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What are Chinese looking for with Technology?
- A User, Government, and Business Perspective
Dolcera Webinar Series
Dolcera
• Dolcera is a knowledge services company based out of Silicon Valley-CA, Bellevue-WA,
Chicago-IL, London-UK, Beijing-China, and Hyderabad-India
• Dolcera works with over 100 innovative companies across the Americas, Europe, and
Asia.
• We are a proud team of 110 engineers and business analysts with expertise in
telecommunication, semiconductors, software, servers, data analytics, chemistry,
packaging, food technology, biotechnology, biochemistry and pharmaceuticals
• Dolcera is helping its clients stay innovative by providing them information related to
• Business Strategy (Business research, and innovation strategy formulation)
• Intellectual Property (Engineering services) and
• Visualization tools (Dashboard 2.0)
Dolcera
China's first lady Peng Liyuan taking pictures with a Nubia Z5 Mini
from ZTE Corporation; 13-mega-pixel camera; costs about $240/-
Source: http://www.chinadaily.com.cn
Agenda
1. China

Size, migration patterns, influencers
2. The Chinese Consumer

Profile, Expectations, Sensitivities
3. The Chinese Government Strategy


Why did the Chinese Government choose TD-LTE?
Evolving role of foreign players in China’s eco-system
4. The Chinese Corporation

Will Chinese companies play in the global eco-system?
5. Take-aways from this Webinar

Understanding and succeeding in the Chinese technology eco-system
1. China
1. China
(1 of 3)
China’s sheer size and population positions it as one of the key markets in the world today.
Country Overview
•
China has the biggest population in the world (x4 times USA).
•
The biggest city in China is Shanghai with an urban population
of 20 million (comparable to Florida’s population).
•
China is expected to overtake the USA to become the world’s
largest economy by 2017.
Population: 1,350,700,000
GDP: $13.37 trillion
Average Salary: $730 /month
Capital city: Beijing
Language: Standard Mandarin
Currency: Renminbi (yuan) ¥
Links:
http://english.gov.cn
https://twitter.com/china
1. China
(2 of 3)
Urbanization, infrastructure, and a booming middle-class will drive technology adoption.
Growth of ‘Mega’ Cities
‘Mega’ Cities = ‘Smart’ cities
8 mega cities with population >10 million by 2025; over $15 Billion infrastructure investment by 2015.
The ‘rising’ urban middle class
2014
More money to buy luxury products
2020
70% (~1 billion) of the Chinese in cities by 2030 with close to 3 times more $$ to spend.
1. China
(3 of 3)
The Chinese people and the Chinese Government play a role in technology “success”.
Push for “indigenous innovation” and IP,
Regulatory Enforcement
•
•
•
•
China technology R&D in 2013 second only to
the US.
“Only if core technologies are in our own hands
can we truly hold the initiative in competition
and development”- President Xi Jinping, June
2014
Patent application subsidies for domestic
players led to explosive growth in filing
Stricter enforcement of Regulatory and Antimonopoly issues in the since 2011.
World’s largest mobile market
•
•
•
China has the largest number of internet
users (618 million) and about 80% of them
use mobile internet.
Nearly 50% of urban Chinese own and use
a smart-phone 25 hours a week.
Top uses of smartphones are search, news,
texting, social networks, gaming, and online
buying/mobile payment transactions.
Source: GSMA Intelligence: Half a billion Chinese citizens have subscribed to the mobile internet,
Wireless Eco-system Players In China
Service Providers
Infrastructure
Equipment
Providers
Chipset Vendors
Terminal Device
Vendors
2. The Chinese Consumer
2. The Chinese Consumer
(1 of 3)
Chinese smartphone users are power users with high-speed data requirements
Chinese use their smartphones several times a day, for data intensive tasks
• Internet users spend an average of 25.9 hours online every week.
• CNNIC credits this to more Wi-Fi access, maturity of 3G coverage and 4G access.
Instant
Messaging,
Social
networks
Online
News
Mobile
Searching
Music &
Video
Online
shopping
and
payments
Gaming
Average age of a Chinese smartphone user is 25 years. 77% of users have a data plan
that costs about $20 monthly. Chinese on an average own ~1.7 devices per person.
2. The Chinese Consumer
(2 of 3)
Chinese smartphone users look for sleek, stylish, feature-rich handsets
Xiaomi Mi4
-
-
-
5.5-inch 2K Quad HD, 538 PPI
& 16 Megapixel OIS rear
camera 3GB DDR3 RAM and
32GB ROM (Internal Memory).
Qualcomm Snapdragon 805
processor with 2.5GHz Quadcore CPU.
Support GSM, 3G WCDMA, 4G
FDD-LTE network.
ZTE Nubia Z5 Mini
-
-
-
Dual Cameras: Front:5.0MP
Back 13.0 mega pixel/Auto
Focus.
Snapdragon APQ8064 Quad
Core 1.5 GHz
Dimensions: Size (LWH): 2.59
inches, 0.41 inches, 5.31
inchesWeight: 5.6 ounces
Built In GPS & A.GPS Dual sim
dual standby, WCDMA+ GSM,
Wi-Fi:IEEE 802.11 b/g/n,
supports Wi-Fi hotspot
Samsung Galaxy S3
-
-
8MP rear camera,
1.3MP front camera
MTK MT6577 1.2GHz
processor, GPU:
PowerVR SGX531; Android 4.1.9 OS
Support GSM &
WCDMA 3G network
Support WiFi,
Bluetooth, GPS.
2. The Chinese Consumer
(3 of 3)
The trend is towards buying ‘cool’, affordable smartphones more often.
Local brands are more popular than ever
• Chinese prefer domestic, lower
priced smartphones.
• Lower prices has caused pre-paid
and non-contract phones to
become more popular.
Affordability has led to faster replacement
• Android is still the most popular
operating system for smartphones,
and phones are now replaced every 15
months.
3. The Chinese Government Strategy
3. The Chinese Government Strategy (1 of 11)
Why did the Government pick TD-LTE?
Wireless standards that shaped the eco-system in China
Source: CommScope
GSM,
CDMA
WCDMA
FDD-LTE,
TD-LTE
GSM,
CDMA
TD-SCDMA,
TD-LTE
WCDMA
In China,
• The government issued 4G
spectrum licenses for TDLTE in December 2013 (3
networks so far). No
timeline for FDD-LTE.
• Similar trend seen in 3G
when spectrum licenses
were issued for the local
standard TD-SCDMA
before WCDMA.
World-wide,
• As of May 2014, 288 LTE
networks in 104 countries,
among which 36 LTE TDD
networks in 24 countries.
3. The Chinese Government Strategy (2 of 11)
Why did the Government pick TD-LTE?
TD-LTE is believed to help enhance the position of domestic players in the eco-system.
TD-LTE license enhanced
China Mobile’s dominance
Huawei & ZTE top TD-LTE infrastructure
suppliers for China Mobile
Users' market share 2014
(end of 1st quarter)
China mobile
15.0%
23.0%
China Unicom
62.0%
China
Telecom
•
•
China Mobile leads with 62%
Chinese mobile service users, more
than half revenues of three carriers,
and 4 times profits of China Unicom
and China Telecom.
All 3 are state-owned.
•
•
•
TD-LTE equipment providers’ biggest customer is
China Mobile.
In 2014, China mobile will construct 5,00,000 4G
base stations (60% global volume), offer 4G in 340
cities and 100 million 4G terminal devices.
Chinese domestic manufacturers led by Huawei &
ZTE account for about 70% market share.
3. The Chinese Government Strategy (3 of 11)
Why did the Government pick TD-LTE?
Picking TDD LTE: Long-term advantages to China
TD-LTE is seeing increasingly strong adoption worldwide
•
•
•
•
Over 100 operators are investing in the technology.
Infrastructure investments expected to grow at 15% over the next 6 years.
TD-LTE device shipments will surpass 100 Million in 2014 alone.
Large scale adoption will drive integrated LTE eco-system, and impact Advanced LTE & 5G.
Huawei currently leads the TD-LTE
infrastructure market share and is
expected to be tough competition to
Ericsson in the global market.
Source: ReportsnReports.com report The TD-LTE Ecosystem: 2014 - 2020 - Infrastructure, Devices, Subscriptions & Operator Revenue, Qualcomm
3. The Chinese Government Strategy (4 of 11)
Why did the Government pick TD-LTE?
Dolcera IP Study to validate the ‘domestic’ advantage hypothesis
Used the Dolcera ETSI Disclosures database to find all LTE disclosed
patents, and found CN patents.
9,087 Chinese patents extracted from 31,779 patents worldwide.
Our subject experts used keyword, assignee, inventor based searches to
identify additional patents related to LTE.
22,692 additional CN LTE patents found.
Used Dolcera’s PC 1.0, an innovative supervised automation tool that uses
machine learning to classify patents to tag CN LTE patents to TD-LTE, and
FDD-LTE.
Of 9,087 patents, 2,068 patents tagged to TD-LTE. ~6,700 were agnostic.
Analyzed and interpreted trends related to domestic and foreign players
in the LTE space.
3. The Chinese Government Strategy (5 of 11)
Why did the Government pick TD-LTE?
IP: There are more TD-LTE patents that domestic players own than FDD-LTE patents
Few domestic players hold SEP patents; proportion of TD-LTE patents is more.
•
•
Based on Dolcera’s analytics on the ETSI Standards database, Qualcomm and Samsung own the
most number of SEP patents in LTE world-wide.
The number of domestic players in China that have disclosed to ETSI is small; led by Huawei and
ZTE.
Distribution of CN Essential LTE IP
TD-LTE and FDD-LTE IP of top Chinese players
CATT
80
Zte Corp
Domestic
21%
62
Huawei
37
0
1
TDD
6
FDD
Foreign
79%
Mediatek Inc 10
0
20
40
60
80
100
Number of Patents/Publications
Please note that no reassignment information on Lenovo acquired SEP patents related to LTE from NEC in April 2014 was available, and hence not
included.
3. The Chinese Government Strategy (6 of 11)
Evolving role of foreign players in China’s eco-system
‘Foreign’ companies play a significant role in chipsets, and terminal Devices (Smartphones).
Service Providers
Infrastructure
Equipment
Providers
Chipset Vendors
Terminal Device
Vendors
3. The Chinese Government Strategy (7 of 11)
Evolving role of foreign players in China’s eco-system
Qualcomm, a foreign player and Mediatek, a domestic player are major chipset vendors.
Qualcomm leads revenue share in chipset market
Baseband/Apps processor Revenue Share, 2013
•
•
•
Qualcomm leads the LTE market; supports multiple LTE
frequencies with WCDMA and CDMA compatibility.
Samsung, Apple, Xiaomi are players in China that rely on
Qualcomm for baseband ICs or baseband/app processors.
Qualcomm has 69% revenue share, while Mediatek has a
14% revenue share in the Chinese handset market.
Chinese players like Spreadtrum and Leadcore have less
than 1% revenue share.
Mediatek dominates in the low-end domestic market
•
In 2013, Mediatek had almost double the market
share of Qualcomm in shipments to Chinese
vendors.
Baseband share at Chinese domestic smartphone OEMS (2013)
Source: CLSA
3. The Chinese Government Strategy (8 of 11)
Evolving role of foreign players in China’s eco-system
Use of low-priced domestic phones on the rise; high-end ‘foreign’ phones still popular.
Smartphone market is crowded, with a large number of domestic players
•
•
•
Over 100 million smartphones were
shipped in China in Q1 2014.
Apple, Samsung, HTC are the only
foreign players in the top vendors list.
About 10% of phones shipped were
4G enabled, and over 70% were 3G
enabled handsets.
1 in every 4 Chinese buy phones that are priced over $500
•
•
About 27 million phones cost > $500; 80% of which were iPhones.
57% phones cost less than $330.
3. The Chinese Government Strategy (9 of 11)
Evolving role of foreign players in China’s eco-system
While most of top IP holders in China are ‘foreign’, a few domestic players file aggressively.
Foreign players currently hold more IP than domestic players in China
•
The number of CN patents filed has exploded in the last
10 years.
The top assignees include mostly foreign companies with
the exception of Huawei & ZTE.
•
Top IP holders in China: Wireless
NTT Corp
876
InterDigital Technology
Corp.
884
CATT
40,000
Wireless: Patent filing trend in China
No of patents
36,995
35,580
1004
LG Electronics
1132
Ericsson
30,000
26,056
22,397
21,032
20,000
10,55112,121
10,000
16,578
13,331
7,485
1261
NOKIA Corporation
1523
Samsung Electronics
1618
Qualcomm Inc
3416
Huawei Technology
3585
ZTE Corp
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Publication year
3835
0
1000 2000 3000 4000 5000
Number of CN LTE
patents and published applications
3. The Chinese Government Strategy (10 of 11)
Evolving role of foreign players in China’s eco-system
The use of Anti-Monopoly Law (AML) by the Government and Licensing IP (SEP) in China.
AML enforcement increase
•
China’s anti-monopoly law
which took effect in 2008
has been recently enforced
to launch probes on multiple
companies, including foreign
players like Qualcomm,
Microsoft etc.
Recent ruling impacting issues related to antitrust law and IP licensing of SEP
•
In April 2014, the Guangdong High Court of China published its October 2013 judgments in
two Huawei Technologies v. InterDigital cases.
• One held that U.S.-based InterDigital (IDC) abused its dominant market position by
refusing to license standard essential patents (SEPs) for 3G wireless communication
devices on fair, reasonable and non-discriminatory (FRAND) terms.
• The other set a FRAND rate capped at 0.019 percent of the actual product selling price
for IDC to license its Chinese SEPs to Huawei.
3. The Chinese Government Strategy (11 of 11)
Evolving role of foreign players in China’s eco-system
China is a key market. Many foreign brands have been successful, yet challenged in China.
China is a key market; a challenge
•
The ‘brand’ helps Apple gain in China
•
•
Apple’s Q1 2014 revenue from Greater China,
which includes Hong Kong and Taiwan, rose 13%
from a year earlier to $9.3 billion.
Over 75% of phones > $500 are iPhones.
Localization key to Samsung’s success in China
•
•
•
Freebies, local language, localized apps.
Understanding the micro trends within each
region and localizing.
Use of the number ‘8’ and ‘red’ in Samsung
advertising in China
China is an important market on a global
stage, and some companies have been
more successful than others.
Most popular smartphones in China: April 2014
3. The Chinese Corporation
2. The Chinese Corporation (1 of 3)
Will Chinese companies play in the ‘global’ eco-system?
Lenovo’s M&A driven expansion to become a ‘global’ brand.
Lenovo + Motorola + IBM = Global brand
•
•
•
•
Lenovo is the 2nd largest domestic
player in smartphones in China.
Enhanced its IP portfolio, and reach
in the Americas through acquisition
of Motorola in 2014, and NEC
patents in April 2014.
International workforce of 27,000
employees and customers in more
than 160 countries.
Enjoys substantial advantages of
scale, supply chain and costs that
enable it to compete profitably using
a margin-based hardware model.
2. The Chinese Corporation (2 of 3)
Will Chinese companies play in the ‘global’ eco-system?
Xiaomi: The Chinese domestic giant is ready to take on the world.
Affordable smartphones
•
•
Xiaomi's flagship devices, the Mi 3 and 4, are clearly "inspired" by Samsung's Galaxy S5 and
Apple's iPhone 5s, but costs $230; the iPhone costs $750 in China.
Razor thin margins, direct consumer sales, online only presence, minimal inventory help keep
costs down.
Quality hardware, customized Android experience
•
•
The Mi 3 runs on a 2.3 GHz Qualcomm Snapdragon processor, has 2GB of RAM, and a 13megapixel camera.
Its customized version of Android has china specific applications as default.
Going Global
•
By 2015, Xiaomi plans to expand into India, Brazil, and Russia as well as Indonesia, Malaysia,
Mexico, the Philippines, Thailand, Turkey, and Vietnam. Xiaomi is already selling phones in
Mainland China, Hong Kong, Taiwan, and Singapore.
2. The Chinese Corporation (3 of 3)
Will Chinese companies play in the ‘global’ eco-system?
Xiaomi is building its patent portfolio to be a global player.
China Government subsidies push domestic players to build IP strength
•
The Chinese Government provides subsidies for patent filing, and there is a push for “Invented in
China”.
Xioami, for instance, has built up a portfolio of over 1000 CN patents since 2010.
Xiaomi's filing trend
Xiaomi's portfolio distribution
KR, 6
JP, 5
US, 33
WO, 65
Number of
patents/Publications
•
EP, 5
Top Areas of Filing
CN, 974
UI
188
Digital Signal Processing
96
88
50
341
3
74
Priority Year
116
0
654
2010 2011 2012 2013
123
Mobile Terminal
Function/features
Information retrieval/Database
structures/File system structures
Communication
Control/Connectivity
700
600
500
400
300
200
100
0
100
150
200
Number of Patents/Publications
Key Take-aways from this Webinar
Key Take-aways from this Webinar
Intelligence and local due-diligence are key for foreign player success in China.
Success in China comes from understanding local trends and environment.
Dolcera can help with strategic due-diligence during all phases of the business life-cycle.
Get ready for
China
Commercialize
in China
Sustain in China
Consumer
Understanding &
Segmentation
Competitive
Intelligence
Market & Business
Intelligence
Market and IP
Due-diligence
Product Innovation
for China
IP Strategy
Buy or Partner
IP Licensing &
Litigation
Brand positioning
Key Take-aways from this Webinar
Intelligence on the Chinese landscape will become ever critical for any ‘global’ player.
As China’s domestic giants are expand globally rapidly, it is important to know them!
Dolcera’s presence in China adds a local perspective unavailable otherwise.
Primary Research for user,
market, and IP trends.
Customized, and current
information in a fast paced
emerging market.
An Integrated approach to
market analysis with a local
and world view for effective
decisions.
IP Litigation, domestic player
analysis and in-depth reviews
not available easily outside.
Assessment of Chinese patent
literature and other local
sources in native Mandarin.
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