China's crowded smartphone market is going to have some big changes

Pre discussion questions

Do you think there are too many smartphone companies?

Do you think it is good or bad having a lot of smartphone companies?

The startup Dakele (Means Big Cola in Chinese) looked like a very smart company when it released a phone in China four years ago. The smartphone market was increasing by two times every year. The company put famous brand-name parts inside a phone that cost much less than an iPhone.

That $160 gadget started to be sold only four months after Dakele started. And soon the company began to take sales away from the big Chinese companies Huawei Technologies and Xiaomi Corp. People were getting excited about the Dakele 3 model last year.  Online reviews called it the best Apple clone.

Then the excitement started to stop. Huawei spent $300 million on marketing, Xiaomi reduced prices and clones of the clone appeared. Dakele had supplier problems. And it had problems getting loans. This prompted Dakele to close last month-and it probably won’t be the last company to fail.

China has 300 phone manufacturing companies. After 12 months because of competition, a sales plateau and economic growth that has been the slowest in 25 years is causing problems.

The CEO of Dakele said that the mobile-phone industry changed more quickly and badly than expected. He said that as a new company, they couldn’t find more ways to keep sales.

Smartphone sales in China grow in a very big way since 2010 as incomes rose. Prices for chips and displays plummeted. And phone companies offered arrays of discounts. Shops suddenly had hundreds of brands-from large national companies such as Huawei, Lenovo and Xiaomi as well as the smaller Dakele, Tecno Mobile and G

Now that wave has fallen. Smartphones are no longer are exciting in China, and most local Chinese brands are trying to sell to the cheaper consumer. This is the part of the market where buyers don't change their phones as much as those for expensive phones such as Apple and Samsung.

As the smaller companies are being reduced, the bigger ones are increasing their share. China's top two brands-Xiaomi and Huawei-owned together 30 percent of the market last year. Apple and Samsung owned 22 percent.

It's becoming a difficult even for the famous companies like Huawei or Xiaomi because it's hitting saturation.  To try and compete the companies are increasing their products and sales into the cheaper phone part of the market that were owned by the smaller brands.

Try to guess the meaning of the words in bold and match them with their closest meaning from the choices in the right. Some of the answers are very close and have similar meaning. The meaning of these words is how they are used in the reading. Some of these words have different meanings in the dictionary depending on how they are used.

 The answers are below the table.

A=2, B=8, C=1, D=6, E=4, F=5, G=3,H=7

Some example sentences using the new words or phrases from the meaning of how they are used in the reading to help you understand better.

1. It is difficult for a startup company to become known and have new customers.

2. Smartwatches are the most recent gadget.

3. Some Louis Vuitton bags are so good that it is hard to know if they are clones or not.

4. The pollution has prompted the government to warn people to stay inside today.

5. Sales of every product plateaus when most people who want one have bought one.

6. In the beginning new technology grows very fast and the price is high, but after some time the price plummets when it becomes old and common.

7. Fifteen years ago there were only two brands of coffee shops, now there is an array of them.

8. Gangnam seems to have a saturation of phone shops.

Some questions using the new words/phrases. Try to use the words/phrases in your answer.

1. When would you expect to see many startups in business?

2. Describe your favorite gadget?

3. Would you buy a clone of your favorite phone? Why or why not?

4. What would prompt you to change your phone?

5. Do you know another product or service that has plateaued? Why did this happen?

6. What do you think would cause coffee sales to plummet? How about another product?

7. What do you think is dangerous about offering ‘arrays of discounts.’?

8. Have phone sales reached saturation in your country? Why or why not?