Abstract

Examination of the changes that have taken place in mobile phone distribution in China in the last few years shows that the adoption of customized mobile phones by mobile operators China Mobile and China Unicom has been the single most important factor driving these changes. China Mobile's actions have been particularly significant. As China Mobile has made its requirements for customized mobile phone specifications more rigorous, it has become steadily more difficult for mobile phone vendors to secure orders from China Mobile. Many smaller Chinese brands are effectively being excluded from what will, in the future, constitute the most important mobile phone distribution channel in China. The companies that are benefiting from this change are the leading international mobile phone vendors, and the first-tier Chinese vendors.

China's small- and medium-sized mobile phone brands have responded by focusing on new distribution channels such as TV shopping and online shopping. However, these new channels are still very much in the early stages of development in China; the comprehensive regulatory framework that governs their operation in the mature markets of the West is not yet in place in China. Consumers' rights receive little real protection, and there has recently been an upsurge in consumer complaints. Although this channel has grown dramatically in the last few years, it remains to be seen how it will develop over the long term.

As regards the situation in the traditional mobile phone distribution channels, the last few years have seen rapid expansion by both the major 3C chains and the specialist mobile phone retail chains, which have been opening new retail outlets not only in China's metropolitan areas and larger regional cities, but also in small- and medium-sized regional cities. The situation in rural areas is somewhat different; as differences between regions in terms of the level of economic development and consumption habits, it can be anticipated that the traditional agency model will continue to predominate for some time to come. Many small- and medium-sized regional distributors have made effective use of turnkey solutions provided by companies such as MTK and Spreadtrum to develop both own-branded, private-label, and white-brand mobile phone production; these distributors have succeeded in securing a significant share of the market in rural areas and also in small- and medium-sized regional cities.

Appendix

Research Scope

This report analyses the changes that have taken place in the structure of mobile phone distribution in China since 2006, examining the strategies adopted by China Mobile, China Unicom, and other leading players.