In our upcoming Deep Dive to be published tomorrow exclusively for premium subscribers, we have identified 13 countries that are emerging as successors to China’s dominance in the inexpensive, basic manufacturing industry. In the course of our research, we identified assembly and production of cellphones as an industry of particular interest because it provides a strong base for introducing disciplined industrialization to a society.
Two key trends in the global cellphone market have led companies to relocate production and assembly facilities outside of China. First, the developed world has become saturated with smartphones. Although consumers in the U.S. and Europe still buy cellphones to replace old ones, there is little room for growth in the number of new consumers in these markets because most people already own cellphones.
The most substantial growth is expected in markets where people have had limited access to smartphones in the past: parts of Southeast Asia, the Middle East, Africa and Latin America.
Second, the potential for growth exists in areas that have poorer populations. As a result, there is a global push by cellphone companies to develop even cheaper models of smartphones with limited but practical internet usability. The models of choice to meet this demand are those that can be sold for $200 or less. Growth is concentrated in these lower-end models.
For this reason, a premium is placed on cheap labor, which is increasingly found outside of China. The countries on our list of China’s successors also offer advantages such as closer proximity between production locations and targeted sales markets, which are increasingly in the developing world.
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