An inside view on China’s market dynamics and how local vendors are accelerating their innovations.

With almost 500 million mobile phones projected to ship in China for 2015, Chinese companies like MeizuXiaomiHuawei and Lenovo are collectively churning out smart phone models faster than any other manufacturers in the world. The question is “how?”

The answer is multi-faceted. Like the United States, China has a strong domestic handset market with sophisticated expectations in terms of both hardware and software functionality. Chinese handset manufacturers have a tremendous incentive to match — and even attempt to outperform — the rest of the world in terms of innovation.

This is not difficult to do with the exceptionally strong and complete infrastructure of component, technology and manufacturing suppliers that can be found right in its own back yard.

China is uniquely blessed with access to the entire mobile handset supply chain. After all, there isn’t a major branded handset sold anywhere in the world that isn’t made in China.

China also has a very pragmatic relationship with available operating systems, especially Android-based ones.

Google services are not directly available in China, so there is no compelling reason to strictly follow Android OS requirements, except as directly benefits individual handset manufacturers and their user ecosystem.

A case in point is Xiaomi’s MIUI operating system that works on top of Android, and follows the Android CDD (compatibility definition document), yet is uniquely their own. Xiaomi works very hard to control its own Android-based OS, as do most of the other major Chinese handset manufacturers.

In my many trips to China, I observed a willingness to take risks and adopt new technologies as well as a try-it-and-see philosophy that allows new ideas to come to market quickly.

The Chinese companies with whom I’ve worked understand that differentiation through innovation is key to long-term success and the prevention of margin and market share erosion. In addition, their decision-making process is based upon speed, so it is well matched to the pace of change inherent in this ultra-competitive market.

In my next blog, I will dig a little deeper into Chinese manufacturers’ considerations in using sensor hubs to differentiate their phones by enabling always-on features without increasing power consumption.