China’s four biggest smartphone makers are sharpening their focus on the fast-growing premium handset segment by spinning off secondary brands, as the industry braces for another year of decreased shipments around the world.
Oppo, China’s second largest smartphone vendor, is set to introduce next month its Reno brand, which will provide a range of 5G and non-5G premium handsets.
That would follow No 3 player Vivo’s launch earlier this month of its iQoo gaming smartphone brand. In January, Xiaomi announced that its low-cost Redmi line has become an independent brand several months after the Beijing-based company unveiled its Poco brand for the premium market segment.
But it was Huawei, the world’s largest telecommunications equipment supplier, which led the industry in establishing a thriving business for a secondary smartphone brand with its budget-priced Honor line in 2013.
“Huawei’s successful two-brand strategy, which covers all consumer market segments with models in a range of prices, has inspired other local smartphone brands to follow suit,” said Jia Mo, a Shanghai-based analyst at research firm Canalys. “The other players have realised that they need to expand their product lines to target more consumers.”
The broad array of Huawei and Honor-brand devices made available to the market, combined with aggressive promotions and innovative designs, has helped the Shenzhen-based company continue to lead smartphone sales in China and rank No 3 worldwide last year behind Samsung Electronics and Apple.
BBK Electronics Corp, a 24-year-old company based in the southern coastal city of Dongguan, rivals Huawei’s rapid climb in the smartphone industry. BBK is behind Oppo and Vivo and recently established Android smartphone brands OnePlus and Realme. It also runs one of the world’s largest and most sophisticated electronics supply chains for the production of a range of smartphones for the global market.
Jia of Canalys said the trend towards developing multiple brands has accelerated because the consolidation of China’s smartphone industry, which had as many as 300 domestic mobile phone companies about three years ago, has been completed.
Cutthroat competition reduced that number to about 200 last year, as Chinese consumers bought fewer smartphones and the domestic economy grew at a slower pace.
Huawei, Oppo, Vivo and Xiaomi, however, made up nearly 80 per cent of China’s smartphone market last year, according to research firm IDC. These larger, deep-pocketed Chinese smartphone suppliers have won a big chunk of the market by enticing both younger and affluent buyers with their wide variety of models.
The development of new brands by the major players also reflect the broader success of the Chinese mobile phone industry in changing people’s perception that domestic suppliers are only good for inexpensive, low-quality products.
It has also become an important strategy to pursue amid predictions of a third consecutive year of declining smartphone shipments worldwide. The industry is forecast to see shipments reach 1.39 billion units this year, down nearly 1 per cent from last year, according to research firm IDC.
“The biggest question that remains unanswered is what will bring the smartphone industry back to growth,” said Ryan Reith, programme vice-president with IDC’s Worldwide Mobile Device Trackers in a report earlier this month. “There is no question industry growth has been down for reasons that have already been identified – longer replacement cycles, a challenged China market and geopolitical headwinds – but it is short-sighted to overlook the possibilities of some important technology advancements that are within reach, with 5G probably being the most significant.”
For Xiaomi, the world’s fourth largest smartphone supplier, the answer lies in delivering premium smartphones at the lowest possible prices from both the main brand and new independent brand.
Lei Jun, the founder and chief executive of Xiaomi, said “competition or overlap between the two brands is good for the growth of the team”.
At the MWC Barcelona trade show last month, Xiaomi unveiled a 5G version of its Mi Mix 3 smartphone model priced at about US$680, which was cheaper than the new 5G models introduced by other brands at the event.
The premium handset segment, which covers devices priced from US$400, has become more important to the world’s major suppliers because it is growing faster than the overall smartphone market. This segment grew 18 per cent last year, compared with a 3 per cent decline in the total market, according to data from Counterpoint Research.
“Introduction of 5G phones, foldable displays and popularity of the so called affordable premium segment in emerging markets will further drive growth,” said Varun Mishra, a research analyst at Counterpoint, in a recent report.
Oppo’s Reno and Vivo’s iQoo brands also offer competitively priced handsets with high-end design and features. Reno-brand smartphones, for example, will focus on high-end consumers, which is counter to the general perception that Chinese brands target younger consumers and those from lower-tier Chinese cities, according to Oppo vice-president Shen Yiren.
With the new brands from the major Chinese players also targeting the premium handset segment, the world’s biggest smartphone market could be primed for fresh growth.
“Some consumers prefer niche products or functions that mainstream brands might not be able to offer, so these secondary brands are in a position to deliver devices to meet that demand,” said Zaker Li, a Shenzhen-based senior industry analyst at IHS Markit.
Additional reporting by Iris Deng
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