Multinationals eye China as consumption pattern shifts

BEIJING, China (Xinhua) – On its launch day in China, Apple Pay saw over 30 million Chinese bank cards linked to the payment service, an achievement that impressed Apple Pay Vice-President Jennifer Bailey.

"We think China could be our largest Apple Pay market," Bailey told media last Thursday.

To lure more customers, some of Apple Pay's partner banks worked with Starbucks to offer discounts to customers who pay with Apple Pay.

With wages up and people accumulating wealth, the rising middle class is driving a major shift in China's consumption pattern, making the country a huge market that multinationals can ill afford to ignore.

Increasingly, Chinese are able to afford more than just the bare necessities. Instead, they spend on things they like but don't need, those "discretionary items".

According to data from consulting firm McKinsey & Co, discretionary spending is forecast to grow over seven per cent annually between 2010 and 2020, while semi-necessities, including health care and apparel, will expand around six to seven per cent, all surpassing the growth rate of actual necessities.

The shift is already seen in satisfying results reported by companies selling high-end products, such as Apple.

While an iPhone costs almost five times the average price of a domestic smartphone, Apple has a substantial consumer base in China that not only pays for the phone itself but for the brand.

"There's an enormous number of people moving into the middle class and I think this provides us with great opportunities to win over some of these customers into the Apple ecosystem," said Tim Cook, Apple's chief executive during an earnings call.

"We remain very bullish on China, and don't subscribe to the doom and gloom kind of predictions frankly," Cook said.

The Chinese middle class for the first time outnumbered those in the United States in 2015, hitting 109 million at the American standard after purchasing power is adjusted, according to a report by Credit Suiss.

And the number continues to climb. In 2015, China's national per capita disposable income rose 7.4 per cent from 2014 in real terms, outpacing GDP growth.

Seeing the opportunities of an increasingly well-off society, foreign firms are tapping into China's entertainment industry to monetise on the growing interest in the high-end recreational market.

American film studio 20th Century Fox, for example, told

China Daily recently that it had chosen Beijing to be the destination of the world's first ever Simpsons store.

To be opened in March, the store will offer merchandise related to the American animated sitcom, which has proven to be very popular in China.

The decision followed a similar move by Walt Disney Co, which opened the world's largest Disney store in Shanghai in May 2015 to huge queues of customers.

The domestic entertainment industry is also taking off thanks to this shift. During the Spring Festival holiday, box office sales surged 67 per cent year on year to three billion yuan.

Spending on recreational activities including travel, dining, sports, and gaming in China still lags behind the developed world, and "fun" has the biggest potential for growth, said a Goldman Sachs report on consumer research.

Source: Multinationals eye China as consumption pattern shifts

Xiaomi plans to use smartphone chips designed in-house in the second half of 2016

Xiaomi, China's leader in smartphone shipments in 2015, has aspirations to be a chipmaker this year. This would put Xiaomi in the same boat as Apple, Samsung and Huawei, which also design chips in-house.

The Chinese smartphone maker hopes to use smartphone processor chips designed in-house in the second half of 2016, according to Reuters. Xiaomi will use these in-house chips in mid- to lower-priced RedMi Note series of smartphones.

Related: Everything you need to know about the Xiaomi Mi 5

The company has hired 200-300 people to work on designing smartphone processor chips, according to a source speaking with Reuters. It's unclear how many chips Xiaomi plans to make this year.

Xiaomi's move into the chipmaking game may put pressure on current industry leaders Qualcomm and MediaTek. Qualcomm, based in San Diego, California, ended the third quarter of 2015 with 67 percent of the 4G-integrated baseband processor market, according to Bloomberg data. Taiwanese MediaTek ended the same period with 17 percent of the market. Qualcomm has seen its market share decline while MediaTek has seen a steady climb.

MediaTek, which currently supplies most of the chips in Xiaomi's mid- to low-priced handsets, may experience the biggest effects of Xiaomi's in-house-designed chips.

Xiaomi was the leader in smartphone shipments to China in 2015, according to International Data Corporation (IDC). The company shipped 64.9 million units in China, giving it 15.0 percent of the market. Huawei (14.5 percent), Apple (13.4 percent), OPPO (8.1 percent), and vivo (8.1 percent) followed.

Part of Xiaomi's success appears to be tied to its $141 average selling price, the lowest of the top five vendors in China.

Source: Xiaomi plans to use smartphone chips designed in-house in the second half of 2016

Freedom 251: Cheapest smartphone rings in I-T raids, confusion

The income tax department raided the office of the controversial mobile phone company Ringing Bells in Noida on Friday and grilled its employees on the launch of "the world's cheapest smartphone" called Freedom 251.

The company has promised to deliver 25 lakh handsets by June 30, though it's not clear how a fledgling firm would be able to execute such a huge order apparently without any matching infrastructure.

Hundreds of eager buyers thronged outside the company's office on Friday. But the confidence of the firm's promoters seemed far from ebbing. "We will deliver the handsets that we have promised within the given timeframe," Mohit Goyal, the company's proprietor, told reporters. He said the company would also satisfy the government "on all counts".

Hundreds of people who had booked the phone demonstrated outside the Ringing Bells office as a three-member I-T department team rummaged through the company's documents.

Lakhs of people had logged on to the company's website to book the device which is being sold for as little as Rs 251 plus a Rs 40 charge for home delivery. The company's website crashed within a few minutes of its launch on Wednesday.

Interestingly, while the company had created a huge hype on 'Make in India' in its ads, most built-in app icons on the Freedom 251 are a direct copy of icons on Apple's iPhone. Even the web browser app is a copy of Apple's Safari browser that is the property of iPhones, iPads, and Mac computers.

The smartphone also sports a shiny logo of the import firm Adcom which, interestingly, sells an identical version of the phone for Rs 4,000 on its website.

The Freedom 251 device is also supposed to be pre-loaded with government apps.

However, market experts have raised their doubts about anyone being able to assemble a mobile phone, leave along a smartphone, at such a small cost. The experts say it's impossible to put together a mobile phone for anything less than Rs 3,000 by even the cheapest producers in China.

Source: Freedom 251: Cheapest smartphone rings in I-T raids, confusion

Freedom 251, world's cheapest smartphone launch event

It has a 1.3GHz quad-core processor and 8GB of memory, which can be expanded to 32GB.

On the Freedom 251 website, Ringer Bells states that its vision is to "empower citizens, even in the remotest rural and semi-urban centres of India, with the latest in digital technology at incredible affordable prices and cascade knowledge, news and current issues so that all experience the confidence of inclusive growth and equal opportunity".

It features a 3.2-MP rear camera and a 0.3-MP front facing camera and a 1,450-mAh battery.

The smartphone comes with pre-installed apps like Swachh Bharat, Women Safety, WhatsApp, Facebook and Twitter, among others.

Sporting a 4-inch Wide Video Graphics Array display and a 540×960 resolution, the Freedom 251 will cost a measly Rs. 251.

The world record for the cheapest smartphone has been smashed with the introduction of a device that costs just £2.50. The phone is yet to hit the market.

Ringing Bells, based in the Delhi satellite city of Noida, was set up only a year ago and the launch event for the new phone on Wednesday night was attended by a senior leader from Prime Minister Narendra Modi's party.

Cheap smartphone handsets, many of them Chinese-made, are readily available in the Indian market but domestic competitors are making inroads, with models selling for less than $20.

India is the second-largest mobile phone market in the world, behind China, but only 19% of the population are on the internet.

In the last few months, global smartphone makers, including the likes of Xiaomi, Motorola and Gionee have commenced assembling their handsets in India, where the government is pushing local manufacturing through its Make in India initiative.

Source: Freedom 251, world's cheapest smartphone launch event

Is Freedom 251 really the Chinese Adcom Ikon4?

Zee Media Bureau

New Delhi: As per reports floating online, Freedom 251 is nothing but Chinese smartphone Adcom Ikon4, which was selling on Flipkart around Rs 4,000.

The reports allege that Ringing Bells has covered the branding of the phone using a whitener and sticker.

As per media reports, the company booked 30,000 orders on the first day, even though going by the company's claims, the website observed 6 lakh hits per second.

It is being assumed that with 30,000 orders booked, the company would have made more than Rs 87 lakh at the value of Rs 291 per phone including the shipping charges of Rs 40.

Source: Is Freedom 251 really the Chinese Adcom Ikon4?

Global smartphone sales post slowest growth since 2008:Gartner

Huawei performed particularly well, showing a 53 percent increase in sales compared to the previous year as it focused entirely on selling smartphones.

While affordability is a key engine of the remaining smartphone market growth, Gartner also views channel strategy and knowledge of local consumer market dynamics becoming increasingly important - as a outcome of what the analyst dubs the "highly commoditized" Android market.

Last month Apple announced it expected to report its first decline in iPhone sales since the device's introduction in 2007, in the second quarter of 2016, following the company's lowest iPhone sales figure to date.

Samsung maintained its top position, although its market share declined by 2.2% in overall smartphone sales during the year 2015.

Global sales of smartphones to end users totaled 403 million units in the fourth quarter of 2015, a 9.7 percent increase over the same period in 2014, according to Gartner, Inc.

Huawei achieved the best performance year over year - growing 53 per cent, and rising from a 5.7 per cent marketshare in Q4 2015 to 8.0 per cent in Q4 2015. For the whole of 2015, however, its market share fell to 22.5% from 24.7%.

"Current market conditions are prompting some vendors to consider setting up manufacturing operations in India and Indonesia to avoid being hit by future unfavorable currency devaluations and high import taxes", Gartner said.

Indeed, Huawei alone increased its worldwide smartphone sales from 68 million in 2014 to 104 million in 2015, partially thanks to an expansion drive in emerging markets.

Apple's South Korean rival, Samsung witnessed increased sales and it along with Huawei clocked an upsurge in the sales of its smartphones. "For Samsung to stop falling sales of premium smartphones, it needs to introduce new flagship smartphones that can compete with iPhones and stop the churn to iOS devices", said Anshul.

Android benefited from continued demand for affordable smartphones and from the slowdown of iOS units in the premium market in the fourth quarter of 2015, Gartner said.

The data upheld the dominance of Android OS, which held an overall market share of 80.7 per cent. In the Q4 2014 Android smartphones held a market share of 76 per cent. Even the launch of Windows 10 could not help Microsoft gain a significant share in the market as the OS held a mere 1.1 per cent share in the smartphone market in Q4 2015.

Despite the decline, Apple's total market share for the year increased.

Chinese smartphone maker Huawei Technology Co.

FIR against Kanhaiya Kumar based on TV channel reportStrong action will be taken against lawyers, if found guilty of indulging in violence at Patiala House Court. The Bar Council of India said it had appointed a three-member panel to investigate the violence by lawyers.

Source: Global smartphone sales post slowest growth since 2008:Gartner

Worldwide IT Spending Expected to Post Significant Slowdown in 2016, with China Set to Post its First-Ever Decline, According to IDC

FRAMINGHAM, Mass.–(BUSINESS WIRE)–Worldwide IT spending is expected to post a major slowdown in 2016, as economic weakness in emerging markets and saturation of the smartphone market combine to result in a significantly slower pace of tech spending growth compared to the past six years. Having posted annual growth of 5-6% in constant currency terms since recovery from the financial crisis in 2010, the global IT market is expected to increase by just 2% this year (in constant currency). Total IT spending on hardware, software and services will reach $2.3 trillion in 2016. Including telecom services, total ICT spending will increase by 2% to $3.8 trillion, according to the latest data from the International Data Corporation (IDC) Worldwide Black Book.

Worldwide IT spending will reach $2.3 trillion in 2016, an increase of just 2% year over year, according to IDC. IT spending was relatively stable in 2015, in spite of the volatile economy, propelled by another strong year for smartphone shipments, which compensated for a weakening PC market throughout the year. Smartphones accounted for half of the overall industry growth rate of 6% in 2015. Spending on cloud infrastructure was also strong throughout the year, resulting in growth of 16% for the server market and 10% for storage systems. Enterprise spending on software, including SaaS, posted healthy growth of 7% with strong investment in analytics, security, and collaborative applications. However, the strong US dollar made 2015 an uncomfortable year for US-based IT companies. In US dollar terms, the overall IT market declined by 2% last year, and exchange rate volatility remains a wild card which could influence the fortunes of IT suppliers over the next 12 months.

"Aside from exchange rate volatility, IT spending has been relatively stable for the past five years," said Stephen Minton, Vice President with IDC's Customer Insights and Analysis group. "Excluding mobile phones, overall tech spending has continued to grow at 3-4% each year in constant currency terms since we recovered from the disruption of the financial crisis. A solid PC upgrade cycle in 2014 was followed by a major cycle of infrastructure spending in 2015, mostly driven by cloud. IT buyers continue to prioritize software investments like data analytics and enterprise mobility, and have increasingly leveraged the service provider model in order to increase the effectiveness of their IT budgets. Underlying buyer sentiment is strong."

IT spending in China has been a growing source of revenue for tech vendors in recent years, and the market grew by 11% in constant currency terms last year, driven by strong growth in smartphones and cloud infrastructure. However, we now see signs of increasing maturity in the smartphone market after the phenomenal growth of the past seven years, and this is now expected to result in overall IT spending posting its first -ever decline (of -0.3%). While the smartphone slowdown is more heavily related to market maturity than economic weakness, we also forecast a decline in PC sales, and softening growth of spending on servers, storage, and peripherals compared to last year. The software market in China has so far remained relatively stable, but accounts for only 5% of overall IT spending (compared to 30% in the United States). As a result, China is more exposed to volatile swings in capital spending, with hardware markets tending to be more sensitive to economic disruption.

"The slowdown in China is largely connected to increasing rates of market penetration and price competition, but the current economic uncertainty also represents a significant downside risk for the rest of 2016," said Minton. "Emerging markets in general are fragile, and weaker growth in China has already had a negative impact on countries such as Brazil. Mature markets like the US and Europe have been somewhat more stable over the past 12 months, but the downside risks have now increased across all geographies, and the likelihood of a more widespread slowdown in IT spending is now higher than three months ago."

IT spending in the US is currently expected to remain broadly stable, assuming there are no significant disruptions to the broader economy. The US IT market is forecast to increase by 4% for the fourth consecutive year, in spite of an expected decline in the PC market and weakening growth in servers and storage. US businesses continue to invest strongly in 3rd Platform solutions around Big Data, Cloud, Mobile and Social. The "new normal" of 4% annual growth in IT spending is likely to continue in 2017, assuming the overall economy remains in line with current expectations.

Western Europe will post weaker growth in 2016 than 2015, due to the increased maturity of the smartphone market and a deceleration from the double-digit growth of spending on infrastructure last year. Cloud-related investments remained strong over the past 12 months, in spite of inflationary pressures related to currency devaluation, but there are now signs that momentum in the economy is increasingly fragile. However, growth in IT services and software is expected to remain stable, and we also forecast an improvement in the tablet market after a weak performance last year. Including smartphones, overall IT spending in Europe will increase by 1% this year (down from 5% growth in 2015).

Asia/Pacific will post growth of less than 2% in 2016, compared to 7% in 2015, largely due to the overall slowdown in China. The IT market in Japan is expected to stabilize, recovering to growth of 1.5% after posting a slight decline in 2015. India remains a bright spot, and posted growth of 13% last year in constant currency terms, driven by a strong PC market, which was propelled by government initiatives and education projects. While a slowdown in PC revenues and more difficult year-on-year comparisons for cloud infrastructure spending will result in weaker overall IT spending growth of 8% in 2016, underlying sentiment remains strong and we forecast accelerating growth in software and services. India will rebound to double-digit growth in 2017, and will represent an increasingly vital source of growth for global IT suppliers over the next five years.

"India is a vital market for tech companies in 2016, representing a market that still has huge room and potential for growth across many sectors," said Minton. "India's current importance to many IT vendors in some ways mirrors the importance of China a decade ago. Although the overall market is still much smaller than China, India's expected rate of growth will see it overtake Australia and Canada to enter the top 10 largest IT markets by 2020."

Growth in other emerging markets will be more volatile, however, as economic weakness inhibits IT spending. A major slowdown in Russia last year resulted in an IT spending decline of 8.5%, and the recovery will be gradual and moderate in 2016 (recovering to sluggish growth of just 1% overall). The IT market in Brazil is also expected to be sluggish, forecast to increase by just 3% this year. Excluding smartphones, IT spending in Brazil will post a slight decline, with significant declines in PC and server spending. Overall IT spending in the BRIC markets of Brazil, Russia, India and China will increase by just 1% in 2016.

The IDC Worldwide Black Book, Version 4, 2015 (Doc #US41022916) provides ICT spending forecasts for the 2006–2019 period with a focus on 25 individual market segments across hardware, software, IT services, and telecom services for 54 countries in all regions, including North America, Latin America, Western Europe, Eastern Europe, Asia/Pacific, and the Middle East and Africa. The Black Book presents all data in a choice of constant currency or current U.S. dollar exchange rates.

Stephen Minton will present an overview of IDC's ICT forecast for 2016 in a Web conference to be held Thursday, February 18 at 12:00 p.m. U.S. Eastern Time. An on-demand replay of the presentation will be available after the live event. To register, please click here.

About IDCInternational Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. To learn more about IDC, please visit www.idc.com. Follow IDC on Twitter at @IDC.

Source: Worldwide IT Spending Expected to Post Significant Slowdown in 2016, with China Set to Post its First-Ever Decline, According to IDC