These models have been fairly accurate in forecasting diffusion of innovation. While many of the innovators have started to exit and move on, this leaves the imitators around in a slowing market.
Apple has been surprisingly good at being the forefront of innovation entering a market. While people play catch up in smartphones, Apple has already moved onto the next technological innovation: Apple Watch and wearables.
While one may argue that Apple is more of an imitator than innovator, they have a really unique strategy. They enter a market after the initial innovators have entered with a product that becomes the Dominant Design [1]. They don't focus on the Innovator or Early Adopter market, but more on the Early Majority and Late Majority and exit before the laggards arrive. The Innovator and Early Adopter market require the most capital in R&D and Marketing with lowest return on investment.
> Apple has already moved onto the next technological innovation: Apple Watch and wearables.
Seriously? Are there any number at all to show that wearables are a growth bet at this point? The Apple Watch (which entered the market three years ago!) has had an uptake at least an order of magnitude lower than the iPad, the last "next technological innovation" that turned out not to be. Tablets were hot for a while, but at the end of the day the smartphone market remains an order of magnitude bigger. The watch has never remotely been that hot.
Basically: innovation is hard. Wearables are not looking like the next big thing at this stage, and they are surely not going to save Apple from the expected downturn in smartphone sales.
Really? People are still saying Apple is in need of being 'saved'? Wow. I wish I was in as much trouble as them.
If it's not better than the most successful consumer product in human history, it's not worth bothering with? Apple is now the most profitable watch company in the world, they sell twice as many iPads as laptops, and sell more of them than even the biggest selling laptop company sells laptops, and their ASP is still going up.
Sure. Failed products. What's the point of even trying.
> expected downturn in smartphone sales.
Which may be a problem some day, but while sals are flat-ish, even their Phone ASPs are still going up. So while growth may not be as rapid as in the past, they'll just have to console themselves by showering in firehoses of cash flow instead.
The Apple Watch is probably a rounding error when compared to the iPhone, however:
"But the most interesting stuff came when Cook referred to the success of Apple Watch. The Watch sales are part of the wearables business which also includes headphones such as Beats and AirPods.
Last May, he said that business is approaching the size of a Fortune 500 company. More recently, last month, the size had crept up so it would fall in the top 400"
Thing is the Apple Watch is viewed as a status symbol primarily, despite Apple's marketing and messaging stating its a health monitoring/heads up display type device. Many of the people who buy it have no idea that it'll catch some potentially imminently fatal health conditions: http://www.dailymail.co.uk/health/article-5683089/Apple-Watc...
Its impressive how many people buy the Apple Watch without understanding what it offers.
I think it depends on the income. But, considering many people buy regular watches costing 20 times more, I wouldn't see an Apple watch as a status symbol either.
It's possible that the watch gave him "permission" to go to the hospital, but it would seem as if gushing blood ought to suffice. I don't know what it means if it doesn't.
If iPhone sales growth would level to what the Mac is doing then there's not a real problem. Apple is pushing in Enterprise where it wasn't before, services and indeed wearables (I see AirPods everywhere). I think people will buy devices less often, like you saw with iPads. But keep buying Apple.
Remember, Apple seems to enter frustratingly late and frustratingly slow (unless it's to change a port, LOL)
IF wearables is going to be much of a thing I wouldn't expect to see their flagship products come out until everyone else has had some time to work out the kinks with early adopters. Then watch Apple come in with some of the sticky problems solved (like touch on the smartphone, fit/finish with laptops, simpler OS, etc...).
Healthcare digitalization and consumer devices as medical devices is the next huge market that Apple is going to with Wearables. You can clearly see it from their actions that it is a part of their future strategy.
Apple is so big that it needs a huge new market to enter to make a difference in its revenue. Healthcare and transportation are huge markets. Apple is working on both.
I wonder how much of AAPL growth is iPhone sales volume and how much is investors anticipating the next big product category. A cable TV disrupting service hasn't materialized thanks to content owners fear of repeating iTunes's dominance and effective resistance. Cars are hard to build. Medical devices are highly regulated.
Not much, Apples p/e is 17.99 that's not expecting much growth. They simply make insane and slightly growing profit year after year. Honestly they may be undervalued relative to tech stocks as even Microsoft has a p/e of 25.07.
That, plus car manufacturing is a 10% margin business, Apple is closer to 30%. There's not a ton of money to be made, particularly because the growth in the car industry that will exist will mostly be in getting e.g. Indians to drive, that'll have even lower margins and isn't Apple's target group.
Second to no tech companies, sure, but Apple would presumably be competing with companies like Volkswagen, BMW, and Mercedes which are almost definitely better at designing luxury cars than Apple.
My wager would be AR. We have a few years yet before we see useful, comfortable, well-designed AR environments, but once they cross a certain threshold they'll immediately obsolete a massive section of the computer dislay market, as well as provide numerous opportunities for further innovation. Given that it's a market in which products will succeed or fail based primarily on UX, ease of use, and quality of design, each a strong point of Apple, they have the potential to take the sector by storm.
Almost any $200+ phone made since 2015 has a pretty good camera, screen, speed for most people.
Why upgrade when what you have is good enough? One used to check out gizmodo/engadget when a new phone came out but seems not anymore as "the new" is only incremental.
It's interesting because, even though I make the conscious effort to keep my iPhone 5, I thought MOST people upgraded? Reading through a lot of these comments, it seems that's not the case. That's surprising but comforting. Having teenage daughters I really started to get a kind of inferiority complex. Thinking, "Man, am I being unreasonably stubborn here?" But it always just seemed like the phone worked, so why upgrade?
It does make me wonder, however, what's next for Samsung and Apple? Is it that there are still more than enough people upgrading to make plenty of money? Or will they have to come up with new non-smartphone products in the future?
Friend of mine and his wife also keep their iPhone 5 from 2012. Fro my impression going to few random sites they work nicely. They changed battery only once.
So I am really consider getting iPhone SE as my next phone when the current 2 years old Nexus 5 breaks or will not be supported...
The iPhone SE is a solid device, perhaps the only reason to stick with Android is if you need faster speeds or notably better coverage on T-Mobile (which requires Band 71) as Apple's LTE modems aren't great right now.
People upgrade because what they have becomes worse as time goes on. Maybe you don't get OS updates any more and you can't run apps you want, maybe you do get OS updates and your phone is now slower. Maybe your battery charge lasts less than a day and you don't know you can replace your battery or don't want to. Some people I know almost always end up with cracked screens and upgrade rather than repair, and some other people play Ingress or Pokemon Go so heavily that their batteries don't even last a full day.
Chinese carriers offer minimal subsidies, so most customers are paying close to full retail for their phones and aren't tightly coupled to a two-year upgrade cycle. Used phones are a popular choice for value-oriented customers.
Repair is the norm rather than the exception, so most customers will replace a cracked screen or a weak battery rather than just disposing of their phone. Labor costs are relatively low and parts and documentation are widely available. Broken phones (especially iPhones) are frequently bought by dealers, repaired and resold.
The big Chinese brands offer relatively good long-term OS support, but that isn't hugely important for Chinese users. WeChat is the app in China (for many users, it's the only app they ever use) and it's extremely well optimised for older devices. The APK is a mere 60MB and it'll run smoothly on devices with a dual-core SoC and 1GB of RAM.
The US market has historically been the polar opposite of China, but it's creeping closer. Chinese manufacturers are making a push for the US market and consumers are starting to wise-up to the benefits of paying cash for a mid-range device rather than taking the "free" upgrade when their contract expires. The used market is flooded with two-year-old flagship handsets that will perform admirably for another few years with nothing more than a new battery.
IMO WeChat is bloated. While the app itself only uses n MB, it stores all chat history and embedded multimedia on the device itself. Eventually each group chat will hog >1GB. I uninstalled after they made the app refuse to run without constant GPS permission.
There isn't automatic conversation trimming? This is a feature Signal added years ago, I'm surprised iMessage doesn't have it. Then again, Apple seems to have the whole iMessage platform in maintenance mode, the biggest updates are emojis, no giphy integration or new features coming out biweekly or anything like that.
anecdotal feedback though.. your objection to them needing gps permission doesn't stack up at all against the robust platform wechat has become, which hundreds of millions depend on for everyday transactions.
So the OP's point of people in China mainly needing WeChat is 100% relevant. While your side comment about what a single user doesn't like about wechat is 100% irrelevant.
> consumers are starting to wise-up to the benefits of paying cash for a mid-range device rather than taking the "free" upgrade when their contract expires.
What "free phones" they are all leased now. There might not be a monthly fee but at the end of the lease their is a buy out to be paid. My wife's Essential phone (SHE HATES IT) is $6 a month for 24 months and then $430 if she want to keep this crash prone phone.
Was there an initial outlay? Depending on when one got it, < $150 for the best two years of what should have been a flagship level device sounds good to me, at least in theory...
Sprint have switched to leases with an optional balloon payment; Verizon, T-Mobile and AT&T offer 0% finance plans with no final payment to own the device.
Regardless, all the networks offer their customers a new device with no money up front and the same monthly payment as soon as their contract expires. It's good for retention, but it means that a lot of customers are largely oblivious to the actual cost of their phone.
Also apps do get updated, and when they do they sometimes grow by almost a 100 MB. Repeat that X times, and the RAM on the phone turns out to be insufficient for larger apps of the new now.
Facebook app was 600MB on my girlfriend's phone. Unbelievable. What the hell does Facebook need 600MB for? (granted it was the mostly the data but it made her phone run like crap because the data is stored in internal storage, not on SD card). I cleared the data and it was back to 150MB in less that an hour. So off course people feel like their phones run like crap with apps like that.
I mean even a $50 phone today is extremely powerful for its price, but developers have no consideration for mobile constraints (then blame web techs...).
This anecdote is hard to believe (the slows the phone down part) because unless the app is constantly hammering the storage system with I/Os even as a background process, storage usage doesn't mean it's actively slowing the Phone down. Also it turns out that caching people's photos, etc., will save a lot of bandwidth and improve loading times (especially precious on mobile). Those JPEGs add up quickly...
Honestly I don't know how much consideration devs are actually paying attention to when most of them are probably using fairly recent high-end phones instead of the super cheap low-end mediatek android phones.
I've also noticed that low-end android phones tend cheap out on storage since most people only care about the size of storage not the speed.
Cache. Phones have limited storage, but they're also limited by bandwidth, latency and power. If the Facebook app did no caching it'd run slower, consume more battery and eat up the data allowance of people on limited plans.
Portable computing devices suffer a lot of abuse. It's very rare to drop your desktop PC in the toilet. Battery runtime is not inflating as quickly as CPU performance gains (which is now thermally limited). Non-user serviceable batteries is entirely on manufacturers.
Smart users get a case to make up for the inherent fragility of glass.
I’ll upgrade my phone as long as the camera keeps getting better which it does. I want the pictures of my kids to be at the highest quality, since 30 years from now they’ll be compared against really sophisticated imagery.
It's rather remarkable how well the PalmPilot [1] proved the design for touchscreen devices to come. If only modern phone keyboards had any input methods approaching the quality of Graffiti.
There will always be people who want the best, but good enough solution serves most people. Smart phones have reached a point where most are at least good enough.
A flagship Samsung is say $700. That is $500 more which is more than a couple bucks a month. Clearly well worth for you but probably not for a good portion of society.
The article backs them up. People in China are no longer seeing phone upgrades as worth it. At one time new hardware made your experience better. My last phone is a downgrade from the previous one (I physically broke my flagship just after the warranty expired so I got a mid range phone to save money), and I can't tell the difference.
It was once driven over by a car and I swapped the innards.
The motherboard died and I swapped that out.
Then I replaced the battery. I've a backup nexus 5 and spare battery waiting. I want to get my money's worth. Upgrading every 2/3 yrs is nuts with how much these cost. I'm pushing for every 6 yrs unless a device truly revolutionary is released. No such device has been released.
One of my mini projects for this bank holiday weekend is to replace the heavily-cracked screen and the battery of my Nexus 5.
I bought the replacement components before realising that I'd have to go 'through the back' to replace the screen - I'm assuming that's going to add on at least an hour to the task!
I'm only replacing the screen now as the digitizer suddenly stopped working the other week - I'd been 'happy' to tolerate its [again, heavily] cracked screen for a good 4 years already!
- ed
I'm back using an old Nokia soapbar phone in the meantime. If it weren't for the lousy camera and mp3 as well as a lack of practical email and the tedious text-inputting, I'm not really missing much else from my 'smart'phone.
I've been using the same phone for almost 4 years now (oneplus one). It came with 3gb ram and 64gb storage and cost about $300, vat included.
There are two tells that I'm using an old phone. The camera is really bad compared to the current ones, and it doesn't have any biometric unlock.
I'm still running my Galaxy S5 from when it first came out, and I've not found any problems with it yet - the camera is good enough for anything I need it for, and the battery can still run a good 4-6 hours active use.
While it doesn't have biometric unlock, I would avoid any new phone that did like the plague regardless - I like having a minimal amount of security, thank you very much.
I am still rocking the original OnePlus one, too. I appreciate the lack of a biometric sensor, and camera is actually better than a lot of newer phone cameras - the only cameras that outshine it are iPhones, top of the line Samsung's and OP5T. So pretty decent for a 4 year old phone?
> camera is actually better than a lot of newer phone cameras
I had OPO too. The camera was perhaps better than some of the current new phone cameras. In today's terms the camera is really, really bad though, and clearly loses to most new models.
$200+? 2015? Well it kind of depends what you mean by good enough.
Out of all the Phone I tried, including latest Android, only the iPhone X came close to being fast enough, as in super responsive. I think iOS 11 actually slows things down for everyone, the whole OS is slower then iOS 10, even on iPhone X, which we can't test with iOS 10.
I really wish we could start to focus on Latency Computing. I want things to have a responsive output, or reaction to my input in less then 16ms.
Run Android then. If you need an iPhoneX to run your mobile operating system, then it's an unforgivably bloated pig. An iPhone X is beefier than some workstations I've used as my main gaming and development rigs in the not so distant past.
I am an iPhone user, but did a detour into Android a couple of years ago. Among other phones I had a Moto G (first or second generation) that was probably around 160 Euro. It was very fast and responsive. I didn't feel/see much difference outside games, compared to the Nexus 4/5 and Moto X 2013/14 that were released at the same time.
Wow, a 21% year-over-year drop... and this makes the fourth consecutive quarter of annual declines (in the previous three quarters, shipments had dropped -3%, -5%, and -14% year-over-year). A hard landing indeed.
The implications for phone makers are unpleasant: price competition is going to intensify and profit margins, which are already thin, will get squeezed even more and might even turn negative. (Only Apple, which makes exclusively high-end devices for style-conscious, less-price-sensitive consumers, looks well-positioned to avoid a profit margin squeeze.)
The implications for mobile software applications and services are also unpleasant: the days of ultra-rapid user/subscriber/revenue growth are likely to end soon.
>Only Apple, which makes exclusively high-end devices for style-conscious, less-price-sensitive consumers,
This is a very tired cliche, and untrue to anyone who's ever seen any of the hundreds of ads where new iPhones are available for $0 from most carriers.
This is about China, but even in the US a free iPhone is not a common carrier incentive. You can see a summary of deals here.* Promotions apparently range from $200-500 in value. Android phones and tablets are the ones routinely given away for free (e.g. T-Mobile currently offers a free Android tablet just for switching an existing prepaid account to post-paid), though again, not for the premium brands like Pixel.
It may be tiresome to hear that iPhones cost more and are popular at the same time, but it’s still true.
After relentless growth we're about to arrive at a plateauing smartphone market. I wish I could read insights from experts on what to expect in coming years in smartphone market in light of similar markets which entered a no growth zone.
Specifically what will happen to prices, market shares , unit sales, pace of innovation, competition, international growth, developer ecosystems.
Looking at the PC plateau. Dell would sell a $700 PC, and then next year when it should have cost $350, they didn't sell it for $350, they sold a different PC for $700.
So "mainstream" handset prices wont go to zero, or $50 bucks. The market will probably establish a set of price points, and vendors will supply models to compete at those price points.
Hopefully a plateauing of the smartphone market along with China starting to produce memory will start to bring memory prices down.
And then manufacturers will consider adding 8-16GB of memory... and at that point I wonder if more people will just use their phone docked to a monitor as their PC if Apple/Google/Microsoft do a better job facilitating it.
I think parent poster is referring to DRAM. 8-16GB of NAND is low even for budget phones. Desktop-like docking implies the need for 64-bit worthy amounts of DRAM.
Dig up articles from about 5 years ago talking about the "post PC era". Replace all the references to PCs with smartphones, and you should have a good idea about what's in store for a "Post smartphone era".
In the post-PC era we have the smartphone as a sort of replacement for a lot stuff that a PC does ( communication, web, sharing, photos, apps. ).
In the smartphone plateau we're maybe not in post-smartphone era as there's nothing yet to steal engagement from the smartphone ( watch, wearables, VR not yet..)
The biggest barriers are probably creating *G infrastructure in countries which don't have it widely deployed, and raising per capital GDP so people can afford devices.
If you're a Chinese OEM, you're prolly looking for volume increases over profit margin.
Apple, as this cycle happens, are now preparing to push up the price in the top end. Likely $949 for updated iPhone X, and $1099 for iPhone X Plus.
Then the rumours, for a Mid Range iPhone, designed specifically with China in mind, starts at ~$700.
Much like the economy that see a shrinking size of middle class, I think the market is going to two segment, sub ~$300 and ~$600+. Take for example, the average selling price of Xiaomi Smartphone is less then $130. That is from a company that has 10 - 15% of marketshare in China. My bet is that the top 4, representing 70%+ market shares are mostly concentrated in the sub ~$300 price group.
Another point worth mentioning, there are 1.4 Billion people in China and only ~800M are Internet users, 90%+ of them through mobile. There is still another 600M to go, as they rapidly transform into a cashless society. The same to India.
I'm no analyst - but I think we'll see a drop in price to drive demand along with a consequential decline in quality. Those 'high end', 'good bang for your buck' flagships will be even cheaper and even more cheaply made.
I think you missed a couple of interesting items. I suspect there will be more feature competition: get ready for water resistant mid and low tier phones, and tons of competition to have the best in class camera in top and mid tier phones.
Certainly we're expecting sales to slow as smartphone sales plateau, but why is it happening in China first? Is it a leading indicator of slowing growth? After all, smartphone purchases are most decidedly discretionary.
If there is a utility plateau (i.e. everyone who can justify needing one has one), then one might expect that areas with more disposable income would have more people able to keep purchasing for fashion reasons while nations with tighter margins might continue at more of a replacement rate.
Countries where the 24 month subsidy cycle is dominant will have a lot more inertia that countries where they are rare.
Also, China is home to the "cheap flagship" brands, so much of the middle range of the market will already buy close to the technological limit. In countries where the middle of the market is mostly held by the lesser offerings of more premium brands, upgrades to a higher price tier can effectively substitute technological progress (for a while): customers expect a faster phone after n years, and if the technology doesn't deliver many will be willing extend their price range. If it helps. For those who already had a "cheap flagship", it won't.
Smartphone maker Xiaomi is rushing to get its IPO done, the market is betting a $100 billion valuation [1]. This reminds me what its founder Lei Jun said a few years ago - "Even a pig can fly if it is in the middle of a whirlwind" [2].
Now the market has apparently reached its peak, I am wondering whether those who are thinking to buy Xiaomi shares will find their whirlwind and fly. ;)
It sometimes amazes me that people switch their phones so often. I tend to have a phone for 3 years. Many of my friends change every year ! One step to towards reducing global warming is reducing consumption.
Well the average replacement rate is approaching 3 years, so you shouldn't be too amazed.
But you should also consider that those who switch don't throw their product in the garbage. The resale value of flagship phones, particularly Apple, is really solid.
For example, Apple today sells a 3 year old model (6s) for 65% of the price of its latest model. Even if you sell it second hand, you can usually get >30% on a 3y old Apple model. You can usually get like 75% on a 1 year old model.
I know a guy who buys a new phone every year and sells his old one. Say he buys every year the latest and greatest flagship for say $1000, sells it for around $750 a year later and buys a new phone. He consistently spends about $20 a month on the latest phone. It's not as crazy as you'd think, $20 a month for the very best tech in your pocket is pretty trivial to most people on HN. The numbers may be a bit different for everyone.
I have a Xiaomi phone. It costs less than 200 dollars after taxes in my country, and it's great.
My cell phone company basically gives them for free in exchange for the 2 year contract, so after my 2 years are up, I'm definitely switching it for a newer model, or I'm leaving money on the table.
Many people are way more careless than I am, or heavier users, and definitely switch every year (or even less!).
Chinese phones make it much more feasible. OTOH, if you care about environment, these are no good - no user-swappable batteries for instance.
They don't give them away free, they build the cost into your contract. If there's sufficient competition in your local market you'll be able to buy a sim-only deal that costs less and returns that money to you and let's you upgrade on your own schedule to a phone of your own choosing.
I thought that too. However last Black Friday I found the best deal on an iPhone X was to pay £450 up front and then pay £29 per month for 2 years (totalling £1147 or £6.13 per month above the phone’s list price). The data and minutes I get would cost me at least £15 per month, making my deal absurdly good value!
It's the local state company. So no "sufficient competition" there (there are 2 other companies, but neither gives significant advantages, and you can't keep your phone number, which is a huge disadvantage).
Even if I went to China and bought the phone there I'd still be behind, no way to get a data-only contract for less than phone+data.
I'm not happy about it, it's just the way things are, and the reason I'll be switching phones next year (just because I'm basically forced to by the carrier).
That's not free, and is basically back to the subsidized plans that were so terrible. With TMO I know exactly what I pay for service and for the phone. I could pay the 0% loan off on the phone today and my bill will down accordingly. When the 2 years is up, my bill will go down accordingly. I could pay off the phone and leave TMO today if I wanted to.
Same here. They only reason that I upgraded to the nexus 5x from the nexus 5 was that the modem in the 5x supported additional LTE bands. If there's no signficiant changes in the modem hardware you're just paying more money for a slightly better version of the phone you already have.
You went from the slowest and more bugged phone that I ever had to one that it’s even slightly slower... it’s not really a good upgrade choice to do after 3 years.
Yep, I just switched from the Nexus 5X to Moto X4. Nexus 5X only has 2 GB of RAM, which on recent versions of Android means apps are swapped out and shut down constantly. If you were browsing the internet and switched to a different app, you were guaranteed to have to reload the webpage from scratch if you didn't switch back to your browser within 5-10 seconds. Plus Snapchat was unusable due to camera lag and high memory requirements.
I'm still using a Nexus 4 with 2gb of RAM, running android 7. 6 was terrible performance, but it's been running well with 7; no issues with constant swapping or the like. The camera is absolutely atrocious, and the 8gb internal storage is really showing it's age, but it still runs everything really well for me - probably since I've never used apps like Facebook. The biggest issue so far has been a flash sector failure or a cosmic ray or something that forced me to wipe everything and reinstall from scratch.
I would have upgraded it in the last year or two but I can't find a phone I really want, nearly everything produced these days is a much larger form factor.
All of my "techy" friends except myself are guilty. They buy a phone at most every year and often times within 6 months. What gets me is that on top of that, they exclusively get the top phones (pixel 2, Samsung s9+, and the latest iPhone were the main purchases this year).
Yet here I am, with my one plus 2 and cannot imagine changing it within the next 3 years as the improvements are negligieable for me at this point. The only thing I can consider switching to is either an iPhone or the Librem 5.
This is a good thing if you want a truly open source phone.
Smartphones have become a commodity. Yet the solidarity among fabricators against a { us: hardware, you: software } business model has been remarkable.
Margins have been razor thin for awhile, the business is incredibly cutthroat. Though it might come from Taiwan, I hope this is the straw that breaks the camels back.
BTW I'm talking on the low end here. It's already being done on the high end by Fairphone, and a few others.
Your second link is broken. Your first link, from 2016, indicates that Apple made a 38% margin.
>Apple's margin on iPhones is 59-64%. Samsung is 17%
Apple does not make 59-64% margin on their phones. This highly inaccurate figure was likely extrapolated by taking the retail price of the phone and subtracting the cost of its parts. The real profit margin which is likely around 30-40%. As for Samsung, their flag ship phones also generate a profit margin that is similar to that of Apple's.
Indeed, and Apple's EBIT margin is around 30%. It's an important figure because unlike say an LG, I don't think you can really see Apple phones separate from the rest of the company. Would we buy as many phones at these prices if we didn't have the App Store, OS X Macs, iCloud, Apple Music, Beats, Watches, Tablets, etc etc, in short, the ecosystem. All of that needs a company with massive overhead to work.
Exactly my point. This market has winner take all type dynamics.
Consider the textiles industry. There are brands selling expensive t-shirts for nice profit margins. And there are a ton of t-shirt exporters that can probably barely string a few dimes together.
It's exactly the same in the smartphone market. There are ~50+ Chinese smartphone manufacturers that are barely profitable. They wholesale $20-$40 phones in the Indian market to stay afloat.
Product with more volume (especially routine like groceries) usually have less margin due to lower risk than those with low volume and higher risk (of not selling in the necessary time period).
Ahh yeah makes sense. I wish it was closer to being the OnePlus5T range of being $500-600USD vs what its priced at. Then it's a no brainer to purchase but now being so expensive and untested on US LTE bands its too risky (and our government says not to by Huawei for national security reasons).
I don’t think the government says not to buy huawei phones. They are more worried about routers and back end telecommunication equipment, which is their main market.
Well, yes, but it's worth noting that smartphones are now down at the $40 and less level. And China doesn't have that many extremely poor people anymore.
Read Hank Paulson's book, Dealing with China. The Communist Party can only extract so much value from to masses while corruption and opacity are the norm in government. Instead of looking at the economy as a virtuous cycle of re-investment making more resources available for collateral, they treat the economy like a well and wonder why it keeps running dry.
China’s growth fueled by massive debt is over(350% to gdp, government + corporate + individuals). it’s barely returning one yuan for every yuan debt it takes on. The Chinese consumer is weighed down by housing debt and credit card debt. And the tariff is going to hit the consumers hard; soy prices increases already has Chinese consumers screaming.
Interestingly, the US' total private and public debt amounts to 3.5 times the GDP as well but few seem to have as much concern over its debt as they do China's. Also, the UK appears to have a similar level of private debt as the US, and only a bit less public debt.
On public debt alone, China:UK:US is 66:85:107 percent of GDP, according to the IMF.
So what is the reason for major concerns over one but not others? Developed vs developing countries? Stronger vs weaker financial institutions/systems? Something else?
Note that a key measure that the US and other developed countries tend to be ahead of most developing countries is national wealth, i.e. its assets minus liabilities, as a percentage of GDP. (This is unsurprising since they have much more time to accumulate assets.)
"As of the first quarter of 2010, the Federal Reserve estimated that total public and private debt owed by American households, businesses, and government totaled $50 trillion, or roughly $175,000 per American and 3.5 times GDP."
As the parent noted China has a very high debt to GDP ratio. But more importantly it's really hard to tell in China where the state ends and real capital markets begin (well, they probably don't exist outside of Hong Kong). The Communist Party certainly has a saying when it comes to Chinese banks extending loans to Chinese companies (as a part of their 5 year plans, etc). The US on the other hand has a well regulated and audited capital market. This just means that the debt in China is probably even less sustainable than it appears, which in the long term will either require a gradual depreciation of the Yuan or a constant "cooking of the books" to keep borrowers solvent. The former will cause social unrest when lots of savers see their wealth disappear and the latter just leads to an inefficient economy - with unprofitable "zombie" companies being kept alive by constant loan extensions.
It's clear that the US is much stronger from the asset point of view.
If one looks at real economy, however, China can basically produce almost anything they need, except oil and some advanced electronics (which they are catching up fast and might become self-sufficient within 10 years). The US can do the same in the medium term but it will take time to reestablish its manufacturing industry to cover all needs.
Both are basically self-sufficient if need be. There is no severe weakness in the real economies of either country (except oil for both, over the medium term).
> 3.) US gdp to debt is only around 100%
You mean debt to GDP? Yes for public debt alone, but the same figure for China is around 66%. Check out my post above for comparisons of various measures and references.
I don't see how self-sufficiency matters (unless war). In a globalized economy you want to keep the high-margin business and offload low-margin business to someone else.
I'm not an expert, but my understanding is that heavy reliance on imports increases the riskiness of debt, as external pressures and events can impact the debtor without recourse (whereas even in the event of a local industry failure, imports remain a stabilizing secondary option).
In an event of financial crunches, a self-sufficient economy should still be able to hold its own without dire threats from cut of essential imports. Its economic crisis could be quite bad but won’t be catastrophic, as in some well-known cases we’ve read about in the news.
“The yuan's officially in the IMF's basket of reserve currencies.
On Saturday, the Chinese currency was added to the IMF's special drawing rights (SDR) basket, joining the US dollar, the euro, the yen, and the British pound.
"The inclusion into the SDR is a milestone in the internationalization of the renminbi, and is an affirmation of the success of China's economic development and results of the reform and opening up of the financial sector," the People's Bank of China said in a statement, according to Reuters.”
Everything point you made is invalid which means that you either misinformed or for some reason you want to deliberately misrepresent the economic landscape or you are a blinkered ideologue.
I'm astounded how little discussion the effects of China imposing tariffs on Chinese people has been getting really. Everyone's happy to talk about how imposing tariffs would just hit poor people the hardest and how retaliatory tariffs are a terrible idea when the topic is American tariffs, but the discussion of Chinese tariffs on food is all about the effects on American farmers - there's very little about them hurting China, even though they should if we applied those same theories on tariffs to them.
This is not the debt to GDP ratio, this is the sum of all government debts and assets. The debt to GDP ratio only includes public debts. The United States has a debt to GDP ratio of 104.17% as of 2015, less than the average for an OECD country. If you want to compare private debt to GDP, we're doing just fine there as well.
“the rate of growth is strong, rising more than 80 percentage points from January of the same year. The household debt-to-disposable income ratio is catching up to developed country levels, having reached 68.3% by the end of 2016.“
It used to be that even house loans were rare. Things have changed very rapidly in the last 10 years, and even credit card debt is a concern to the middle class now (if you can believe the Chinese press, see http://www.chinadaily.com.cn/china/hk20threturn/2017-04/24/c...).
Then there are the traditional loan sharks in china’s informal sector that have been around forever and don’t show up in official stats (not to mention less dangerous friend/family lending).
* Bass Diffusion Model: https://en.wikipedia.org/wiki/Bass_diffusion_model
* Diffusion of Innovation Model: https://en.wikipedia.org/wiki/Diffusion_of_innovations
These models have been fairly accurate in forecasting diffusion of innovation. While many of the innovators have started to exit and move on, this leaves the imitators around in a slowing market.
Apple has been surprisingly good at being the forefront of innovation entering a market. While people play catch up in smartphones, Apple has already moved onto the next technological innovation: Apple Watch and wearables.
While one may argue that Apple is more of an imitator than innovator, they have a really unique strategy. They enter a market after the initial innovators have entered with a product that becomes the Dominant Design [1]. They don't focus on the Innovator or Early Adopter market, but more on the Early Majority and Late Majority and exit before the laggards arrive. The Innovator and Early Adopter market require the most capital in R&D and Marketing with lowest return on investment.
[1] https://en.wikipedia.org/wiki/Dominant_design