12:00 AM, September 10, 2018 / LAST MODIFIED: 12:15 AM, September 10, 2018

China and the curious case of affordable smartphones

For the past few years, China has been dishing out some of the best phones in the market at a fraction of the price that non-Chinese brands such as Apple and Samsung offer at. Slowly but surely, the Chinese phone manufacturers are taking over the global phone market. Just recently, Huawei has overtaken Apple in smartphone sales, becoming the second biggest seller of smartphones this year. The top 5 list of smartphone sales support this Chinese uprising as 3 of the companies in the top 5 is Chinese. The Xiaomi Poco F1 is the latest in the seemingly unending line of smartphones that are coming out of China. With its specs, the Poco could easily demand a very high price, yet it costs only a fraction of other flagships. So how does China manage to sell extremely powerful phones for so much less than others?

To understand this question, we first need to understand some basic things about the economy. A products cost is affected primarily by a few factors. These are the cost of raw materials, variable costs such as labour costs, and fixed costs such as power bills, salaries for staff etc. Lastly, the producer of said product will also want to make a profit. That means the producer must mark up the products a bit after costs. There are many other different things at play as well, such as the Chinese government and their massive markets. So here are the reasons why China can make their phones so cheap.

Goods from China have been historically very cheap due to the low cost of labour and many different resources. Their wages are some of the lowest in the world, even now. The wages have only started to increase since 2011, which is leading to many Chinese manufacturers to turn to automation. Even with wages that have increased a little, they have the advantage of building and selling phones locally, which severely cuts down their transportation costs. Now, why is that an advantage?

The Chinese phone manufacturers have the single largest phone market to sell to. This is also helped by the fact that non-Chinese companies have a very tough time penetrating that market due to government limitations and simply not being able to compete with their Chinese competitors. This huge market of 1.52 billion phone subscriptions is another reason why China can sell phones for such a small price tag. Chinese manufacturers can simply sell their phones within the same borders they made it in, which cuts down a lot of the costs.

As noted above, the Chinese government places many restrictions to make sure their home-grown companies stay on top. This affects all foreign companies entering China, including phone companies. However, this is not the only advantages the Chinese companies get at home. They also receive lots of government support. Huawei is even being considered being banned from use in US government due to its deep historical ties to China and its government. Many in the US have long worried that the government of China may be using Huawei to spy on American citizens. Not to mention companies such as ZTE and Huawei get a lot of support from the Chinese government, in legislative and economics.

There are a multitude of other reasons why China can sell phones for so cheap, and I'm not sure if it's possible to run down all of them. One is that China is not as concerned about the environment as the rest of the world, and are not afraid to increase the profit margin at the cost of the environment. This has led to such a bad environment that there have been flights delayed in Shanghai due to air pollution. Worker rights are also not too important in the country, and they have a reputation for working their labours to death. All of these add up to very low costs per product, whether it be a phone or any other manufactured goods.

Overall, it's easy to see why China can sell Snapdragon 800 series powered phones at such an affordable price. The low cost of their manufacturing, a massive local market that favours them, a government that is constantly helping out home-grown companies and being environmentally insincere has led to Chinese domination on the smartphone market. If this keeps up, there is a good chance that all the phones you'll see a few years from now are all Chinese brands.