The US’ Clean Apps initiative would severely limit the global ambitions of China’s smartphone vendors

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The US unveiled a

The US intends to prevent Chinese smartphone vendors from preloading or offering apps developed by US companies.
If Chinese vendors are forced out of these markets, there will be a significant opportunity for US-aligned vendors like Samsung, Motorola, and LG.

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The US State Department unveiled a five-pronged “Clean Networks” initiative that aims to thwart China’s global tech ambitions. One of the five prongs, the Clean Apps initiative, would prevent “untrusted PRC smartphone manufacturers” from pre-installing or even offering apps made by US companies.

The State Department said that more than 30 countries and territories have committed to the Clean Networks initiative, though it isn’t clear when or how the plan will be implemented.

China’s state-backed newspaper the Global Times dismissed the severity of the threat, saying “the policies require a lengthy and cumbersome implementation period” and characterizing them as an attempt by President Trump to gain support prior to the November election.

If implemented, however, we believe the Clean Apps initiative would severely limit the global ambitions of China’s smartphone vendors. Competition in the global smartphone market is already fierce — for China’s smartphone vendors, it would be next to impossible to sell a device outside of China that can’t run popular apps such as WhatsApp, Facebook, Instagram, YouTube, and Snapchat, to name just a few.

In India, for instance, WhatsApp is used by an estimated 93% of smartphone users; the Clean Apps ban would essentially force Xioami and Oppo out of India’s massive smartphone market, where the Chinese smartphone vendors accounted for 43% of Q2 2020 shipments. Generally, Xiaomi and Oppo would be more exposed than Huawei to fallout from the Clean Apps initiative, since they’re more reliant on selling devices outside of China, particularly in India, Europe, Latin America, the Middle East, and Africa. 

These restrictions on Chinese smartphone vendors would benefit US-aligned smartphone manufacturers, but it may also slow smartphone adoption in developing markets. China’s smartphone vendors excel at selling cheap smartphones in developing markets — in Q1 2020, the average price of smartphones sold by Xiaomi stood at RMB 1,038 ($149).

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If Chinese vendors are forced out of these markets, there will be a significant opportunity for US-aligned vendors like Samsung, Motorola, and LG to fill the void. New entrants to the budget segment could also attempt to fill the gap — as part of its partnership with Jio, for instance, Google is developing an ultra-cheap 5G smartphone targeted to the 350 million people in India still using 2G phones, per the Economic Times.

Still, China’s smartphone vendors have honed their operational efficiency to reach current thresholds of affordability and functionality, and it won’t be possible for US-aligned vendors to fill this void overnight. The Clean Apps initiative would therefore hinder overall smartphone adoption …read more

Source:: Business Insider

      

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