Coolness is only skin deep, but being uncool goes to the core. The Chinese phone-maker CoolPad is a case in point, and is about as cool as a Microsoft viral video. But that’s not putting off China’s smartphone buyers, who have bought so many CoolPad devices that the Shenzhen-based company is now outselling Apple’s iPhone in the country.
That’s the most surprising finding in recent figures from Gartner which show that CoolPad’s Android-based phones have soared to third place in terms of the number of smartphones sold in China at the end of the previous year. CoolPad is one of four Chinese brands in the top six, a phenomenon we first noted last year when Canalys pointed out that domestic phone-makers now account for 60 percent of sales in China.
Going back to the Gartner numbers, China’s smartphone top six now looks like this:
1st - Samsung
2nd - Lenovo
3rd - CoolPad
4th - ZTE
5th - Huawei
6th - Apple
So how did CoolPad phones, made by the relatively tiny China Wireless Technologies (HKG:2369) which used to make PDAs and very unimaginative feature phones, manage to leap past the over-hyped and hallowed iPhone? And that’s despite Apple doubling iPhone sales in the country in 2012. As anyone following the progress of Android in China, you’ll have figured out how already. Android is one big reason, and price is the other. Basically, CoolPad is making a lot of serviceable - if not very trendy - phones for a mere 10 percent of the cost of an iPhone 5. The CoolPad 8060, for example, sells for just 500 RMB (US$80) unlocked, and is a highly affordable gateway to the smartphone world .300 million smartphones to be sold in China in 2013
With smartphone sales at an estimated 189 million in China in 2012, and expected to reach 300 million by the end of 2013, Apple can no longer ignore the entry level market. To do so, some might say, would be to replicate the mistake of decades past that made Apple’s Mac OS into a fringe platform, dwarfed by the widely-used Windows. Apple might have an addressable market at the moment of a few hundred million Chinese middle-to-upper income individuals, but the larger potential market is people who can’t afford to pay out one, two, or three months’ salary for the current iPhone.
Although Apple would never go as low as CoolPad’s price points, there are rumors that Apple is pondering a lower-cost iPhone that could better help it battle Android in China and other important developing markets. Even if Apple aimed at half of the cost of the full iPhone, that would create a smaller iPhone priced at 2,500 RMB in China. That would at least put it closer to more well-specced Android devices in China (not CoolPad’s), such as the Xiaomi Mi2. The young phone-maker Xiaomi sold 7.19 million of its Android-powered phones in 2012, mostly to Chinese consumers.
In some ways, Xiaomi is the cool equivalent of CoolPad. While Xiaomi phones seem to be sold mostly to younger people, with 70 percent of them sold online, CoolPads are sold to a wider - and maybe less affluent - range of consumers from electronics retailers such as Gome and Suning.
CoolPad, then, represents the huge amount of people in China who’re ditching Nokia and feature phones, and jumping onto the cheapest thing that lets them play Temple Run 2. Apple needs to decide whether it wants to bring Xiaomi and CoolPad buyers closer to its price range, or forever push them - all half a billion of them - out of its exclusive club.
Admittedly, the CoolPad 8060 is terribly low spec, and runs only Android 2.3. ↩
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