Little money made off Android in China during current 'chaotic phase,' says VC

Posted:
in iPhone edited January 2014
A well-known venture capitalist said Monday that Google's Android mobile operating system in China is undergoing a "chaotic phase," with "almost nobody" currently making money off of it in the country.



During a panel at TechCrunch's Disrupt Beijing conference on Monday, David Chao, co-founder of venture capital firm DCM and a former Apple employee, attributed Android's chaos to the lack of an official Google app marketplace in China. According to him, there are as many as 70 third-party application stores for the platform in China.



Moderator Greg Kumparak pressed Google executive John Lagerling on whether the company plans to bring the Android Market to mainland China. But, he dodged the question, noting only that the Mountain View, Calif., software giant works to launch all its products in all markets if the environment is right.



Lagerling, who serves as the Director of Android Partnerships for the company, did say, however, that one of the issues that has arisen with the variety of Android app markets in China is the difficulty in supporting application updates, which has caused some confusion among developers.



Though Apple has seen explosive sales growth for the iPhone in China, with one recent survey suggesting that the company is now the leading smartphone brand in the country, panelists noted that Android is currently dominating China's mid-range market for smartphones.



"If you go to the market to buy a phone, Android is your only choice," said Wang Hua, founding and managing partner at Chinese startup incubator Innovation Works.



Referencing his time as an Apple employee, Chao compared Android's prospects to those of MS-DOS and Windows in the 1980s and 1990s.



"If you look at the numbers, Android surpasses iOS," he said, though he did point out that the developer argument in favor of Apple's platform is often that there is more money to be made on iOS than through Android.



Panelists agreed, however, that, in the long term, Apple may be at a disadvantage against Android in China because the market tends to be more chaotic and open. The iPhone's high price will also likely be a barrier to entry for many Chinese consumers.



"For the consumer side, Android is the only system that can enable $100 smartphones that can enable all consumers to enjoy smartphones," Wang said. "Android makes smartphones a commodity."



Lagerling went on to admit that Android needs China to succeed.



"If we screw up the way we build Android, then OEMs and developers will start choosing something else," he said. "We need to be attentive to the needs of the Chinese market. We are trying to take the pulse of the needs of the Android market."



Meanwhile, Chao sees China as necessary for Android because it will become the largest mobile internet market. "With Google's ego, [it] cannot ignore China," he said. The 3G subscriber base in China just hit 100 million, according to a note from Ticonderoga Securities analyst Brian White on Monday.



Chao also sees 2012 as an "explosive year" for Android, especially for tablets. "We're going to have 1000RMB ($157) and below tablets coming out. I think Android is going to be the game console of choice for China," he said. Gaming consoles are currently illegal in China, though the unofficial gray market for the systems has flourish there.



When asked who's making money off of Android in China, Chao replied, "Almost nobody," citing thin hardware margins and mostly free app downloads as the reasons.



However, Chao believes that over the next three years, Android is going to be "one of the most lucrative" markets.



For its part, Apple has already grown its China business into its second-largest market as of the September quarter, largely driven by the success of the iPhone in the country. Greater China sales for Apple in the third quarter of calendar 2011 reached a record $4.5 billion, or 16 percent of total revenue. Beside the U.S., China is the only country that accounts for more than 10 percent of Apple's revenue.
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Comments

  • Reply 1 of 36
    Why isn't Microsoft moving WP7 more aggressively in China? They're all all excited about a few countries in the EU due to their Nokia deal, but c'mon. China is a much bigger market than all of Western Europe put together.
  • Reply 2 of 36
    sricesrice Posts: 114member
    I heard the delay was due to problems translating the BSoD into Cantonese.
  • Reply 3 of 36
    Sell products that fill your customers with delight is all that matters. You'll never sell as many as all of the cheapshit competitors but you'll make more money, make more people happy, have more good people want to deal with you and know you.



    Purveyors of cheapshit have cheapshit invade their whole lives.
  • Reply 4 of 36
    tylerk36tylerk36 Posts: 1,037member
    I saw an Android phone the other day. It looked quite nice. From what I hear Android phones don't get major updates like iPhones do. I mean iOS update was major yet I understand that Android doesn't update their phones via software update weather its via 3g or 4g or PC. If thats so then Android is flawed in my opinion. Of course all electronics are. I just chose to be with one that makes me happy.



    So android in China in my opinion is just like any other phone manufacturer. Although it's Apple Biggest smart phone competitor in china I see that Apple will retain an edge over Android. I think that Apple keeps adding smart features and now that iOS 5 can update directly to the phone, this will give Apple an edge. We will have to see.
  • Reply 5 of 36
    Quote:
    Originally Posted by tylerk36 View Post


    I saw an Android phone the other day. It looked quite nice. From what I hear Android phones don't get major updates like iPhones do. I mean iOS update was major yet I understand that Android doesn't update their phones via software update weather its via 3g or 4g or PC. If thats so then Android is flawed in my opinion. Of course all electronics are. I just chose to be with one that makes me happy.



    Semi true. The issue is stupid. A lot of oems rush out hardware that is so subpar that future versions wont even run (4.0 updates are sure to be a shitshow) and shadowing a dead past expect users to update hardware for new software.



    It's an unnecessarily archaic model but it exists and from what I read Google really can put it's foot down and force more consistent and timely updates.



    Things may smooth out and for the sake of the Android platform I'd hope they do.



    And yea contrary to what you'll read here some Android powered phones are quite nice though some OEMs ape iPhones too much (Samsung) or often make ugly hardware IMO (Motorola)



    There are diamonds in the rough.
  • Reply 6 of 36
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by AbsoluteDesignz View Post


    There are diamonds in the rough.



    It's hard for a layman to differentiate an uncut diamond a petrified turd.



    Even as more phones come to market with the ability to run Android 4.0 will they he prepared to run Android 5.0? How will The customer know without reading detailed technical reviews like on AnandTech? This is why Apple's model will continue to dominate as a high yield, high profit brand. They've built in loyalty and earned trust. Google has made Android in a kenel of abused dogs. Sometimes ou can tell which ones will bite and which ones are kind, but there are too many fringe cases where you just can't peg the personality until it's too late.
  • Reply 7 of 36
    Quote:
    Originally Posted by AppleInsider View Post


    Gaming consoles are currently illegal in China...



    Say WHAT!?
  • Reply 8 of 36
    drdoppiodrdoppio Posts: 1,132member
    Quote:
    Originally Posted by solipsism View Post


    ...How will The customer know without reading detailed technical reviews like on AnandTech?



    Do you really believe that the average customer cares about OS version and upgrades? Especially given that any Android above 2.0 runs all the apps for later versions?



    Are all iOS5 capable iPhones running iOS5 today? How about iOS4? If not, why didn't people upgrade?
  • Reply 9 of 36
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by DrDoppio View Post


    Do you really believe that the average customer cares about OS version and upgrades? Especially given that any Android above 2.0 runs all the apps for later versions?



    Are all iOS5 capable iPhones running iOS5 today? How about iOS4? If not, why didn't people upgrade?



    Yes, savvy consumers care about TCO and the peace of mind from trusting a vendor to a reasonable degree.
  • Reply 10 of 36
    drdoppiodrdoppio Posts: 1,132member
    Quote:
    Originally Posted by solipsism View Post


    Yes, savvy consumers care about TCO and the peace of mind from trusting a vendor to a reasonable degree.



    Sadly, the average consumer is nowhere near savvy.
  • Reply 11 of 36
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by DrDoppio View Post


    Sadly, the average consumer is nowhere near savvy.



    I'd say for a given product the average customer is savvy about a product in some regard. I am using median to define average, but mean wold also likely work in this statistical measure of the central tendency. You're clearly referring to mode in what sounds like a highly pessimistic and slanted view of what entails buyer awareness.



    PS: A customer doesn't have to know Apple doubled the RAM's peak theoretical bandwidth or made internal the previously external WiFi antenna on the 4S for them to be savvy about their purchase.
  • Reply 12 of 36
    Quote:
    Originally Posted by solipsism View Post


    Yes, savvy consumers care about TCO and the peace of mind from trusting a vendor to a reasonable degree.



    If that were even remotely true, the Nexus S, Nexus One and the upcoming Galaxy Nexus would be the No1 Android handsets per generation but that couldn't be further from the truth.



    HTC's Desire destroyed the Nexus One in sales, the Galaxy S destroyed the Nexus S and I have a feeling that the Galaxy S II will vastly outsell the Galaxy Nexus.



    People are fickle and like pretty things and care little for software updates IMO.
  • Reply 13 of 36
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by GalaxyTab View Post


    If that were even remotely true, the Nexus S, Nexus One and the upcoming Galaxy Nexus would be the No1 Android handsets per generation but that couldn't be further from the truth.



    HTC's Desire destroyed the Nexus One in sales, the Galaxy S destroyed the Nexus S and I have a feeling that the Galaxy S II will vastly outsell the Galaxy Nexus.



    People are fickle and like pretty things and care little for software updates IMO.



    1) What exactly about rather Nexus One makes you think it sould number one? It was sold off contract on a website for 7 months, had many reported HW faults, no track record from Googl/HTC and has been proven to be a brand you can't trust by not getting further updates.



    2) if people didn't care about software updates then how did Apple sell 1 million copies of Lion in one day on the Mac App Store, did Siri buckle under 4 million devices doing excessive "testing" of the service in the first weekend of 4S sales, and people complain that their iOS 5.0 should have come with Siri simply because the local HW can handle it. Also, why do major news outlets, not just tech sutes, report updates to Apple's HW and SW. Seems to me these fickle people that you say care little are wanting them. It's usually a good idea to trust the marketers to know what their audience wants.
  • Reply 14 of 36
    Quote:
    Originally Posted by solipsism View Post


    It's hard for a layman to differentiate an uncut diamond a petrified turd.



    Even as more phones come to market with the ability to run Android 4.0 will they he prepared to run Android 5.0? How will The customer know without reading detailed technical reviews like on AnandTech? This is why Apple's model will continue to dominate as a high yield, high profit brand. They've built in loyalty and earned trust. Google has made Android in a kenel of abused dogs. Sometimes ou can tell which ones will bite and which ones are kind, but there are too many fringe cases where you just can't peg the personality until it's too late.



    It's actually fairly easy to determine the petrified turds from the gems. Then again as I typed that I realize my perspective isn't the layman's.



    I'll never argue that Apples model doesn't work. And I wish Google would in the very least adopt Microsoft's model (with a little more room for superficial customization).



    I like Android. But I could see myself switching easily if shit gets too hectic even for me.
  • Reply 15 of 36
    drdoppiodrdoppio Posts: 1,132member
    Quote:
    Originally Posted by solipsism View Post


    2) if people didn't care about software updates then how did Apple sell 1 million copies of Lion in one day on the Mac App Store, did Siri buckle under 4 million devices doing excessive "testing" of the service in the first weekend of 4S sales, and people complain that their iOS 5.0 should have come with Siri simply because the local HW can handle it. Also, why do major news outlets, not just tech sutes, report updates to Apple's HW and SW. Seems to me these fickle people that you say care little are wanting them. It's usually a good idea to trust the marketers to know what their audience wants.



    In other news, some 20 million users did not update to Lion on day one. The claim is not that no one cares about software updates, but that most people don't care. You have given examples of a large number of people caring, which does not disprove that a larger yet number doesn't. You have also given examples of hardware updates which don't allow to gauge with certainty whether HW or SW is the motivating factor. None of the arguments that you've given disproves the point that most people don't give a rat's behind about software updates.
  • Reply 16 of 36
    blastdoorblastdoor Posts: 1,893member
    Two big difference between iOS vs android and apple vs dos/windows:



    1. Companies that sold PCs back in the 80s actually made money, as did the software guys

    2. Apple in the 80s was a dysfunctional mess whereas apple today is a finely tuned machine
  • Reply 17 of 36
    hill60hill60 Posts: 6,989member
    Quote:
    Originally Posted by DrDoppio View Post


    Do you really believe that the average customer cares about OS version and upgrades? Especially given that any Android above 2.0 runs all the apps for later versions?



    Quite a few judging by this news regarding the first dual core processor Android phone that was released.



    LG Optimus 2X will not be getting a taste of Ice Cream Sandwich







    No ice cream sandwich for you.
  • Reply 18 of 36
    MacProMacPro Posts: 18,142member
    Quote:
    Originally Posted by Suddenly Newton View Post


    Why isn't Microsoft moving WP7 more aggressively in China? They're all all excited about a few countries in the EU due to their Nokia deal, but c'mon. China is a much bigger market than all of Western Europe put together.



    Maybe Microsoft listened to the trolls on AI a few years back that claimed no one in China could afford a smart phone.
  • Reply 19 of 36
    drdoppiodrdoppio Posts: 1,132member
    Quote:
    Originally Posted by hill60 View Post


    Quite a few judging by this news regarding the first dual core processor Android phone that was released.



    LG Optimus 2X will not be getting a taste of Ice Cream Sandwich







    No ice cream sandwich for you.



    Please! The majority of the customers don't care, and don't post on tech-centric forums! Could you find a source that is even more biased than GSM arena's comment section?
  • Reply 20 of 36
    drdoppiodrdoppio Posts: 1,132member
    Quote:
    Originally Posted by Blastdoor View Post


    Two big difference between iOS vs android and apple vs dos/windows:



    1. Companies that sold PCs back in the 80s actually made money, as did the software guys



    Companies that sell Android products now actually make money too, as do the software guys. I haven't looked at the numbers but my guess is that they make more money than those back in the 80s.



    Quote:

    2. Apple in the 80s was a dysfunctional mess whereas apple today is a finely tuned machine



    This is a true difference, for Apple. This time, it will not need Microsoft to save it.
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