Why smartphone companies can no longer compete on hardware

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There has been incredible developments in the smartphone hardware industry in the past decade.

We have seen the quality of smartphone displays reaching levels comparable to television screens. We have seen cameras improving from VGA cameras to 4k cameras. Keypads have moved onto touch screens which are more sensitive than your own skin. Memory has improved by leaps and bounds, along with capabilities of processors installed in these devices. We have seen a complete transformation from the briefcase phone to the phones we use today.

The problem with differentiating smartphones based on hardware

Easy access to scale at an economical rate is exactly what threatens the smartphone industry.

This is a business where the incumbents have differentiated their products largely on their hardware specifications. And due to the same ecosystem they have helped develop and use, everybody else can use it too.

For example, if Samsung comes up with a new smartphone with a 5 inch display screen, a 4k camera, 8GB RAM, some Snapdragon chipset, 64 GB memory, this same phone can be replicated and released by other brands. The timeframe by which this happens can be as short as a week to 15 days. A smartphone manufacturer can no longer differentiate their product on hardware alone anymore.

How’s this possible?

The main reason why all this has been possible is no longer a secret.

It’s China, or more specifically, a particular province called Guangdong, which is situated in Southern China. This province, or more specifically, the Pearl River Delta, single-handedly produces 70 percent of all smartphones sold in the world.

The Pearl River Delta is a wonderland for any hardware professional or enthusiast.

This is the corridor seated between Guangzhou, leading to Shenzhen, and spills out from Hong Kong to the rest of the world. It is said that a simple traffic jam here could lead to a global increase smartphone prices. This particular area is filled with factories spewing out not just smartphones, but tablets, laptops, drones, hoverboards etc. Whatever new electronic device catches the world’s fancy, would be manufactured in these factories. Whether you are a huge corporation with a new product line, a parts manufacturer/seller, or a small time entrepreneur with a product idea, this is where you go to make your dreams come true, economically and at scale. And everyone knows this!

In the mid 2000s, smartphone manufacturers like Apple, Samsung or Sony had the scale and the skill to get their products manufactured here. This led to the development and growth of a whole manufacturing ecosystem. We have factories sharing production capacity, supplying parts to each other, and working together to produce components, or complete products, or both.

And this ecosystem became very capable of taking on smaller projects, smaller scales and even multiple products being churned out on the same day. It is a wonderland for any hardware professional or enthusiast.

And this is not limited to those who want their prototypes to be turned into a mass consumer good. If you want the schematics for the latest smartphone in the market, you will probably find it there. If you want to understand something specific about a product, but a patent won’t give you access to that information, you will find it there.

Chinese brands were among the first to tap on this ecosystem

Chinese brands were among the first to figure this out.

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