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In Urban China, Cash Is Rapidly Becoming Obsolete

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Paul Mozur, writing for The New York Times:

Almost everyone in major Chinese cities is using a smartphone to pay for just about everything. At restaurants, a waiter will ask if you want to use WeChat or Alipay — the two smartphone payment options — before bringing up cash as a third, remote possibility.

Just as startling is how quickly the transition has happened. Only three years ago there would be no question at all, because everyone was still using cash.

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jqlive
87 days ago
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This is very true... Apple is currently trying to make Apple Pay the third choice.
Beijing/Hong Kong
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★ Apple’s China Problem: WeChat

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Ben Thompson had a great column this week, in the wake of Apple’s quarterly results and Microsoft’s announcement of the Surface Laptop:

Did you hear about the new Microsoft Surface Laptop? The usual suspects are claiming it’s a MacBook competitor, which is true insomuch as it is a laptop. In truth, though, the Surface Laptop isn’t a MacBook competitor at all for the rather obvious reason that it runs Windows, while the MacBook runs MacOS. This has always been the foundation of Apple’s business model: hardware differentiated by software such that said hardware can be sold with a margin much greater than nominal competitors running a commodity operating system.

Hardware differentiated by superior, exclusive software is the key to understanding Apple. It’s the reason the company was founded. Apple II’s were the best personal computer hardware and had the best software. Part of why Woz is so venerated is that he was unimaginably gifted at both hardware and software. Hardware differentiated by software is how Apple survived in the late ’90s, when the company was struggling. It explains all the company’s success after that: the iPod, the resurgence of the Mac, iPhone, iPad, and Apple Watch. Any comparison between Microsoft’s Surface Laptop and Apple’s MacBooks that doesn’t place heavy emphasis on the value of MacOS is vapid.

Thompson then turns to Apple’s languishing iPhone sales in China:

But that is not what is going on in most of the world: plenty of folks — more than last year — are happy to buy the iPhone 7, even though it doesn’t look much different than the iPhone 6. After all, if you need a new phone, and you want iOS, you don’t have much choice! Except, again, for China: that is the country where the appearance of the iPhone matters most; Apple’s problem, though, is that in China that is the only thing that matters at all.

The fundamental issue is this: unlike the rest of the world, in China the most important layer of the smartphone stack is not the phone’s operating system. Rather, it is WeChat. Connie Chan of Andreessen Horowitz tried to explain in 2015 just how integrated WeChat is into the daily lives of nearly 900 million Chinese, and that integration has only grown since then: every aspect of a typical Chinese person’s life, not just online but also off is conducted through a single app (and, to the extent other apps are used, they are often games promoted through WeChat).

There is nothing in any other country that is comparable: not LINE, not WhatsApp, not Facebook. All of those are about communication or wasting time: WeChat is that, but it is also for reading news, for hailing taxis, for paying for lunch (try and pay with cash for lunch, and you’ll look like a luddite), for accessing government resources, for business. For all intents and purposes WeChat is your phone, and to a far greater extent in China than anywhere else, your phone is everything.

As Thompson adds in a footnote, “Or, to put it another way, the operating system of China is WeChat, not iOS/Android.”

Thompson cites a staggering statistic: among existing iPhone users in China who bought a new phone in 2016, only 50 percent of them bought another iPhone. That is an incredible statistical outlier compared to iPhone users in the rest of the world, where Apple’s retention rates hover around the mid-80s.

Here’s a Business Insider report from November of last year, with retention statistics from 2014 through 2016 from UBS analysts Steven Milunovich and Benjamin Wilson. Business Insider leads with the iPhone’s slowly declining retention rate globally, but the real story is halfway down the page, in this chart.

According to that research from UBS, iPhone retention rates hover in the mid-to-high 80s in the U.S., U.K., and Germany. In Japan they’re in the mid-70s, but holding roughly steady. China’s numbers have plummeted — and these numbers from UBS (in the mid-50s for Q4 2016) are in line with the 50 percent number in the Chinese survey Thompson cited.

So here’s Apple’s China problem: Chinese iPhone users aren’t nearly as loyal to the iPhone platform as iPhone users elsewhere are. This is already hurting Apple financially. Apple’s Q2 2017 financial results (announced this week) were, overall, OK. But other than China, they were actually good. The drop in iPhone sales in China was so severe, and China is so big, that it singlehandedly turned a good quarter into a so-so quarter.

I subtly disagree with Ben Thompson on one point. Thompson attributes the iPhone’s slide in China to two factors:

  1. The whole “the operating system of China is WeChat, not iOS/Android” thing.
  2. The staleness of the iPhone 7 form factor.

Thompson knows Chinese culture well — he lives in Taipei, visits China often, and speaks Mandarin. My grasp of Chinese culture is rudimentary at best, and I’ve never traveled to Asia. So I defer to him on the point that the iPhone as a status symbol is more important in China than it is elsewhere.

Thompson, though, I think places too much weight on the fact that at a glance, some models of the iPhone 7 are indistinguishable from the iPhone 6 and 6S. Thompson argues that this is more of a problem in status-conscious China than it is elsewhere — that in China, there are many people who forego an upgrade to an iPhone 7 because other people won’t be able to tell that it isn’t, say, a boring two-year-old iPhone 6. I just don’t buy that. For one thing, the black and especially jet black iPhone 7 models are instantly recognizable as the latest and greatest.

But more importantly, I just think the whole “if it doesn’t have an altogether new form factor, it’s boring” thing is hogwash. I wrote an entire column about this when the iPhone 7 debuted, and won’t rehash the whole argument here. But I am convinced this viewpoint is mostly that of the tech and gadget obsessed.

Again, I’ll concede that the status symbol aspect of a high-end smartphone may well be more important in China than anywhere else in the world. But even if I also concede that the iPhone 7’s mostly-like-the-iPhone-6 form factor is a problem for the Chinese market, if the iOS platform engendered the loyalty in China that it does elsewhere, the result would be Chinese iPhone owners waiting another year for the next iPhone. Instead, according to the market research cited above, half of the Chinese iPhone owners who bought a new phone in 2016 switched to an Android device. There are some fine looking Android phones at the high end of the market, but there are none that, based on form factor alone, would explain this. And none of them have anything close to the luxury brand prestige that Apple does.

In Apple’s “hardware differentiated by software” formula, the software is more important than the hardware. That’s why gadget writers so often get Apple wrong: they’re focused solely on hardware — the object, not the experience of using the object. That’s also why the financial press so often gets Apple wrong: they focus only on the hardware because that’s where the money comes from.

If forced to choose, I would much rather run iOS on a Google Pixel than Android on an iPhone 7. I would rather run MacOS on a ThinkPad than Windows on a MacBook Pro.1 Whenever I bring up this thought experiment — would you rather run Apple’s software platform on non-Apple hardware or run some other software platform on Apple hardware — I get email from readers who say they actually do choose Apple products, especially MacBooks, for the hardware. I believe them, but those are the sort of customers with the least loyalty to Apple. If all you depend on is, say, Chrome, a text editor, and a terminal, it’s easy to switch to another laptop brand. If you depend on native Mac and iOS apps, iCloud, and iMessage, it’s arduous, at best, to switch.

If it really is true that “the operating system of China is WeChat, not iOS/Android”, that’s the whole ballgame right there. Again, my disagreement with Thompson here is subtle. He even describes WeChat’s centrality to the Chinese smartphone stack as “the fundamental issue”, leaving the supposed boringness of the iPhone 6S and 7 as a secondary issue. My difference with Thompson is that I don’t think the iPhone 6S/7 hardware is a problem at all. Personally, I think the iPhone 7 is such a great phone, and the 7 Plus in particular has such a great camera, that the quality of the latest iPhone hardware, including how it looks, shows just how much of a problem it is that WeChat, not iOS, is central to the iPhone experience in China.

That’s a real problem for Apple, because even if Thompson is right (and I’m wrong) and Apple does have a boring-looking-hardware problem in China, they can (and seem poised to) remedy that by releasing exciting new iPhone hardware this year. But if the problem is that iOS engenders far less platform loyalty in China because of WeChat’s centrality — or even worse, if WeChat is central and better on Android than it is on iOS — there’s no easy fix for Apple.

Postscript

For those of you like me, who know very little about WeChat, this 2015 piece by Connie Chan (as linked to by Thompson) is a terrific introduction: “When One App Rules Them All: The Case of WeChat and Mobile in China”.


  1. I always use ThinkPads as my go-to example of high-quality PC hardware; perhaps I should start using Microsoft Surfaces? ↩︎

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jqlive
160 days ago
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Gruber really sounds like an arrogant journalist in this article. His views are not the views of the Chinese. I work in China, and I can clearly tell you that Ben Thompson is correct in every count.
Beijing/Hong Kong
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2 public comments
satadru
169 days ago
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Interestingly though, I would much rather run the Pixel's Android on an iPhone than the reverse... That camera software...
New York, NY
jhamill
169 days ago
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Aw, the old " I don't know the culture but" argument. Classic.
California

Twitter Is Ditching the Default ‘Egg’ Avatar

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INT. CONFERENCE ROOM ON MARKET STREET

Mid-level Twitter staffer: We need to do something about harassment from Twitter eggs. They’re posting nothing but sexist, racist, and hateful messages and it’s driving away users.

Twitter executive: Okay, let’s get rid of the eggs.

Mid-level Twitter staffer: Oh great, I’ll let everyone on my team know that we’re cracking down on anonymous abus—

Twitter executive: No, like, we’re getting rid of the eggs. We’re replacing the picture with a gumdrop-shaped silhouette.

Mid-level Twitter staffer: But that doesn’t do anything about abuse.

Twitter executive: Ah, but we won’t have any harassment from Twitter eggs any more, right? Am I right? Huh?

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jqlive
204 days ago
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Beijing/Hong Kong
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Night Shift Coming in macOS 10.12.4

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Today Apple introduced new betas for several of its operating systems. Among those is the first beta of macOS 10.12.4, which brings Night Shift to the Mac for the first time.

Night Shift is a feature that first came to iOS in version 9.3 last spring. At the time, Apple published an informational page about the iOS update that included the following description:

Many studies have shown that exposure to bright blue light in the evening can affect your circadian rhythms and make it harder to fall asleep. Night Shift uses your...device’s clock and geolocation to determine when it’s sunset in your location. Then it automatically shifts the colors in your display to the warmer end of the spectrum, making it easier on your eyes. In the morning, it returns the display to its regular settings. Pleasant dreams.

The Sierra beta includes a toggle switch in Notification Center for quickly turning Night Shift on similar to the way you can turn Night Shift on from the Control Center on iOS. If Apple follows past practice, macOS 10.12.4 with Night Shift will likely be released to the public in early spring. For now, the beta is available only to members of Apple's developer program, though it is possible that a public beta may be released in the coming days.


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jqlive
270 days ago
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Notification Center? That's a weird place to put Night Shift. In my opinion, it would be easier, more visible, and quicker for users if it was placed in the Menu bar.
Beijing/Hong Kong
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John McTiernan’s First Film in 14 Years: ‘The Red Dot’, a Short Promoting ‘Tom Clancy’s Ghost Recon: Wildlands’

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Watch the short first. It’s terrific. (Warning: violence.) Then follow the link and read Drew Taylor’s piece for Vulture:

McTiernan’s involvement in The Red Dot hasn’t been widely publicized (or even particularly acknowledged), which is a shame, especially considering it’s his first filmed project in a whopping 14 years. (His last movie was the rainy Rashomon-on-a-military base thriller Basic.) McTiernan’s inauspicious reemergence leads to a couple of bigger questions: Where, exactly, has he been? And what makes this ad so special?

To answer the first question, you have to go back to 2006, when Anthony Pellicano, a private eye with ties to some of the most powerful people in Hollywood, was arraigned on federal wiretapping charges. It was the conclusion of both a three-year investigation and Pellicano’s 30-day stint in prison for illegally keeping explosives in his West Hollywood office. The resulting trial would eventually embroil some of Hollywood’s biggest executives (Michael Ovitz and Brad Grey) and shiniest stars (Tom Cruise and Chris Rock). At the time, Vanity Fair described the scandal as Hollywood’s Watergate.

But only one member of the Hollywood elite would actually get sent to prison for to his relationship with the notoriously scuzzy Pellicano: John McTiernan.

This is an amazing story, and despite being a huge fan of McTiernan’s work, I had no idea about any of it until today.

Good to have McTiernan back.

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jqlive
273 days ago
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If you work in the film industry, you know McTiernan is not a name you want to associate with. He's a persona non grata, because of his past, his working style, how he treats people, and his personality.
Beijing/Hong Kong
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Xiaomi is selling the concept phone of your wildest dreams

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Nothing says sci-fi like a bezel-less screen, and Xiaomi’s newly announced Mi Mix Android phablet is very sci-fi with its 91.3 percent screen-to-body ratio. This 6.4-inch device has just been announced as a concept phone by the Chinese company, but weirdly enough, it has a price, ¥3,499 ($516), and a release date of November 4th in its home country.

Think of every out-there spec you could cram into a phone and the Xiaomi Mi Mix probably has it. The rear of this handset and its side buttons are both made out of ceramic. The display is curved at the corners — just like that Sharp prototype we recently saw — and all the top-mounted sensors have been removed. tweaked. The proximity sensor has been replaced by ultrasound, the earpiece has been replaced with a piezoelectric speaker that uses the metal frame to generate sound, and the front-facing camera is relocated to the bottom (though the phone can thankfully be rotated upside down for more flattering selfies).

Xiaomi Mi Mix
Xiaomi Mi Mix

Inside, the Mi Mix has the latest Snapdragon 821 chip that powers Google’s Pixels, 4GB of RAM and 128GB of storage. Looking at the status bar above, the Mi Mix seems to also have support for two SIMs, a popular feature in China, and Xiaomi also notes it has a 192Hz / 24-bit DAC chip for higher-resolution audio. There’ll also be a ¥3,999 ($590) option with 6GB of RAM, 256GB of storage, and 18-karat gold accents around the camera and fingerprint sensor on the rear of the Mix. The battery weighs in at a generous 4,400mAh, the rear camera comes in at 16 megapixels with phase-detect autofocus, and yes, the headphone jack is intact ("for now," as Xiaomi’s Hugo Barra jokes on Facebook).

The big deal here, though, is really that design and the incredible display. Xiaomi recruited noted French designer Philippe Starck to lead the design effort — which, frankly, with a display like this basically left him to just say "keep it simple, stupid" for the rest of the device. The Xiaomi Mi Mix is said to launch on November 4th in China, but we can’t imagine there being a great many of them to go around. Hell, the devices held up on stage during Xiaomi's launch event were stuck at the same 8:16 time as on the press image above, so it's not certain that we've even seen a functional unit yet. Xiaomi itself calls the Mi Mix a concept phone ( as well as "a breathtaking work of art that surpasses existing innovations in the smartphone industry"), so the real devices should be quite the exclusive pieces of kit to find.

Update, 6AM ET, October 25th: A hands-on video with the Mi Mix has just been posted to YouTube, showing the new device in real-world action.

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jqlive
362 days ago
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Beijing/Hong Kong
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