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Waking the Dragon: The Rise of Android in China

[Android is leading the smartphone revolution in Western Markets. But what about China, the country with the biggest mobile user base? Guest author Hong Wu analyses the state of Android in China - from chipset vendors to software developers - and how the dragon is waking up.]
The article is also available in Chinese.

The Rise of Android in China

HuaQiang Road, ShenZhen, GuangDong, China, an ordinary weekend.

At 10 o’clock in the morning, there are few pedestrians around. Sanitation workers are cleaning up hundreds of deserted mobile phone packages and plastic bags near mobile phone supermarkets, along with bundles upon bundles of mobile phone manuals, and even a few dozens of broken CDs, with labels showing clearly the words “HTC” or “SonyEricsson”.

Clerks in more than a dozen bank branches on HuaQiang Road and ZhenHua Road are busy refilling cash into their ATMs. In the next 5 hours or so, those bank clerks and ATMs will be responsible for hundreds of millions of Yuan in cash transactions. Yes, cash and stock products are the rules of transaction here. This commercial business district, often called as “HuaQiangBei” (or north of HuaQiang), is the strike-it-rich spot for many poor grassroots classes in ShenZhen. This neighbourhood has become the global hub for consumer electronics.

Android has recently become the hot topic within HuaQiangBei district. Sales figures of Android phones have been climbing on a daily basis at YuanWang Digital City. Most of these Android phones use Qualcomm’s chipset, while only a few of them run a chipset that’s made in China.

Nearby, at MingTong Digital City, one can find heaps of ShanZhai (山寨) mobile phones on sale (ShanZhai refers to Chinese imitation and pirated brands and goods, particularly electronics). There only a few Android phone models on display, but customers keep coming back asking for more. In the meantime, the software engine that powers ShanZhai smartphones has shifted from Windows Mobile to Android, and most of they are using chipsets that are made in China.

A 15-minute drive from HuaQiangBei business district, at CheGongMiao business district, are the headquarters of dozens of mobile phone design companies, who are in the midst of the mobile food chain. On a daily basis, engineers here crank out some very exotic prototype phones using MediaTek’s chipset solutions. Since 2009 when Android caught fire, sales guys from MediaTek, HiSilicon, Rockchip, Actions-Semi, and other chipset vendors are arriving day after day, hoping to sell their solutions and get a piece of the pie from the Android revolution.

Once an Android-based white label design is out, the phones will be manufactured in factories at Bao’An ShenZhen and LongGang districts. The plastics are then stamped with the right retail brand stickers, and put on the shelf at the consumer electronics crossroads that is HuaQiangBei.

The MediaTek powerhouse

MediaTek (MTK) sells between 300 to 400 million chipsets a year for 2G handsets, and is the predominant force behind low cost phones in China. MTK’s foray into the smartphone market began in February 2009 when they released the MT6516 design, at that time based on Windows Mobile 6.5 OS. MT6516 is a dual core solution; the application processor is an ARM 9 running at 416MHz, while the baseband processor is an ARM 7, running at 280MHz, supporting 2G (GSM/EDGE). This solution suffers somewhat in terms of performance when compared to the Qualcomm’s MSM7200, but its BOM is lower.

One step up, the MT6516 deluxe version includes a 2.8” QVGA resistive touch screen, 2MP camera, GPS, WiFi, and Bluetooth silicon, with a quoted wholesale price of $90. The basic MT6516 version with no touch screen or camera is quoted at $60. Note that approximately $10 of that quote goes towards the Windows Mobile license fee. In other words, expect prices to go down considerable with an Android design.

Despite its market mussle, MediaTek didn’t anticipate that the Android revolution would arrive so soon. For example, MediaTek didn’t join OHA until 2010 while the first MTK Android handsets are just making their first steps into the Chinese market (there is a rumour that a leading Android OEM had earlier veto’ed MTK’s entry into the OHA to avoid price competition).

TongXinDa in ShenZhen has been the first ODM to release an Android phone based on MTK’s MT6516 solution, the “TongXinDa TOPS-A1”. The phone boasts unique features such as dual SIM cards (both GSM and CDMA, and both at active states), a dual boot system (Windows Mobile 6.5 and Android 1.6 both stored in ROM) with 256MB RAM and ROM, and a 400×240 screen resolution. The phone ad is shown below (note that the HTC logo is a fake).

But these are just the first steps of Android as it awakes the Chinese dragon. The full MTK Android 2.1 solution won’t be out in mass production until the end of 2010.

More competition at low-cost Android phones

Rockchip, a design vendor based in FuZhou, China, showed its RK28 solution at HongKong Electronics Show in 2010, focusing on Android tablets and smartphones.

Rockchip is a homegrown chipset design company which conquered the market of MP3 portable media players with its RK26 and RK27 series. In 2009 Rockchip announced its foray into smartphone business with the RK2808 Android solution, but was not widely adopted due to chip heating problems and performance issues.

In a second effort at the smartphone market, Rockchip released its RK2816 solution in 2010, running on an ARM 9 application process at 600Mhz and an NXP baseband chip. The RK28 series is not as tightly integrated as MTK’s MT6516. MTK put both applications and baseband into one single chip, while RK28 used Infineon for their baseband. RK28 series’ advantage lies at its inheritance of multimedia technologies from Rockchip, with hardware decoding of 720p H.264 video.

Rockchip’s RK28 design has been taken up by Ramos (Blue Devil) to power an smartphone device under the model name W7. The device runs Android 1.5, sports a 4.8” 800×480 resistive touch screen, and is intended as competitor to iPod Touch, with a focus on video media playback features. BuBuGao is another OEM planning to deliver cheap smartphones using the RK28 solution.

In the tablet space, Actions-Semi has been designing a new chipset based on the mISP 74K kernel, running Android 2.1. Marketed under the EBOX moniker, the company aims to head-to-head competition with the iPad with support for H.264, MPEG-4, DivX and Xvid hardware decoding at up to 1080p resolution. Such specs are unheard of among current Android solutions.

Around five years ago, phones based on MTK chipset shook up Chinese cellphone market that was dominated by Nokia, Motorola, Samsung and other local brands like Bird, TCL and XiaXin. MTK enabled phones to be sold at very low prices while still boasting advanced features, including exotic ones like eight stereo speakers or 365 days of standby battery life.

Today, most local brands are gone, and the remaining few have reverted to using MTK chipsets for their phones. International OEM brands have to slash prices on their mid-end to low-end phones in order to compete in this fierce cellphone market. MTK’s entry into high end smartphones using Android may certainly repeat the history we witnessed five years ago. Android phones running FroYo selling for under $100? Maybe just a few months away.

Android Developers in high demand

With such a rapid growth of Android-related activities, Android developers are in hot demand today in China. A 2-year Android pro can command up to 20,000 Yuan (close to $3,000) per month; whereas a 10-year J2EE veteran makes probably the same salary if not less. Companies, big and small, are busy scouting for Android talent, but challenged due to the small pool of qualified engineers.

At ifanr.com we recently conducted a survey, with the help of the China Android Dev group (over 1,400 members, 18,000 messages, the largest and most active discussion group for Chinese Android developers) to capture the demographics of Android developers in China. Our survey received over 500 valid responses with some revealing insights into the state of Android developers in China:

In terms of demographics, over 80% of respondents are between 20 to 30 years old, while another 10% is between 31 to 35 years. These are pretty young and dynamic groups of developers.

When asked about how many years of mobile development experience they have, close to 40% are just getting started. And another close to 50% of respondents are within 0-2 years of experience, which is to be expected, given that Android is a two-year-old platform.

In terms of their role in Android development, 37% of survey respondents are part time developers, while over 40% are professional developers. Only 10% are students while about 15% are still holding out to see how Android progresses.

It’s also worth pointing out that over 60% of respondents are individual developers, a.k.a. one-man teams, while over 90% work in teams made up of less than 50 developers. There are companies with more than 100 developers, mostly likely big telecoms like China Mobile, as well as handset manufacturers and design houses.

Given that we targeted Android developers, almost 80% of respondents have developed on Android. We also see healthy shares of iOS, J2ME, Windows Mobile, and Symbian. Based on current trends, we can foresee Android and iOS commanding larger market share going forward, while J2ME, Windows Mobile and Symbian share will shrink further.

Over 45% of respondents have not yet published apps on Google’s Android Market. This is mostly because Android Market and Google Checkout do not yet support Chinese regions. This is a well known issue; there is a large number of developers in China wanting to publish apps onto the Market who can’t; for example many of them have to set up an overseas bank account in order to register and pay for the Market registration fee. It’s a major hassle for individual developers, and where hopefully Google has a mitigation to offer in the near future (PayPal integration perhaps?).

In terms of revenue models, about two thirds of paid apps are using ad banners, while the other one third are using pay-per-download according to the results of our survey. As for the types of ad networks used, Google AdSense comes out on top with nearly 50% of votes. AdMob comes in second with nearly 30% votes. Wooboo, Youmi, and Casee, ad networks from China, are also making strides here.

The level of satisfaction from app revenues is evenly distributed, with 20% of respondents saying they are not doing well and losing money, and 18% saying they are extremely satisfied and doing well or optimistic about the future (the rest 60% is for people who do not make money from apps).

In terms of go-to-market channels, Google’s Android Market tops with more than half of the share. China Mobile’s Mobile Market (MM) is also popular among developers. MOTO SHOP4APPS is surprisingly getting 5% (or 10% among the ones submitted).

Overall, Android has seen explosive growth in China. More and more developers are joining the ranks daily. However, due to the limitations of Android Market and Google Checkout in China, many developers are turning to alternative markets and payment gateways.

In the operator camp, China Mobile is making a big splash trying to woo developers onto its Android-variant, the OMS/OPhone platform. HTC and Motorola are also pushing their own app store agenda.

The Android ecosystem in China is still a sleeping dragon, but is waking up day by day. There will be more ad networks, more app stores, and more payment gateways coming out in the foreseeable future before consolidation moves in. Android in China is probably at its most exciting stage right now.

- Hong

[Hong Wu is a seasoned mobile app developer based in Silicon Valley, US. He's currently building an awesome product that hopes will make TVs enjoyable again. He's also a core member of ifanr.com, the leading new media blog site in China that focuses on mobile Internet industry, smartphones, gadgets, and exciting startups in China. You can contact Hong at lordhong /at/ gmail.com or follow @lordhong on Twitter.]

  • http://blog.radvision.com/voipsurvivor/ Tsahi Levent-Levi

    Hong,

    This is a great post with too much useful information :-)

    What do you think will happen with all these Chinese vendors? Will they try to go international? And if so, when will it happen and what would be their strength besides low cost?

    Tsahi

  • http://codeshogun.com Hong Wu

    @Tsahi Hi, they will compete within China market first. With over 1.3 billion people and nearly same amount of cellphone accounts, it's a HUGE pie to conquer.

    I also know many countries are buying cheap phones from China, such as India, Pakistan, South Africa, and many South American countries. The phones do not have unique IMEI # (part of reason it's low cost). So US and many European countries do not allow them on their networks.

  • http://twitter.com/TektonikShift TektonikShift

    Hi Hong Wu,

    I have been to HuaQiangBei many times.

    At noon on weekend mornings, it feels like the center of gravity for electronics hyper-retailing.

    I have worked with MTK in the past and my colleagues are close to executives at Rockchip. When they get fully ramped on Android ready reference designs, the cost down impact on smartphones will be impressive.

    Thanks for the good write up.

    -Tek
    https://twitter.com/TektonikShift

  • Ramesh

    I am an Indian and I am a little worried about android adoption by Chinese developers, if India does not move fast on developing for android, china will race ahead of India in android development.

  • http://codeshogun.com Hong Wu

    @Ramesh don't worry, you guys have this $35 android tablet coming up. But I heard the rumor that it's made in China.

  • raij

    china will race ahead of India in android development.

  • http://www.outsmart360.com Krshna

    Hong, Fantastic article. I do believe strongly that if you're right in terms of the way Android is picking up in China, there would be no reason for them to expand out to other markets at all, even India and other developing countries.

    1. Chinese market is a volumes game, it will be tough to saturate/conquer the market and expand out (will likely never happen)

    2. Following regulations in international markets is cumbersome (ex. IMEI is now actually mandatory in India, Chinese handsets have been legally banned due to security issues) and a qualitative jump for Chinese companies (IMHO)

    How do you see the app markets in China? Is there a language barrier in the Android market? This means developers in China can "pirate" app ideas and customize them in Chinese just for their market.

    Your thoughts?

  • http://codeshogun.com Hong Wu

    @Krshna You are right about China's market. It's just too big for anyone to conquer. Every 6 to 12 month (if not sooner), people buy a new cellphone. The demand is always outpacing the supply there.

    As for Android app markets, language barrier is not necessarily the biggest factor. It's more about cultural things, such as a joke in English is not necessarily received well after translating to Chinese :)

    As for "pirate" app ideas, this happens everywhere, not only in China. We do have over 1,000 Groupon copycats in China as of today. (For the record, Zynga's FarmVille copied Chinese company Five Minute's Happy Farm, so we do have something worth copying to offer :)

    For developers, I would suggest focus on your core market, reach the limit, then thinking about expansion. There are many failure cases for entering the Chinese market w/o good preparation, e.g. Yahoo, Amazon, Ebay. Money doesn't guarantee your success.

  • izico

    From what I know, the ones who are satisfied with Android profitability is just what you claimed: 2% + 1%.

    But my interpretation of the others is quite different to your too optimistic interpretation.

    All the other 97% can be categorized as "not satisfied", the 15% "it's just fine and better in the future" is just the normal optimistic of most developers who have not profited from it but hope it'll occur someday, but in fact the current situation is just the future too.

    So in fact nearly all are losing money on Android market, 97%.

    To profit on it, except you are sure you have a very fresh and hard to copy product idea and super good programming skills, else you'd better look elsewhere.

    I'll work on some hardware attachment to mobile phones later, hardware is harder to copy (they need at least a good design house to copy the design, and it needs time, and if my price is already quite low, fewer have the desire to copy then), and end users have no the idea of free hardware, so they are willing to pay if they the functionality.

    This is a much feasible business idea for mobile phone and especially Android in my view.

  • http://codeshogun.com Hong Wu

    @izico I disagree with your findings. 61% either haven't published apps or published a free app w/ no ad banners. They do not lose any money per se. The 15% "it's fine" category is more like a break-even category. They are not losing money either. With more and more android devices coming out on the market, the percentage of satisfied will only go up.

  • http://www.outsmart360.com/alley Krshna

    @Hong

    Yes definitely. I always feel that countries like China, Japan, Korea etc have a higher entry barrier when it comes to foreign companies/software getting in due to the language. In places like India, for example, everyone is comfortable with english, even in villages, but local companies need to compete with international giants and marketing honchos. So sometimes I feel such insulation also offers a tremendous opportunity for local sucess stories as opposed to places that are not easily insulated against foreign participation.

    About piracy- I'm not saying it negatively :) I was exploring how an existing "good idea" can be copied by a developer, executed and marketed. What I meant to say was there is a tremendous opportunity for local developers to bring in Chinese versions that would touch base with Chinese consumers immediately, but in effect they have ripped an idea off another "international app" that has been successfully running and can not afford to focus on entering China due to the language :)

    Looking forward to read more of what you write in the future Hong!

  • cj

    when will mips gets a win?

  • http://www.androidgold.com AndroidGold – Androi

    There are a lot of companies also starting to make Android tablet products out of China and we're trying to sort out the best Android tablets, help the OEM manufacturers improve them, and showcase them on http://www.androidgold.com

    Some of the bigger challenges facing these factories include complying with Google's CDD document in order to pre-install the market app.

    Then again, in this economy, they may simply bypass Google altogether and setup their own Android app markets, and I bet they are as free swinging with license enforcement in their online markets as they are in their handset markets on the ground in Shenzhen – though perhaps one main reason Android is displacing WinMo for phones and tablets is that they can more easily justify international sales as the licensing conflicts are not so apparent if they exist at all.

  • darius

    Hmmmm. sorry, I don't think that survey was a very good data source — too much unresolved self-selection by participants. But the chipset information and the informal observations are both very interesting.

  • http://www.mayton.com Andrew

    Hong,

    This is a great article. Could you please offer your opinion on Chinese Ad-network companies (i.e. Woohoo and etc). How long have they been in operation? Do you think they have a good chance against Admob of Google and iAD of Apple?

    Andrew

  • daisuke watanabe

    Hong–great article. I'm curious what you think of HiSilicon's K3 android solution vs. MTK's 6516.

    Daisuke

  • Hong

    @andrew Chinese ad-networks started to popping up in the last 6 months. they are very young, and in very early stage. i don't think they can compete with big shots like Google or Apple. Google has established ad network in China already, and Baidu, Sohu, Sina sure wants piece of pie too.

    • http://www.casee.cn xin ye

      I have issue with you on this comment, Google, Apple, where are they? you talk to any Chinese Android developers, the fill in rate from Google is not even 10 per-cent, and their eCPM is so low, like 0.01 cents
      US. Pls check us out, we've been in business for 4 years, we come from mobile and internet background. I hope folks have more understanding of the China market.

  • http://www.casee.cn Xin Ye

    Hong, great write up. We, CASEE (Mobile Ad Network in China) would love to work with international App developers in China, where we can help with bringing in advertising revue. We are 100 times larger than Admob in China, because they have no business and ops ppl here, even now so with Google's funny relationship with local regulators. We have many app partners in China so we have the largest reach to help companies promote services on Android. Send me email at xin at casee dot cn

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