How are Chinese phones so cheap and have good specs?

More and more Chinese phones cost less and less, and according to the specifications they match some Flagship phones - how is that possible? Some even have better specifications and cost several hundred euros less. In this article, I will write and explain several methods they use.

First, let's compare a good Chinese phone with the currently most popular Galaxy S9 smartphone:

	Umidigi S2 (4G)	Galaxy S9
Screen	6″ Edge-to-Edge	5.8″ Infinity Display
Rear camera	16.0MP + 5.0MP	12 MP
Fingerprint reader	Yes (back)	Yes (back)
ROM / RAM	64GB / 4GB	64GB / 4GB
Battery	5.100 mAh	3.000 mAh
CPU	8×2.3GHz	4×2.7 GHz + 4×1.8 GHz
Price	~153€	~840€

As we can see the specifications are similar between the Galaxy S9 and the Chinese phone Umidigi S2, and the price difference is huge. And this is not the only phone and the only manufacturer, there are a lot of them. How is it possible then that they all keep such a low price of the phone, and that these phones have specifications like Flagship?

1. Buy wholesale components

Chinese manufacturers are buying "wholesale" components that are available to everyone instead of spending money on developing technology and making their own components, as large companies do (Samsung, for example, produces screens and processors).

2. Save on marketing

Big companies spend millions on advertising their products, while Chinese manufacturers spend almost no money for that purpose. They advertise their products through social networks and use a technique called "Guerrilla Marketing". Just because their phones are cheap, users will advertise them themselves.

3. They rely on ready-made e-commerce platforms

Almost all Chinese mobile phone manufacturers sell their devices online through online shopping platforms, such as Aliexpress, GearBest, Amazon, etc. They don't spend money on physical markets that fewer and fewer people visit (there are a few exceptions, such as Xiaomi).

4. Rely on "Agglomeration economies"

Since most of these companies are located in or near Shenzhen (a city in the south of the People's Republic of China that has the status of a special economic zone in that country), they can quickly and easily procure cheap parts and labor. That's why they don't have to invest a lot of money in their own logistics. There is a whole story about that city and why the Tech industry is developing there, but maybe on another occasion.

5. They pay less for components

It may surprise you, but the fact is that these Chinese companies buy mostly the same components as those of larger companies. The only difference is that they pay less for the same component than large companies. And how do they do it? The answer is  Binning.

You see, big companies have to maintain their reputation and that's why they buy top-class components. Those components passed the tests and, say, only 1% did not pass the test on several thousand units, which is extremely small. Components from that class are much better, but also much more expensive.

On the other hand, lesser-known companies buy parts from the lower classes. Parts from these groups have a higher percentage of defects during the inspection, and therefore their price is significantly lower.

6. Don't make a profit on phones

Most manufacturers of these cheap phones do not make money on phones at all, they sell for as much money as they have invested. Why are they doing this ?!

This strategy is not used by all Chinese phone manufacturers, but some do, such as Xiaomi.

This logic makes sense because it will sell more phones, which immediately leads to an increase in the number of users. Along the way, they build a brand and increase market share. And where are the earnings? They earn the most from the various accessories and services they offer.

For example, Xiaomi makes a lot of money selling headphones, power banks, TVs and even selling travel bags and slippers. In addition, they make money by selling services and applications that come with the phone, e.g. MiCloud.

Switching from a Flagship Phone?

Does this mean that we should all switch to these cheap phones because, well, look, they have great specifications? The answer is - NO.

While these phones have specifications that on paper match Flagship devices, they still have flaws. And here are a few:

1. Quality workmanship

Maybe these cheap Chinese phones look nice "to the eye" from a distance of 1+ meters, but you can see the not-so-high quality workmanship up close. If you were to compare one such phone with a Flagship phone, you would see at the moment which phone costs 150 and which 800 euros. Big companies simply invest money in technology and the production process itself, and of course, you can see the result in the end.

2. Display

Although the specification states that the phone has a 6-inch edge-to-edge screen, the quality can be seen as soon as you look at it. Mostly you will not see the number of pixels per inch (PPI) in the specification because that number is mostly small. For example, the phone I initially used for comparison has 268 PPI and the screen is 6 inches - is there anything worse? Even the iPhone has a better resolution.

Not to mention screen technology, AMOLED and similar technologies forget, that IPS is the best you will get.

3. Camera

Again, the specifications of that phone mention two cameras with a lot of megapixels, but what are they really like? To put it mildly - horrible. "Dual-lenses" are used here only for marketing purposes. The bokeh effect is there only on paper, and in reality, the camera only blurs the part around the center of the image (see the example below).

I've looked at a lot of reviews of these Chinese phones with 2 or 3 cameras, and each phone has the same story: the other camera doesn't do anything. Ok, if it's a Telephoto camera then it still does that switching from one to the other for zooming, but if you're expecting a super Bokeh effect - forget about it.

Those cameras don't even have any software processing, so they might recognize the edges and blur the rest. All you can get is an average quality image without any advanced technologies.

4. Support

When I wrote about Flagship phones I mentioned good support as an advantage. And I mention it here because these Chinese phones have no support.

For example, if your phone arrives with the Android 7.x system, you will likely have that system for as long as your phone lasts. The only hope is the Android community that may offer some Custom ROMs, but that happens mostly when it comes to the little-known Chinese phones.

Then why buy a phone like this?

Well mostly because of the price. If you need a phone that you don't care about if it falls out, someone steals it, etc. - go ahead. If you want a better quality phone that will last longer, and you have the latest great options, then I recommend some flagship.