The China Angle: New Platforms, Big Changes Calling

[In his latest 'China Angle' column, Beijing-based developer Frank Yu examines the nation's buzz around new 3G mobile platforms like the iPhone, the obstacles they face in the region, and why shakeups in China may ultimately affect the industry worldwide.] The Year of the Ox in China started in an auspicious way with the spectacular towering inferno fire of the Beijing Mandarin Oriental Hotel from a freak fireworks accident. The sense of bad luck and a slowing economy looms for 2009. Although the economy is still growing by 6% that’s almost the same as a recession for China which needs to grow in double digits to keep the masses employed. The games industry is supposedly recession-proof, but the reality is that it goes through sales slumps and layoff periods like other industries when cash is tight. In China, two of the largest game companies, Shanda and Netease reported great year on year growth for the 4th quarter. The New Buzz However, since the global financial meltdown started to be felt in January, the question of sustained growth for the Chinese gaming industry remains an open question. As low end manufacturing and service workers lose their jobs, its not apparent that they would spend what little savings they have on online games. The game companies in private have become concerned that the days of fast growth may come to a screeching halt in 2009. But something cool is coming up in 2009 as well. The big buzz these days in China are social networks with games and the looming mobile internet as a game platform. In a more positive note, many of us are waiting for the impending launch of the wireless 3G mobile networks in China. China Mobile, the dominant mobile carrier in China is set to launch their 3G TD-SCDMA network to the mainstream this month. Previously limited to a few test accounts, this launch marks the full entry of China into 3G and a potentially large mobile gaming market. Unfortunately, the TD-SCDMA is a China standard only adopted by China Mobile so far. This means that 3G handsets from other countries won’t work on the China Mobile network. The distant number-two mobile carrier China Unicom, however, does use W-CDMA, which is a global standard and compatible with the Apple iPhone 3G. Strong rumors indicate that China Unicom will get the iPhone app partnership with a launch of the China iPhones perhaps as early as May when their network launches. Gumming Up The Works There are, however, two possible snags still to an iPhone launch in China still. We all know that the iPhone and iPod touch are great game platforms. We also know that a large chunk of the apps downloaded by iPhone users can be classified as game or entertainment categories which makes the iPhone/Touch a stealthy game console. However, at this time, all game consoles continue to be illegal in China -- with the exception of the Nintendo DS Lite -- due to a JV Agreement with a local company. All Playstations, Xboxes, Segas and even the Wii are technically illegal to sell in China. One can argue that the iPhone and the iPod Touch are actually portable game consoles with a phone or music player attached. Depending on how Chinese regulators decide to define the iPhone as a game machine, a phone or an internet appliance will have an impact on how it is regulated or even allowed into the market. Another potential snag is that China has a law forbidding mobile handsets sold in the local domestic market from having both 3G and WIFI on the same device. The law was probably created to help promote China’s 3G market but what it will really does is to encourage more gray market handsets from Hong Kong and Taiwan to be smuggled into China. The Apple iPhone in its current form cannot be launched in the China market without having WiFi or 3G disabled. Rumors seem to indicate that there is a move to have the law changed, since it would also effect Android phones as well -- which may be the platform that China Mobile hopes to back for their 3G network. Many of us are excited about the prospects of having the iPhone and these other new game platforms enter the Chinese market. We hope to see new distribution models, content, handsets and business models that will help shake up and shape the largest mobile and gaming market in the world. The changes implemented in China will cause ripples to both games and the mobile industry worldwide. [Frank Yu is the CSO and COO for Shouji, a Beijing based mobile game developer. Prior to his current position, Frank started and led the first China game team for Microsoft and served as the first Xbox Regional Business Manager for Asia. He can be reached by email at [email protected].]