From status symbol to disrupter: Charting China’s mobile phone boom

Retired businessman He Run remembers his first mobile phone was “the size of a small kettle” and worth more than a year’s salary for most Chinese.

It was 1991, some 18 years after the first mobile phone call was made by Motorola engineer Martin Cooper, and He was one of the few wealthy businessmen in China to own the cutting-edge technology.

The Guangdong native splurged 20,000 yuan – or about US$3,745 at the time – on a clunky Motorola, nicknamed the “da ge da”, which translates to big boss phone thanks to its ubiquitous appearances in Hong Kong gangster films.

“My phone was imported, about the size of a small kettle, and very expensive compared to the monthly income of ordinary people, which was only a few hundred yuan at that time,” said the 75-year-old, adding the phone could only make and receive calls.

“Owning it was definitely a symbol of wealth, power and social status. Only the richest in China could afford it. Most of them were the first batch of private entrepreneurs or import and export traders.”

Although mobile reception was unstable, people were proud of their new gadgets and carried them wherever they went. He recalls standing his bricklike Motorola upright on the end of his table while he ate at restaurants, just to show it off.

In China’s rapidly liberalising business community, a mobile phone was not just a status symbol, but a sign of reliability, according to He. It said: here is someone with a link to the outside world, and a strong cash flow.

Fast forward to today and China has more mobile phone users than any country in the world. Last year, more than one billion people in the mainland owned one, official data showed. At the end of 2022, China’s mobile phone penetration rate, or the percentage of the population that owned a smartphone, reached almost 72 per cent, only lower than the United States, Japan and Russia.

China’s adoption of the technology has allowed mobile commerce to boom. More than two-thirds of Chinese have shopped using their smartphone, compared to an average of 32 per cent across the US, the United Kingdom, France, Spain and Australia, according to reports from PayPal.

Mobile payment is so widely accepted in China that banknotes have become almost obsolete in many places, as most people prefer to use their e-wallet to pay for everything from utility fees to items of shopping at malls and even wet markets.

“I’ve travelled to some Western countries and I’m just not used to their payment system being so outdated and inconvenient, still paying by cash or credit card,” said He.

John Kou, a veteran electronic engineer in his early 50s from Shenzhen, said the rapid development of the mobile economy was underpinned by the investment in telecoms infrastructure, which helped China catch up with the world’s mobile network development and narrow the country’s urban-rural divide.

“For about 15 years, from 2000, China expanded both fixed and mobile networks out of the cities and into remote towns and villages, and the efforts have paid off,” Kou said.

Under a programme called “Cun Cun Tong”, which means connecting villages to the outside, the central government ordered all state-owned telecoms operators to build base stations and networks in rural areas.

“No matter how vast and sparsely populated the place is, even in impoverished mountainous areas, the Chinese government has connected electricity, telecommunication signals and asphalt roads regardless of the cost, which is impossible in most countries,” Kou said.

China now possesses among the world’s largest and most advanced mobile network infrastructure. The number of 5G base stations was 2.38 million at the end of February, accounting for 22 per cent of all mobile base stations in the country, official data showed.

China is also making strides in integrating big data, cloud computing, and artificial intelligence (AI). By 2025, the country is expected to account for nearly 30 per cent of the world’s total data by volume, according to a 2019 report by International Data Corp and data storage firm Seagate.

China’s digital economy was estimated to be worth 45.5 trillion yuan in 2021 and accounted for nearly 40 per cent of overall gross domestic product, according to the China Academy of Information and Communications Technology.

Befitting its status as the world’s factory, mobile phone manufacturing has also boomed in China. Most of the 1.2 billion smartphone units shipped around the globe last year were manufactured or assembled in China – whether that be an iPhone designed by California-based Apple or a POP7, from Shenzhen-based Tecno.

Multinational investment in the 1990s that helped China develop a formidable supply chain means it can produce sophisticated electronic components, from speakers to touch screens, with the exception of semiconductor chips, which are mostly imported to power high-end smartphones.

In previous decades, China has earned a huge amount of foreign exchange through the manufacture and export of electronic products, including mobile phones, said Liu Kaiming, head of the Institute of Contemporary Observation.

Mobile phones are crucial to the ecology of China’s electronics industry, said Liu, whose organisation was started in 2001 in Guangdong, the country’s manufacturing hub, and has partnered with many global brands and institutes to supervise supply chains at hundreds of OEM companies.

“Electronics are the cornerstone of China’s exports, which in turn are the cornerstone of China’s economy,” he said.

George Magnus, a research associate at Oxford University’s China Centre, said mobile phones have significantly lowered the cost of accessing, providing and transferring information.

“In this context, it has to be regarded as one of the key drivers of China’s globalisation abroad and its economic development at home since the 1990s,” he said.

“It goes without saying that China’s strong performance in mobile patent systems and mobile internet functions are notable. However, mobile phone impact on China may actually be greatest on society rather than the economy.”

Mobile technology has ushered in changes to traditional relationships and exchanges, and challenged the ruling Communist Party of China, Magnus said, referring to protests organised online such as those against stringent Covid curbs.

“Whether this will evolve more dramatically in future as China’s economic and social headwinds rise will be an important test for the power of mobile,” he said.

The US has been allying with the Netherlands, Japan, South Korea and Taiwan to restrict chip exports to mainland China since last year on national security grounds. In response, Chinese President Xi Jinping has stressed the importance of self-reliance and making breakthroughs in “bottleneck” technologies, such as chip design and manufacturing.

Despite the restrictions on advanced semiconductor access, this does not mean China’s mobile phone sector will stagnate, Magnus said, though it is likely to become less competitive.

Zeng Liaoyuan, an associate professor of information and communication engineering at the University of Electronic Science and Technology of China, forecast China’s mobile phone sector to experience a few “painful decades” before its domestic semiconductors match the state-of-art products being made internationally.

“It would take China at least 20 years to be self-reliant in making chips used in high-end smartphones – and that’s an optimistic estimate,” Zeng said.

“At the height of the chip war, the worst scenario for China will be that only domestic brands with basic calling and app functions are available on the mainland.

“As a countermeasure, sales of foreign smartphone brands could be banned and Chinese suppliers of components could be asked to stop serving selected ‘malicious’ foreign brands.”

Historically, however, geopolitical tension and technology competition has driven innovation, such as the birth of the internet in the US during the Cold War, he said. Early incarnations of the web were developed as a way for American government researchers to securely share information.

“I believe innovation will enable China to achieve self-reliance. In the end, China will be able to make its own smartphone chips,” Zeng said.