For years, the iPhone has carried a small etching on the back that says ‘Designed by Apple in California. Assembled in China.’
It’s fueled the stereotype that China is the world’s factory, but hasn’t had a flexible enough education system to produce R&D talent that can also design world-class products for a global audience.
But that’s a stereotype that isn’t exactly true anymore.
A small group of companies — both small, bootstrapped app startups and multi-billion dollar giants like Tencent — are showing that they can design apps or higher-end hardware with international appeal.
Tencent, one of the country’s gargantuan Internet powers with a market cap of $72 billion dollars, often likes to point out the international reach of its messaging app Weixin or WeChat. That app has blossomed to more than 190 million monthly active users over the past year and with about 40 million of registered users outside of China.
“I’m very glad to see the internationalization of Tencent,” said the company’s CEO Pony Ma this month at the GMIC conference in Beijing. He later added, “The manufacturing sector in China went globalized and the service industry can be internationalized as well…. It’s difficult, but if we can make it, it would be a revolution.”
Interestingly enough, WeChat’s growth abroad is being fueled by the Chinese diaspora — immigrants are taking WeChat with them to stay in touch with their families back home, according to app-tracking services like Onavo. They base this hypothesis on the correlation of WeChat active usage with that of other Chinese-language apps.
Younger Chinese startups are also building internationally as well. I met a Shanghai-based startup called Intsig two weeks ago that has a business card scanning app called Camcard with 50 million registered users and 10 million monthly actives, with half of them outside of China.
“A lot of people are surprised when they find out we’re a Chinese company,” said Louisa Cao, who heads marketing for the company. It helps that exchanging business cards is much more ritualized and formal in China and Japan than it is in the West, so that gives startups in Asia a competitive edge on understanding what consumers want in a product in this area. Similarly, messaging apps out of Asia like Line, Kakao and WeChat are leading the way, with Western startups like Path arguably borrowing some of their strategies like stickers.
Blux, another company out of Xian, the second-tier Chinese city that’s home to the famous army of Terra Cotta warriors, has built a higher-end photo app called Blux Camera that’s been featured by Apple more than 100 times on the iTunes homepage for global audiences. As the cost advantages that China has over Western markets narrows, the co-founder Jo Yin told me that it now can make economic sense to run global market-facing startups outside of the traditional hubs of Beijing and Shanghai (as they’ve become too expensive).
One of the reasons that all of these startups can built products for foreign audiences is because they’ve been trained either at Western universities or through working for multi-nationals. Some are run by “sea turtles” or Chinese who have returned home after years of working or studying abroad. Intsig’s CEO Michael Zhen spent years at Motorola where he picked up ideas on how to manage teams and think globally.
It’s also helped that the Chinese government has gone far in protecting and nurturing domestic technology companies and startups, a trend which continues with the government’s recent investment into a GPS alternative called Beidou and an Ubuntu-based OS that would help Chinese firms move off Western software platforms. Now that companies like Tencent have reached a certain prowess in domestic markets, they can look outwards.
To be fair, achieving global reach is something only a small fraction of local Chinese startups can do. It requires an international fluency; founders have to understand what kind of design and marketing attracts foreigners. Chinese web services can seem noisy and busy; they can be filled with more links and text as Mandarin characters are complicated to create on QWERTY keyboards.
There are even a few U.S. growth-stage companies that haven’t been dissuaded by Google’s very public about-face on the Chinese market and are hiring design and developer talent locally. Evernote recently launched a China-focused version of its enterprise service and they very intentionally took on local hires to develop product.
“It’s easy to sell your products everywhere. But when we say we want to be a global company, it’s because we want to make our products everywhere,” said Evernote CEO Phil Libin, when he launched Evernote for Business locally in China.
He went on to say that China’s copycat reputation is unfair.
“Chinese companies don’t have a good reputation for innovation in the West. The reputation that Chinese companies have is that they don’t really innovate. They just copy and I don’t think this reputation is right. It’s not a problem that Chinese companies copy. It’s that everyone copies. Chinese companies don’t just copy. They copy and improve. Copy and improve is what everyone does everywhere. That’s what Apple does. That’s what Microsoft does. That’s what Facebook does. Very few companies start with a first-of-a-kind idea.”
Indeed, probably the most interesting company to watch as it expands globally is Xiaomi, which did just that. They took Android and improved upon it.
They’re probably the best example of how China is moving up the value-chain from low-cost manufacturing into high-end design.
Just three years afters being founded, the company is on track to do $4.5 billion in handset and accessory sales. Some have made the metaphor that Xiaomi is the “Apple of Android” in that it’s an integrated hardware and software maker that has built its own special skin of Android and sells high-end hardware at or around the cost of materials. They compete head-to-head against Samsung in mainland China, and according to third-party mobile app analytic services like Umeng, they’re in second place.
Although Xiaomi will only publicly talk about its plans to sell handsets in Hong Kong and Taiwan, a source close to the company says it’s been on the lookout for a general manager that could bring their Android skin, the MIUI, to North American audiences.
They’ve been able to develop a rabid fan base locally in China because they allow people to participate in the designing of the phone by requesting features. Internally, they have small teams of engineers, product managers and designers that work alongside each other on a very fast cycle. They release a new version of the MIUI every week.
But they don’t know if the model will translate abroad yet. Chinese consumers are very comfortable with paying for the full-cost of the phones upfront and buying devices online instead of through brick-and-mortar stores.
“We don’t know how developed regions like Taiwan and Hong Kong will accept products like Xiaomi,” said co-founder Lin Bin in an interview. “Greater China is just one step beyond mainland China.”