And what that tells us about the fate of Apple in China... That meant I was almost certainly a secondary or even tertiary receiver of the phone — China’s gift-giving culture is all about regifting — but back then, the Apple brand carried enough cachet that my father’s friend still saw it as good enough to give a close friend’s daughter, if not quite prized enough to present to a business partner... the news just confirmed what we already knew: China’s domestic brands have made huge strides in the years since 2012, creating new features and products that take into account what Chinese users want, for a small fraction of the price. Apple, meanwhile, has mostly failed to localize or reinvent itself, on the assumption that global cachet would be enough.
The homegrown groundswell began with a little-known brand called Xiaomi, which burst onto the scene in the early 2010s as one of the first brands in China to have its own operating system, and offered high-speed processing on the cheap. At first it appeared to cater to a completely different market than Apple. Selling entirely online, Xiaomi offered both a low-end model — the Redmi for as low as 699 yuan (then under $150) — and a higher-end model that was still far cheaper than the cheapest iPhone (less than 2,000 yuan, then under $350).
But with time, the useful features on Xiaomi products, as well as those of its competitors like Huawei and OPPO, combined with the price, began to outweigh the increasingly limited glamour of the iPhone. I myself transitioned to a high-end Xiaomi from an iPhone in early 2014 after a young professional friend of mine, who worked in marketing in Shanghai, raved about the Xiaomi Mi Note, which is one of the big-screen models, or “phablets,” that have long been popular in China and East Asia, where many prefer the bigger screens — Huawei’s latest measures a whopping 7.2 inches — ideal for taking selfies and watching TV dramas. (Apple released its Plus series in late 2014 with larger handsets, which did send its sales shooting up in China — but also added $100 to an already expensive price tag.)
Apple also long resisted the rise of another important local feature: the dual SIM card system, a component that may sound boring but for Chinese people has become essential. In China, where many young people have never owned laptops, phones have become all-in-one devices — part television, part computer, part phone. Transitioning between two SIM cards on all other cell brands is a seamless process: one card for streaming and downloading at cheaper rates, the other one for making calls. Growing international tourism has also raised demand for phones that can accommodate a second, foreign SIM — and yet for years, Apple didn’t budge. The company finally gave in to the dual SIM card in the form of special models for China and Hong Kong last fall.
It’s telling that the main example of Apple localizing its products to China in the last few years was a special model gold-colored iPhone. First introduced in 2013, it was a clear play for the Chinese market, and was, admittedly, a huge hit on the mainland. Many joked that the gold iPhone was targeted at the tuhao, a recent term that roughly translates as “tasteless nouveau riche” and that mockingly refers to the wealthy who feel the need to show off. The color was even given the name tuhao jin, or tuhao gold.
But the allure of gold-colored plating — a feature focused not on user experience but aesthetics — goes only so far, it seems. And it may not be enough at this point to keep even the tuhao loyal. Huawei, China’s largest smartphone maker by market share, recently overtook Apple to move to second place globally. Its popularity among the wealthy and business class at home has shot up in recent years; its prices have been steadily rising as it shifts focus toward higher-end products. Many upper-middle-class Chinese who once owned iPhones have since switched to Huawei — including my dad.
[Xiaomi uses flash sales to gage demand for their product. Consumers get a ticket for the right to purchase their phone. Xiaomi then goes to Shenzhen and gets a bulk rate.]
.. No matter how one views Xiaomi — and there are many ways to view it, for better or worse — one thing is clear: It, and other such companies (like WeChat and Alibaba), indicate a broader trend around innovation coming from China.
Companies and countries that were once positioned as copycats or followers are becoming leaders, and in unexpected, non-obvious ways. For example, through scale, distribution, logistics, infrastructure, O2O, a different kind of ecommerce, mobile marketing, even design… But of a very different kind than iconic examples like, say, SpaceX. Or Apple, which arguably could damage the U.S. if single-mindedly regarded as “our official most innovative company”.
Or so argue the guests on this podcast, which include a16z partner Connie Chan and author/long-time observer of internet and social media culture Clay Shirky, who is currently based at NYU Shanghai, wrote the popular book Here Comes Everybody, and most recently authored Little Rice on “smartphones, Xiaomi, and the Chinese Dream”.