China Daily:
China should end smartphone subsidies to overseas vendors and give more support to local brands, industry insiders said on Tuesday, as telecom carriers pledged to cut operating expenses and Apple Inc gets ready to debut its next-generation iPhone.
Xiang Ligang, a telecom researcher in Beijing, said cutting carriers’ subsidies to foreign-made handsets will not only reduce carriers’ operating expense but also leave local players with more market demand.
The perception is that buyers of high end phones are price insensitive and will buy the phones even without the subsidies.
China Mobile Ltd, the nation’s largest telecom carrier by subscribers, said it plans to cut about 5 billion yuan in subsidies this year as a part of its 20 billion yuan operating expense reduction campaign. The company paid smartphone makers more than 26 billion yuan in subsidies in 2013.
“Giving subsidies to high-end phones made by Samsung and Apple does not make any sense because buyers in this category are not price-sensitive,” Xiang said. “In other words, they will buy a 5,000 yuan smartphone even if there is no discount.”
That last point may well be true for buyers at the top of the market, but it will certainly have an effect on mid and low end buyers. This amounts to a foreign goods tariff.
how long before we add a 100% tax on everything coming from a Chinese brand?
China will continue to engage in this behavior because it can. No one here thinks of cutting off a cheap labor supply. The Chinese government will do everything git can to ensure that western corporations do not benefit from the growing Chinese consumer market. We don’t have the political will to make things fair.
The toughest part of buying any device is dealing with the fact that it was made in China, with a government inhospitable to anything but state capitalism disguised as communism.
Firstly, it appears as though the proposed removal of “subsidies” is across the board for both local and foreign brands. It affects foreign brands more because they tend to be more expensive and hence more reliant on cost defferal to drive sales, but it’s not a tariff or a barrier to trade.
That said, the whole idea behind the move is just plain wrong. There is no such thing as a phone “subsidy”. It’s simply a deferral of the cost of the device. Any payments to Apple or Samsung are input costs that get recovered via subscription payments. It also reveals a key flaw in the Chinese model of capitalism – the persistence of central control. The long term affect is to reduce customer choice and productivity. Reduced competition from foreign brands will hurt both chinese phone makers and consumers in the long run.
It’s a classic example of the Chinese leadership’s xenophobia and the mistaken belief that they can make better decisions than the market.
“This amounts to a foreign goods tariff.”
Really? Eliminating what is essentially a loan is a tariff?
I suppose people who don’t mind going into debt can get a loan from a bank instead. Buying a subsidized phone is the exactly that. Getting a loan from the carrier.