Editor’s note: Benjamin Dolgin-Gardner is the founder of szceit.com in Shenzhen, China.
How do you end up with millions of new sales overnight with low development and implementation costs? In the case of Chinese electronics companies Rock Chips and Box Chips the answer has been simple – hitch a ride on Android.
China’s economy is booming thanks to low cost assembly, the country’s key advantage when competing on the global playing field. Manufacturers deliver low cost laborers who are able to follow processes and procedures to a reasonable degree of accuracy at very reasonable rates, and thus gain an edge over Western manufacturers.
In my years in China I’ve seen technologies come and go, but none have excited these manufacturers like the prospect of Android. It’s a solid, “open” operating system that lets them do a number of interesting things without many risks.
The West in turn has provided the “design” element of the process, enabling the overall product to be reliable and aesthetically pleasing. Chinese companies aren’t yet geared to competing in this arena. In order to undertake the gamble of developing an OS that gave them an exclusively Chinese platform (a la Microsoft or Apple for the US), Chinese firms would need an extensive process of re-education.
Then there’s the problem of IP. While Western competitors have strong rules in place (and real penalties) for infringement of their IP – Chinese companies face a business environment where their development costs would be lost overnight as soon as another company could clone their product. Success, then, often led to copying.
This of course doesn’t mean that Western companies in China get an easy ride. In fact Apple, a strong defender of its IP everywhere, has been unable to prevent clones and copies from flooding the market, all guaranteed to look similar to the original, though never approaching the same quality or usability.
So it becomes clear why Android is so appealing to the Chinese marketplace: it enables companies to move into the usability “design” space that they’ve previously been unable to access. Here you have a strong, internationally accepted operating system, with an open license to be copied (at no cost) and installed and used on any device you like. In fact the OS developer positively encourages you to do so.
It’s a stable platform with the weight of Google behind it and the thousands of talented computer science graduates in the country can play with it, adapt it and improve it – without having to design a system from the ground up. The market entry costs are limited to wages, so there’s a huge incentive for Chinese firms to get involved.
This means that the traditional IC players now face stiff competition from China, with Rock Chips and Box Chips already selling millions and another local firm, Actions, about to enter the fray. These companies can focus on the Android platform and develop newer and faster processors to support the latest hardware and Android updates. As the OS gains further market traction and the Chinese companies find a growing talent pool of skilled engineers to work with it, this competition is going to get stronger.
Niche developers in China will benefit, too. They’ll have local chip sets for reasonable costs, and a versatile workforce to draw on – moving more in the long-term to a quality model, based on customization opportunities and away from a volume pricing model.
Currently there’s still a defined lag from Chinese firms in the commodity technology market, and when Android first launched this lag was a year or more over developed nation equivalents, but today this is down to 3 or 4 months. Soon Chinese companies, playing to their own strengths in the supply chain, will close this gap to make it negligible or even begin to take a leading role.
For Google this is a big win too. The Chinese consumer market is a huge one and the trade-off for using a free Google service is that the user agrees to share data with Google. Of course Google’s ability to aggregate massive amounts of personal data directly relates to the quality of their products and services, but it matters more how they can exploit the information they gain from their use.
China has only 40 million credit card users (based on slightly outdated figures released in 2010) and over 500 million computer users. This means that if the Android system were to appear on just 10% of all devices in the country, Google could conceivably, but probably won’t be able to access, more information on Chinese consumers than the country’s credit agencies! The rub is that the Android these firms are running is not “official” and as such rarely communicates with Google’s servers.
As the price of Android tablets and phones continues to decrease, the percentage of users is likely to grow exponentially.
This model of quality firmware partnered with lower-cost, mid-quality hardware, enables companies like Rock Chips and Box Chips to make millions of unit sales, and to win over not only the traditional “value” customer, but also the more discerning customers, domestically and overseas. It also encourages other IC manufacturers to come to the party and many will soon be joining them in an Android led technology revolution.