Developer markets

imageMobile minds, too

In 2014 the number of mobile-phone subscriptions will overtake the number of human beings, according to the International Telecommunication Union. Much of the growth will come from Africa and Asia, where getting a phone is only the first step: many millions more people will get online too. India and China will both launch “fourth generation” mobile broadband in 2014, with subscriptions priced well below those in the West, perhaps as low as $2 a month in India.

The opportunities for tech firms are enormous. Yet Western firms will face stiff local competition. At first this will take the form of price warfare from domestic imitators. In China Apple has been pushed into seventh spot in smartphone sales by Xiaomi, a company that openly models itself on Apple and started selling phones only in 2011. Domestic producers now have 60% of China’s smartphone market, according to Canalys, a research firm. A home-grown phone-maker, Micromax, will outsell Samsung in India in 2014.

Some of the best ideas will come from unexpected places
More significant is what poor countries are doing with technology once they get it. One well-known example of poor-country innovation is M-PESA, a mobile money-transfer system that started in Kenya and is catching on in Asia.

More recently an Indian entrepreneur created Hike, a mobile-messaging app like WhatsApp and Viber, which lets smartphone users send messages using data connections, bypassing sms charges. But Hike also works with non-smartphones. In India, with a smartphone penetration rate of only 6%, that is an essential feature for many. Nothing similar is offered by any of the big messaging apps—not even China’s WeChat, poised to become the world’s largest.

What poor-country innovations typically have in common is that they are born of scarcity. M-PESA’s mobile money did not flourish in the West because Europe and America, with an abundance of banks and credit cards, have no need for it. WhatsApp, which came out of Silicon Valley, does not need users of older, non-smartphones to expand its network.

That is not to suggest that innovation is a zero-sum game. M-PESA received early funding from Vodafone of Britain. Hike is part-owned by SoftBank, a Japanese telecoms giant. Such cross-ownership benefits everyone. In 2014 money and technology may come from the West but some of the best ideas will come from unexpected places, as the developing world turns into the developer world.

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