Just a few weeks ago, the world learned that China's key online retailer Alibaba would be spending a third of a billion dollars — $364 million, to be exact — building out logistics capacity in partnership with electronics giant Haier Group.
Most commentary on the deal focused on the supply partnership's non-IT possibilities — the injection of cash from Alibaba means Haier's large domestic appliance business, as well as the Amazon-like catalogue of goods Alibaba sells, will have far greater reach throughout the Chinese market. USA Today called the company a mix of Amazon, eBay, and PayPal, with the world's stock markets competing hotly to host its upcoming IPO. Amid this, Alibaba and Haier are reported to be focusing their plans for increased supply capacity toward delivering goods to mid-size cities in the Chinese interior, a massive but underserved market.
What's less reported, but intriguing, is the deal's potentially deep implications for smartphone supply chains, including potential rivals like Samsung and Apple. In addition to basic products like washing machines, Alibaba's new partner Haier also manufactures a popular mid-range handset called the Zing. And the Zing runs on — wait for it — a proprietary Alibaba OS, the fifth device to launch with the OS in the past three years. The company claimed last year that phones and a tablet running on its OS had sold just over a million units in 2012.
A million units constitutes barely a ripple in the Chinese handset market, where most estimates say over 100 million devices sold just in 2012. It's certainly not enough to catch the attention of component manufacturers and existing suppliers for handset component or touchscreen glass — yet.
The new move suggests the broader strategy, however. Providing logistical support to its key mobile partner — Haier's phones also link to Alibaba's cloud-based services, launched back in 2009 — means Alibaba is attempting to enter markets competitors haven't proven a capacity to serve yet, despite several years' head start. The company seems to be betting that it can establish itself in China's interior by getting there first, via the massive logistics build out with Haier.
If that's true — and we don't know yet, the announcement is just a few weeks old and nothing is built yet –; then the next question is whether competitors will try to beat Alibaba at its own game, or just sell through them. Speculatively, it's hard to imagine a logistical capacity on the scale the partnership seeks to create won't appeal to non-Alibaba IT supply. Once a FedEx or UPS-style system reaches China's interior, you can bet that road into a new Chinese market will get crowded with devices, and at least some manufacturing and wholesale traffic. By then, though, Alibaba will own the road, and will be setting the tolls.
It's all very new, and the upcoming IPO could yet change the story in unexpected ways. What we know for certain is that a massive effort is underway to build a new logistics system in China from the ground up, and that one of the region's biggest domestic IT players is behind it. We don't see that sort of thing very often, and if only for that reason, for anyone in the IT supply game this is a development that bears watching.