Published: November 22, 2018
Growth of global mobile phone sales has ceased. The golden age of mobile app has ended because of the excessive competition, the tax imposed by the platform, and soaring development and marketing costs. In Last article , axion claimed that Apple business see its limit with raise price of new iPhone at level over ASP. “The smartphone trend” is about to end that has changed the world over the past decade. Mobile has already become "given condition", and the next frontier is being searched.
I wrote this article for the purpose of exploring business trends post mobile. The target audience is assumed to be person working for tech industry, media advertising industry, consulting firm and financial industry, entrepreneur, investor, person who finds jobs or going to work in peripheral industry in near future. I would like business person to read this article particularly. It contains technical explanation, but it is possible for you to take essence while skipping it. The era of "there is no need to understand technical aspects on the business side" is over.
I generally wrote this article on a smartphone. I got bored with the smartphone . I am looking for new value of computing. Let's progress to the next world with us.
Peter Thiel talks about mobile in an interview with NewYork Times. “We know what a smartphone looks like and does. It's not the fault of Tim Cook, but it's not an area where there will be any more innovation”
According to internet measurement firm Comscore ["Global Digital Future in Focus 2018"] (https://www.comscore.com/Insights/Presentations-and- Whitepapers/2018/Global-Digital-Future-in-Focus-2018-Canada-Edition ), The trends of Internet users globally are as follows.
Facebook, Thiel invested and worked for as a director, is appropriate example to explain this trend. Formar desktop website for Harvard student concentrated development resources on mobile as the trend emerged. Now, most of Facebook's traffic is from mobile apps. According to 2018 Q2 earning call, more than 90% of its advertising revenue derived from mobile. DAU(Daily Active Users is 1,471 million, of which 1 billion is from Asia Pacific and others where people use internet with mobile mainly.
Mobile does not die like French monarchy. Mobile trend has two frontiers. One is the unconnected and the other is extraordinary evolution itself.
___ Cheap phone gives Connectivity to people who do not have the Internet. Rich countries with mobile as background (given conditions) will enter the season of diversification and tremendous evolution of computing. In addition, in rich countries, there will also be sophistication of computer networks and human-machine interface (HMI). __You ought to be very excited, right?
There are many people all over the world who do not have mobile. In other words, there are still many people who are not Internet users. Mobile is good “gateway drag” for the unconnected.
The number of global Internet users reached 3.6 billion in 2017, accounting for 49% of the world population. 50% hasn’t been “enlightened”. However, the growth rate of Internet users on has slowed down, with 12% growth(year on year) in 2016 and only 7% in 2017. After accomplishing a half oh the world population, the growth rate is expected to slow down more than before(Kleinerperkins "Internet Trends Report 2018") .
There are several tasks. The spread of smartphones is inseparable from connectivity supply(Internet connectivity). If the wireless network (wireless network) is not widespread, smartphones are just “phone packed with transistors". Smart, clean and consistent government leadership is needed for stable connectivity and access to cloud computing, but emerging economies often have difficulties in having a functional government. Even a $ 100 smartphone and tens of dollars of communication cost is too expensive for the low incomes of developing countries.
"Gateway drag" should be cheaper. It's not a headset that costs around 50,000 yen, not an expensive iPhone that the seller earns nearly 50% of profits, but "cheap phone". In emerging countries cheap phone is "the future of the Internet".
Indian economy growing steadily is a typical indicator. According to [IDC India] (https://www.idc.com/getdoc.jsp?containerId=pr 44210918), the smartphone company shipped 33.5 million units in India in 2018 Q2. The number of units grew by 20% compared to the same period last year. In the market with an average selling price (ASP) of around 150 dollars, Chinese crowds such as Xiaomi, Vivo, Oppo have tough competition.
Supply of connectivity is also progressing in India. According to telecomlead.com, in 2017 , wireless network subscribers reached 424.67 million, accounting for 95% of Internet subscribers in India. Since India's largest konzern Reliance has entered telecommunications carriers, 4G users are rapidly increasing, reaching 238 million. The speed of 4G is only [one third of the world average] , but It is certain that India is eager to catch up rich countries. In the application layer, advanced services based on the mobile platform are challenging based on the funds of the West, China and Softbank. Factor like macroeconomic tables like per capita GDP and urbanization that make facilitation of wireless networks easier and optimize resource allocation, will affect the development mobile Internet in India.
Even in India where governance is unstable, supply of mobile phones and connectivity has been successful. A similar scenario can be expected in the Middle East and Africa.
As China is took as precedent that experienced miracle development, it is reasonable to think that the ASP of the smartphone will rise in proportion to the economic situation of the country. A few years ago in China, major manufacturers such as Huawei and Xiaomi produced and sold mainly cheap prices phones, but they have shifted to medium to high price range recently.
India's problem is not to have Shenzhen, electronics manufacturing basement. The majority of electronics are imported from China, and most of smartphones come from Shenzhen.
Knowledge on hardware and software does not accumulate in the domestic market. India might become simple export destination. This challenge may possibly be take over by Middle East and Africa countries.
China is a world factory in electronics, smartphone production is unlikely to be transferred abroad. Chinese enterprises not only dominate manufacturing but also catch up North American Tech companies on technology development.
Huawei's growth is phenomenal. It is like rise of Japanese electronics in the 1980s (most of Japanese electronics has lose competitiveness in late 2010s) Smartphone ”HUAWEI P20 Pro" is a masterpiece showing camera performance and its machine power of self design SoC (system on chip). Huawei has obtained so many patents very quickly in semiconductors and can design its own AI chip.
Huawei 's new SoC, Kirin 980 competes with the iPhone's A12 Bionic on 'First 7 nm process in history”(both chips fabricated by TSMC). The number of transistors of Kirin 980 is expected to be the same as 6.9 billion and A12 Bionic. The company shows comparative data with Qualcomm's Snapdragon 845, claiming that Kirin 980 is 37% better in performance and 32% better in power efficiency than Snapdragon 845 ([Reference: PC Watch] (https: // pc.watch.impress.co.jp/docs/news/event/1141126.html)).
However, the current Kirin 970 loses to Snapdragon 845. The single processor benchmark of Snapdragon 855 was leaked to Geekbench and it was a fairly wonderful score (Source: Geekbench). Galaxy S10 with Snapdragon 855 will be released in 2019, when Kirin 980, A 12 Bionic, Snapdragon 855 will compete each other. According to comparison of Geek-bench, A12 keeps some leads in CPU performance comparison on single processor. However, the industry will have unique era in the history of smartphone chip when powers of three players balance completely.
It is important for Huawei to compete with Apple, Intel, Qualcomm in high-end SoC. The future is just around the corner where development and manufacture of high-end mobile phone is completed in China without crossing the Pacific Ocean.
In addition, Taiwan's TSMC is extremely important for chip production. It is expected that only TSMC in Taiwan will be able to produce the aforementioned "first-ever" 7 nm process in 2018. TSMC claims to manufacture 5 nm in 2019. This means that TSMC have proprietary advanced technology and huge investment required to realize this. As electronics assembler giant Foxconn is Taiwanese, Taiwan is a major investor to Shenzhen, Pearl River Delta and Yangtze Delta. Cohesiveness in electronics around Taiwan and Shenzhen is extremely worthy. it is doubtful that other players will be able to show competitiveness to the area in the near future.
Huawei is said to be developing its own OS. Currently, Android and iOS have 99.9% of the smartphone OS market. It is Duopoly.
According to South China Sea Post, It is said that they began to develop their own OS when US authorities conducted investigation into Huawei and ZTE in 2012 with “allegation of national security issue“. Huawei founder Ren Zhengfei said at the time that the company should have its own OS to prepare for the worst situation. The US of the Trump regime puts pressure on Huawei and ZTE again this summer (ZTE got temporarily import banned, the authorities keep surveillance to ZTE thereafter). The paper estimates that Secret OS development became very important again. On the contrary, the company's executives explain officially that they do not need to develop own mobile OS and Android was "totally acceptable”.
CCS Insight, which makes interesting annual forecasts, predicted that China's proprietary OS adoption is probably likely by 2022 [claim (https: // www. theregister.co.uk/2018/10/04/ccsinsighttech_predictions/) and causes "fragmentation of technology control by the United States". CCS believes that China is taking the initiative in 5G and acquiring the mind share of its services throughout the world.
●quotation● "The current political tension between China and the US and ensuing troubles for ZTE and Huawei present a strong incentive for other Chinese companies to create their own operating system for smart devices. Spurred by a desire to quickly reduce their dependence on US companies, Chinese technology players use the replacement of 4G smartphones with 5G-ready devices to advance the transition to a home-grown platform."
Huawei currently designs devices and SoC, and some applications. In addition, it is natural to consider OS design. But Android is open source. It is reasonable to ride on Google, which is easy to spend on abundant development resources into OS. Android users outside China heavily depends on applications such as YouTube, Google, etc. The cost of making a distinction between Android and its own OS like Windows Mobile is high. Huawei is electronics manufacturer giant Google can not ignore, but the conditions of its own OS are not in place.
CCS also revealed that Tencent and Alibaba became more important in Western Europe and emerging markets. Regrettably, they are liked by authoritarian governments (of many emerging countries) to do "scoring citizens" just like e-commerce. Ubiquitous surveillance allows states to monitor the extent of individual activities and political opponents suffer and face economic challenges when applying for credit, work or travel.
CCS also revealed that Tencent and Alibaba became more important in Western Europe and emerging markets. Unfortunately, they are favored by authoritarian governments (like many emerging countries) who want to operate 'citizen's scoring' just like e-commerce. Ubiquitous surveillance allows the state to monitor a wide range of individual activities. Political protesters could have Various difficulties given by authorities.
What will we bring to the world where gateway drag is not connected yet? That is Tech Economy. China is a typical example of the mobile first penetration that brought about a new economy. Even though consumers in developed countries have preconceptions or people still hanging on the screen of the portal site, there is a mobile-based net experience where there was nothing in China, and the convenience of the unknown users was pursued It was. In commerce and finance, China is building up a business that far surpasses Western and European days. Regarding the contrast between wealthy countries and emerging countries in finance, in Japan I will post these articles earlier (["Digital revolution in Asia is happening in Asia: Beyond developed countries"] (https://digiday.jp/platforms / asian-digital-revolution /)), so let's advertise here. A few years after this article trying to arrange the regulation Japan is pretty masculine.
What will the gateway drag bring to the unconnected world? That is fantastic: ”Tech economy". China is typical example where mobile first spread Internet has brought new economy. Consumers in wealthy countries have prejudices about various digital services. There are outdated people still viewing portal site. Suddenly the mobile Internet entered where there was nothing in China, and convenience for user was thoroughly pursued. In the commerce and finance field, China has created digital business that far surpasses rich countries, the predecessor. Regarding the comparison between wealthy countries and emerging countries in finance, I mentioned this article a few years ago(["Digital payment revolution is occurring in Asia: Medium India beyond developed countries"] (https : //digiday.jp/platforms/asian- digital - revolution /)). A few years after this article, Japan is finally trying to regulate it.
As scale of Chinese market increased, large-scale social implementation of digital business model has rapidly progressed. The scale of Internet user in China encourage players to continue experiments and enable digital players to quickly achieve "economies of scale". As of August 2018, China has 800 million people Internet users, which is the combined scale of the European Union and the United States.
The enthusiasm for digital tools widely shared by Chinese consumers supports growth, and promotes the rapid introduction of innovation, and makes China's digital player and its business model very competitive. According to McKinsey's "China's digital economy: A leading global force", Nearly one out of five Internet users depend on only mobile phones (“mobile only”), compared to only 5% in the United States. The proportion of Internet users using mobile digital payment is about 68% in China. It is only about 15%, In the United States.
China's three largest net giants have built a rich ecosystem that extends beyond them. Baidu, Alibaba, and Tencent, also known as BAT, are building a solid position in the Internet world and also dispatching poor quality and inefficient 'offline market' at the same time. BAT companies have developed multifaceted and multi-industry digital ecosystem that touches all aspects of consumer life. In 2016 BAT provided 42% of the total investment by venture capital in China and played a much more important role than Amazon, Facebook, Google and Netflix, which was only 5% of US venture capital investment (Source: "China's digital economy: A leading global force"). Not only the three major companies in China, but also hardware manufacturers like Huawei, Xiaomi, DJI, Toutiao, Didi and others have also built their own ecosystem. Chinese digital players enjoy the remarkable advantages of close connection with hardware manufacturers. The Pearl River Delta's industrial concentration is likely to continue to be a major producer of net-connected devices due to the strength of hardware manufacturing capacity.
Not only does the Chinese government apply stringent regulations, it also allows digital players to experiment, becoming an active supporter of Tech companies. As the market matures, the government and private sector have become increasingly more aggressive about forming more digital economy development through regulation and enforcement. Today, the government plays an active role in building world class infrastructure to support digitization of investors, developers, consumers.
The trend of mobile is in developing countries, not rich countries in the West. When connectivity spread where there has been no connectivity so far, people begin to enjoy various benefits computer network provides. And there will be new kinds of business that has never been seen and changing the real world's way of life. New Ideas have opportunity to enrich people's lives, giving so creative products with great benefit that could not have been imagined in wealthy countries. China demonstrates it. Next should be followed by India and Africa.