Last week, June 11-13, was a record-breaking GSMA event, Mobile Asia Expo (MAE) in Shanghai, China. On the heels of COMPUTEX and GSMA's March Mobile World Congress in Barcelona, it is little wonder that attendance was up for this important event focused solely on the mobile sector, particularly being held in China, the leading emerging market adopter for smartphones and new mobile connections; over 26,000 unique visitors attended the largest mobile industry event in Asia.
China's 4G LTE driving market
The MAE's location in Shanghai is important for many reasons, most notably is the rising number of mobile subscribers and device upgrades or new device users in China because of the recent 4G LTE rollout. According to GSMA research, at the end of 2013, China has "[…] 630 million unique mobile subscribers actively using more than one billion active SIM connections," representing 46% of the population in China and "[…] 499.5 million mobile internet subscribers." Most of these subscribers rely on 2G connections: "[…] 31 per cent of mobile internet subscribers in the country access mobile internet services via non-mobile broadband networks." The 2013 completed rollout of 4G LTE in China, there is a significant driver for upgrading devices to take advantage of the higher data transfer rates and capabilities now available. Given that the majority of internet users in China are accessing the internet through their mobile devices, the opportunity for additional sales cannot be highlighted enough.
4G LTE continues to roll out globally but the adoption rates are slow still for the US and Europe, with 4G only seeing a penetration rate of roughly one-quarter of users in the US and Japan, as other GSMA research details. Meanwhile, South Korea represents by far the leading 4G LTE adoption rate over 50% at the end of 2013. One thing that carriers can see from South Koreas rapid 4G adoption is the dramatic spike in data consumption. 4G LTE users typically have double the data transfer rates of non-4G users, meaning that carriers are looking at having to consider CAPEX investments to upgrade networks to handle these increases, however they are also seeing increased revenues generated from these users. While that is a cost for the carriers, for the network equipment supply chain, this is positive news.
Globally, by 2020, GSMA Intelligence report forecasts 880 million unique subscribers by 2020 and "[…] almost 4 billion mobile broadband connections expected to be added globally in the period out to 2020." Because of the ability for people in the developing and emerging market economies to have access to the internet via mobile devices, the mobile device and connectivity impact is tremendous and the greatest increases will occur in these markets as new adoptions will likely also be these users' first device. In many ways, as GSMA notes, the mobile expansion that has begun is truly transformative, socially, economically, and for our industry.
Real competition supporting CE device growth
Price is always a critical factor in consumer electronics (CE), and mobile devices have both the cost of ownership plus the ongoing cost of services. With competition heating up in the services and the device arenas in China specifically, and in Asia more generally, we are seeing increased price battles with improved feature and device capabilities for these emerging market consumers. As GSMA research notes:
China Mobile, the world's largest mobile operator, said it would cut prices by as much as 50 per cent in June this year amid shareholder concern about profitability and high network investment. This sharp drop in tariffs followed a decision by the Ministry of Industry and Information Technology (MIIT) that operators – and the "market" – would independently determine tariff pricing in order to promote competition.
At the recent MAE in Shanghai, keynote speaker, Lin Bin, Co-Founder and President, Xiaomi, talked about the importance of mobile and the way that mobile devices, like Xiaomi's are supporting new mobile users and making devices affordable with real choices.
The forecasted market opportunities for Xiaomi are just as impressive as the forecasts for the mobile sector overall in the emerging markets. This rising Chinese mobile powerhouse has the potential to be the first Chinese company to be a global leader in the extremely competitive, and still growing, mobile device space. Xiaomi has experienced tremendous growth over the past couple of years as Reuters recently remarked: "The company expects to sell 40 million phones this year, compared to 18.7 million last year and 7.2 million the year before." At the end of the first quarter of 2014, Xiaomi was the sixth-largest smartphone OEM globally, according to the same Reuters article. Expectations are that the company will continue to rise in rankings based on its strategic market entries across Asia where the mobile adoption rates are strong and hold significant opportunities.