In the United States, subsidizing mobile phones is more or less a way of life. Of course, carriers bear the brunt of subsidy plans by making less money during the quarter that the flagship phone is released. But, devices are sold, the carriers eventually make their money and the buying public is generally happy.
But, in China all that is about to change as Chinese carriers get ready to eliminate subsidies altogether. China Mobile, the largest carrier in the world, has announced that it will be cutting subsidy costs by $ 2 billion with the rest of the carriers expected to follow suit. The second reason for ending the program is that China’s Assets Supervision and Administration Commission asked carriers to cut costs by $6.5 billion over a three year period in response to continuous overspending by carries on subsidies and advertising.
How will all these cuts affect mobile sales? It will probably be good for local companies and rather disastrous for the foreign OEMs. On one hand, companies like Xiaomi and Hauwei, both of which already outsell Apple and Samsung in China, are expected to do just fine. Since their advantage over the big foreign giants has been offering mid-range, lower priced phones with quality specs. Lenovo and ZTE, also Chinese manufacturers, might benefit also. But, Samsung, Apple and the other high-end handset manufacturers outside of China are expected to take a large hit in the pocket from this move.
None of this news seems to bode well for the giants in the mobile industry. We’ll have to wait and see how it goes, but Samsung, Apple and the other manufacturers may need to come up with some highly innovative and creative marketing strategies to continue to make an impact in the world’s largest mobile market.
Sources: Android Headlines/Android Authority/Bloomberg