In China’s smartphone boom, market share trumps margins

Analysis: In China’s smartphone boom, market share trumps margins | Reuters.

Want to make money selling semiconductors to mobile phone makers in China? Sacrifice profit margins and sell a lot of them.

According to the reuters article, chipmakers have to reduce their margins from near to 50% to mid-40s to win in China. Many chipmakers are turning to China as grow in developed countries is slowing down.

Demand for low end android phones are growing in China. According to IDC, it estimates that the Chinese market size is $80 bilion and projected to grow to $120 billion in 2017. Total handsets projected to be 460 million which means a significant market for mobile phone component suppliers.

Someone was quoted “It’s lower margin, but volume growth makes up for it”. Not sure if I agree with that, I would focus on cost down and creating products that meet Chinese handset requirements rather than win by shaving margins off high end products.

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