I told her she couldn't understand since most people believe all Androids are Samsungs. I also own a THL 5000t and when I tell iPhone users I get over two days of battery life and it can basically do everything their phone can do they're incredulous. The fact is that 90% of users buy the brand and associated prestige and simply aren't aware of the facts (and/or value) available. Personally, I'm still not convinced why I should pay $4 for a Starbucks coffee the same way I won't pay $700+ for a Samsung, Apple, HTC etc phone.

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