Why are Chinese mobile so cheap?

Jul, 18 2023

Economic Scale

One of the primary reasons Chinese mobile phones are cheaper than their Western counterparts is the concept of scale. China is the most populous country in the world, and its domestic market alone is massive. When a company produces products on a large scale, the cost per unit decreases significantly. This is exactly what is happening in China.

Moreover, China has a vast network of suppliers and manufacturers that can produce parts at a lower cost. This is due to the sheer volume of parts they produce, which again, reduces the cost per unit. When these parts are assembled into a smartphone, the overall cost is much lower than it would be in a country with less production scale.

Low Labor Costs

Another factor contributing to the lesser cost of Chinese mobile phones is their low labor cost. The average wage in China is much lower than in Western countries, meaning that companies can employ more workers for less money. This allows them to operate large factories and produce vast quantities of goods without incurring huge labor costs.

However, it's important to note that while labor costs are lower in China, the country has made significant progress in improving worker rights and wages in recent years. Still, compared to Western standards, labor remains relatively cheap, making production costs lower.

A Different Market Strategy

Chinese mobile phone companies also employ a different market strategy than their Western counterparts. Instead of focusing on high-end, expensive devices, many Chinese companies target the mid-range and budget market. They produce phones that are affordable but still offer good performance and features.

This strategy has proven to be very successful, particularly in developing countries where the average income is lower. Many consumers in these markets cannot afford the flagship models from Western companies and instead opt for the more affordable Chinese brands.

Less Spend on Marketing and Advertising

Chinese brands typically spend less on marketing and advertising than Western brands. Large Western companies often invest heavily in marketing campaigns, celebrity endorsements, and high-profile events to promote their products. These costs are then passed on to the consumer in the form of higher prices.

Chinese companies, on the other hand, tend to rely more on word-of-mouth and online sales, which significantly reduces their marketing costs. This allows them to sell their products at a lower price while still making a profit.

Government Support

The Chinese government plays a significant role in the success of its domestic mobile phone industry. The government provides subsidies and incentives to companies that contribute to the country's technological advancement, which includes smartphone manufacturers.

In addition to financial support, the government also provides infrastructure and policy support that favors domestic companies. This allows these companies to operate at a lower cost and thus sell their products at a lower price.

Efficient Supply Chain

Finally, China's efficient supply chain also contributes to the lower cost of its mobile phones. China is home to many of the world's largest electronic component manufacturers. Having these manufacturers close by reduces transportation costs and allows for faster production times.

This proximity and efficiency mean that Chinese companies can quickly and cheaply obtain the parts they need to manufacture their phones. This efficiency is reflected in the final cost of the product. In contrast, Western companies often have to source parts from multiple countries, which can increase costs and production times.