I have used four Chinese smartphones in the last four years. One common trait that all my Chinese phones had was a cheap price and huge specs. How is China able to produce cheap products with such huge specs? In my previous article, why smartphones are expensive, I did research and found out 10 reasons that make flagship phones to be very expensive. On the other hand, I realized there are smartphones that are cheap e gship phonesensive. On the other hand, I realized there are smartphones that are cheap despite having almost the same specs as flagship phones. I did another research and found six reasons why most Chinese phones are cheap.
Here is a list of common Chinese Smartphone Brands
The following are the reasons why most phones on the list above are cheap.
Research and Development
Most of the Chinese smartphone manufacturing companies do not have a research and development department. The R&D is responsible for coming up with new technology to be used in mobile phones. Doing research costs a lot of money.
What most of these Chinese companies do is they buy smartphones from companies with R&D and then they replicate it in their own products. By doing this, they bring out smartphones that are already loved by people and they spend zero on ‘experimenting’ technologies.
On this list, I only know of Huawei that has a research and development department. You can also confirm that Huawei phones are not as cheap as most of the other Chinese brands. What smartphone technology has ever been invented in China if not by Huawei?
IBM company made the first smartphone with a touchscreen in 1992. In 2013, Samsung, the South Korean Company was the first one to use a curved screen on smartphones. An American company called Essential was the first to put a notch on a smartphone screen. In 2011, the Taiwan smartphone company, HTC put the first dual cameras on a smartphone. Motorola from the US and Sony from Japan were the first companies to make a phone that had a front facing camera way back in 2003.
These are just a few examples of phone companies that started a trend. Out of the many Chinese companies available, none has pioneered major smartphone technologies. Chinese companies prefer to wait for others to do the dirty work of inventing before they jump in. Not having a research and development department is one way that Chinese companies cut production costs, which then allows them to sell their products at a lower price and still make profits.
Cheap Skilled Labor
Unlike what most people assume, the labor in China is cheap but they are skilled. Other countries like India also have cheap labor but they are not as skilled as the Chinese. In addition, the Chinese have machines that help them produce products faster and more accurately. The thousands of industries in China also mean it is easier to get components used in making smartphones.
According to Huffpost, the average pay for a worker in China is less than a tenth of the average pay for an average worker in the United States. Chinese workers also work for longer hours compared to workers in the US. Smartphone companies in China take advantage of cheap skilled labor to produce millions of smartphones each year.
The many counterfeit phones that come from China just show how skilled workers in China are. Unlike jobless people in most countries who do criminal activity, Chinese prefer to make fake products and sell. The efficient labor force in China is another reason why smartphones mad in China are cheap.
Just like most countries, China seeks to grow its domestic industries in a bid to strengthen its economy. To successfully grow themselves, they favor their own companies and do as much as they can to make business hard for foreign companies. Chinese smartphone companies have a less tax burden to worry about, which enables them to sell their products at cheap prices and still make a profit.
Recently, China announced that it will not charge tax for integrated circuit making and software developing companies for two years starting 2019. From 2021 to 2024, these companies will only pay half the tax. Such favors give Chinese companies advantages that foreign companies barely get.
When Chinese smartphone companies make phones, they produce them in masses. The aim is often to flood the market with their smartphones. You may find Chinese companies that have only made three smartphone models but these three models are available in most countries. From nowhere, a brand suddenly becomes popular.
Most of these Chinese smartphone brands began less than ten years ago, some are less than four years old, but their name has already spread in over ten countries. Mostly, they focus on areas with a huge population but have less money.
Producing smartphones in masses helps Chinese smartphone companies make profits even when they sale their phones at cheap prices. This leads to the final reason why Chinese smartphones are cheap.
Low Profit Margin
Chinese phone companies get very low profits from each sale. Some go for losses for a while before they start making profits. Despite the low profit, they make per sale, their mass production helps them make huge profits like other foreign smartphone companies. As I had mentioned earlier, they focus on third world countries where a huge population of people does not have mobile phones.
People in these countries have very little money to spend on buying a mobile phone. Therefore, they find Chinese brands to be very appealing to their lifestyle.
Most Chinese phones have sub-standard components. They use the cheapest technology possible to make their smartphones. That is why some of the Chinese phones are not durable. Some companies use components that are too fragile to last even a month.
Snapdragon is a high-quality processor used in expensive phones. In most Chinese phones, they use Mediatek. From screen technology to the type of battery to the additional components like headphones, Chinese companies use cheap components.
However, some Chinese smartphone companies mix high quality and sub-standard parts. Their aim is to cut costs and sell their products as cheap as possible because their target market cannot afford expensive phones.
These are the six reasons why Chinese phones are very cheap despite having huge specs.