- The strategy of low-cost smartphones with features similar to high-end ones seems to be changing in China.
- Now the big companies in the Asian powerhouse are focusing on creating more competitive devices.
- These companies would be setting their sights on a market where Apple and Samsung reign supreme.
The big Chinese manufacturers of smartphones are in the midst of a strategy shift that could put them alongside Apple and Samsung. Until now, these companies have been characterized by offering low-cost models with some functions similar to the devices of the giants in the sector. However, they would be willing to go a step further.
With the new strategy, the firms backed by Beijing hope to enter the large market where the American and South Korean companies command. With their eyes set on this future scenario, some of these strong companies have already announced new launches of highly advanced cell phones. Some of these models would not be very different from the recent Galaxys or iPhones and the same applies to their prices.
This new battle on the horizon would come after one of the worst years for this market. Some analysts fear that Chinese conglomerates could flood the market with high-end phones, which would jeopardize the stability of the dominant companies. This conclusion is supported by the results of the Mobile World Congress exhibition held last week in Barcelona.
At this event, which is the largest of its kind in the world, Asian companies stood out for quantity and quality. Although the prices of their models are no longer cheap, they are certainly still below those of their rivals.
Chinese manufacturers want a place under the sun
Currently, Chinese smartphone manufacturers have a very small share of that market. As a result, both Apple and Samsung remain the two mainstays of the industry. The competition between these two companies has allowed them to leave behind a multitude of companies looking to be part of the high-end market.
The step forward of the communist country’s companies seems to be shaking the management of the traditional firms. Ever since the companies backed by Beijing started to make headlines with their low-cost cell phones, their rise was only a matter of time. In just a few years, the management of the most prominent companies became real strongholds in several markets, such as Latin America.
Some Western governments are actively seeking ways to curb the rise of Asian firms in their markets. Allegations of spying through the use of 5G networks, whether true or not, are among the measures to spoil the rise. In Europe and the United States, authorities are highly combative against powerhouses like Huawei. Although these measures become serious stumbling blocks, the company has not stopped developing and gaining sympathy.
Last month, one of the most prominent Chinese manufacturers, Oppo, made official the launch of its foldable mobile model, the Find N2 Flip. To get an idea of the quality of this model, it stands out that its price reaches $1,000 dollars. For its part, Xiaomi launched its Xiaomi 13 and Xiaomi 13 pro, which also exceed the $1,000 price tag.
The foldable mobile trend was also adopted by Honor, a Huawei spin-off. It launched its Magic VS, priced at around $1,700.
Securing a foothold in the high-end market
The high prices of these new models mark a huge distance from the mobiles offered so far. This suggests a clear change of direction in the aspirations of Chinese firms. It should not be lost sight of the fact that these companies came to the fore thanks to their low-cost models and are now looking to build on the popularity gained over years of accumulating strength.
Likewise, it should not be interpreted that they will completely abandon their policy of cheap cell phones. In other words, they would offer devices for all budgets. This last strategy is one of the weak points of their rivals, at least of Apple.
“A multitude of companies such as Oppo, Xiaomi, OnePlus, Vivo, RealMe and others are ready to flex their muscles as they try to secure a place in the market alongside Apple and Samsung, which increasingly dominate sales worldwide,” CCS Insight’s Ben Wood tells CNBC.
As outlined at the outset, this conversion by Chinese manufacturers comes after a rough year for the sales market. So low was 2022 for companies in the sector that the level of sales compares to 2013. But the issue is particularly focused on the high-end mobile market. There, sales increased considerably.
By 2020, sales growth for mobiles priced above $800 rose 11%. By 2022, that increase represented no less than 18% and, of that percentage, the vast majority belongs to Apple and Samsung.
A motivation for Chinese manufacturers
But the drop in sales in general combined with the unprecedented increase in the high-end sector is a motivation. Hence, Chinese companies are targeting precisely the most attractive market for consumers today. It is worth mentioning that these are the countries where people are most likely to shop, or in short, the USA and the EU.
Although the challenge may seem great for the pequinesas, the growth in revenues and profits they could obtain makes it worth a try. But one aspect that should not be overlooked is that this step forward for the companies coincides with the reopening of China after a complex year with covid-19. Among other things, this represents a great ease for executives when traveling to do business around the globe to carry their phones.
This is the assessment of Neil Shah of Counterpoint Research. In statements to the aforementioned media, he assures:
“The loosening of the blockade is a “reset” for companies that manufacture and export to global customers to meet in person and expand relationships and business opportunities.”
For the next 12 months, the expert expects to see overwhelming growth among companies in China. And this point is not just confined to mobile manufacturers, but to Chinese companies across all industrial and commercial sectors. At the same time, faced with such an onslaught, it is not surprising that the authorities in Western countries are looking for ways to put up a shield to protect their companies.
The Huawei precedent
This is not the first time that Chinese companies have sought to compete with established technology powerhouses in the sector. Huawei managed to make the leap and in a short time became the leading player in the global market. The company’s position seemed to have no other path but to consolidate, but in 2020 the U.S. authorities put the emergency brake on.
The U.S. government announced a series of punitive measures that led to the fall of the company’s power. Thus, with the protectionist hand of the US government, Huawei’s business was crushed in Western markets and the rest of the Chinese manufacturers could probably see themselves in that mirror.
On the other hand, one should not overlook another crucial fact that has to do with profitability. No company in China is close to Apple’s level of profitability, which becomes a roadblock. These conglomerates are projected to be a major headache in the market, but they are also up against two powerful firms that enjoy the sympathy of their users.
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