The end is in sight for Google’s seven years in wilderness away from China. With none of the theatrics that accompanied its voluntary withdrawal from the country due to web-search censorship in January 2010, Google is now firmly on a path not only to return to China but also to potentially seize a spot alongside Apple as one of the most profitable tech companies there. But it takes a clever undertaking in China to be successful. Brand perspective is one key dimension, but it requires mastering the art of operating in China to survive.
This announcement by Google to enter with full force the global consumer hardware industry recently was welcomed everywhere. Google Pixel mobile phones, Google Home artificial intelligence-enabled speakers, Google Daydream View virtual reality headsets, are very intriguing device options that can help Google’s revival in China. Based on what Google has so far revealed – including pricing – these products may find a large market among Chinese consumers. A case hat can be somewhat true, but demands more than the simple marketing systems that Google employs.
Even though company has made no specific mention of plans to re-enter China. China’s government will not likely embrace the re-entry of Google with rose petals. Instead, I suspect more cooperation arrangement struck between Google and Government as a way to strike a win-win bargain. Also Google can rely on China’s enormous grey market for electronics hardware to bring its products into China’s on-and-offline retail network. Hong Kong is usually the main transshipment point, not only because prices are lower than in the PRC, but the quality of hardware sold there is considered to be higher.
There is a precedent here. Apple took six years after the iPhone’s launch to ramp up its official sales channels in China by doing a deal with the main carrier, China Mobile. By that point, an estimated 30m to 50m grey market iPhones were already in use in China. Mobile phones running Google’s Android system already dominate the Chinese market, with about 300m sold this year. Most are sold unlocked without carrier subsidy. The catch though, non of the Google services are shipped with most products as these services cannot work and indeed end up impacting the performance of these devjces.
Google Pixel promises a have huge advantage no other Android phone can match by closely integrating the operating system and device hardware to optimise the performance of everything else on the phone. In all of China’s many Android brands will be impacted by this move, but none more so than the current market leader, Huawei, if Huawei goes to adopt this strategy, a move I think Huawei will counter by possibly forking out its own OS or perhaps teaming up for Tizen software. Huawei dominates the high-end Android market in China, even more so with Samsung’s recent woes. If the Pixel is priced right and offered with adequate localization, it should compete favorable with flagship models from other OEMs pretty well. But this requires reviewing the default configuration or offering a means for local versions being integrated under the auspices of the Chinese internet and device regulators.
Huawei device footprint in China is only for numbers, not aimed at the high-end buyer market yet. The Chinese market for high-end devices has been primed with non-Chinese innovation for a long time. But as sentiment for Chinese innovation picks up steam, it urging the increasingly wealthy Chinese citizens to look inward for innovation first, and thus creating a new wave of opportunity for local brands. As this campagin continues, Huawei devices will turn pride into profit and steepen the competition for non-Chinese brands like Apple, Samsung and Google etc. Huawei has also learnt from the best in shaping its strategy. Modeling it’s go-to-market after Apple Store, Huawei has also established a great online store that is becoming a recognized in the market as it continues its dual-prong strategy of attracting all types of buying experience.
While we are all not very surprised by Google’s device strategy, it also comes at such a weird timing when hardware margins are under a huge pressure for growth. This bold announcement by Google is as well commendable as it signals what the ambitions of Apple has done to influence Google by way of taking its brand to an all new business area altogether. It’s arguably justifiable though, that as Software companies see more room to grow their innovation, they will want to camp their innovation in a more encapsulating models, taking care of both software and hardware for the ultimate glory. Microsoft tried severally though, and is still reshaping its strategy to find the sweet spot. It’s phone strategy has met major heart aches over its run and attempt even to compete with Sonys media device with the Zune proposition fell flat on its face. There are strugglers and shakers, and while many are struggling, Google could have found the key to the software business transformation to hardware+software business panacea, but were still early in the days to know.
We also find similar interests being chased by other software and internet players, like Facebook as it similarly looks into the wireless hardware space and continues its network switching ambitions. LeEco which is a Chinese internet software pioneer for Online video now making a huge and swooping stride into the hardware space with propositions for smartphones, smart bikes and even electric cars. Google had toyed around before, selling small volumes of its outsourced Nexus-branded mobile phone to showcase more of Android’s features. Huawei was one of the companies making Nexus phones. Recall that Google had also acquired several integrated hardware and software companies in the past, including Nest, Motorola’s and other robotics firms in the past. Motorola was to help focus on the premium device space, an acquisition that was only to fend off attack to Android’s core, and not really as a matter of Motorola’s greatness. It later sold of Motorola to Lenovo, making the acquisitions look flimpsy to the ordinary mind. (Btw, that was a smart WIN-LOSE balance)
As Google defines its future strategy as becoming, like Apple, a fully vertically-integrated hardware and software business, and having one of the world’s most powerful artificial intelligence platform, it’s essential that it takes reconnaissance of the ecosystem that will need to exist to drive its business in the future. Google introduced three hardware products. More are certain to follow, including perhaps a mid-priced phone that will take aim squarely at China’s Xiaomi (among others), already reeling from falling sales and an inability to crack the more lucrative higher-end Android market.
Google’s advantages run so deep they can seem unfair.
Not only does Google own and develop Android software, its competitors except Apple rely on it. As at now it also has one of the world’s best and most recognizable brands an a $70bn cash that it can splash around for a while trying out new strategies. As for the other new Google hardware products – the home speaker and virtual reality (VR) headset – the market seems ripe for the taking. Despite billions of government dollars invested into Chinese companies working on machine-learning, artificial intelligence and VR, none has come to market in any significant way. And yet, Google is miles ahead setting the trends and providing the leadership that non can match – across breadth, capability and experience in human-machine dialogue.
While Google Maps, Gmail, Drive are all blocked in China, Google Translate is not. Indeed, the Chinese government quietly stopped blocking it about a year ago. It’s the only one of Google’s major online offerings that can be readily accessed in China. The reason: Google Translate has become an essential tool for Chinese companies is in order to be active in international relations, as well as for many of the 150m middle class Chinese now vacationing abroad each year.
If Sundar Pichai, Google’s CEO, is correct, the world including China is moving from a “mobile-first to an AI-first world”. Google is already miles farther down this path than any Chinese company. It need not reestablish its search engine business in China to be a major force there. In the seven years since Google departed, China improved competitively with similar offerings to the gap left by Google. It paved way in many areas for more internet tech companies to emerge, a move that perhaps paid off for local internet technology development. Poised now to reenter China by the “back door”, Google will be challenged by a new competitive landscape that it must understand to reassert a market position that compliments and as well forged or couches a market for itself.
If Google manages to bring products that reach just 1-3% of the China Android market, it could bolster its influence in the Asian space and future more remarkedly empower its ambitions in the device marker.