Chinese language giants make high-end smartphone play towards Apple, Samsung

Chinese language smartphone makers wish to push into the high-end machine market to problem the dominance of Apple and Samsung after one of many worst years for the market on document.

At Cellular World Congress — the world’s largest cellular present — in Barcelona, Spain final week, Chinese language smartphone makers had a few of the most distinguished stands and shows, recent off the again of launching new merchandise.

Final month, Oppo, the world’s fourth-largest smartphone maker, launched its foldable smartphone known as the Discover N2 Flip which was priced at greater than $1,000. Its larger rival Xiaomi adopted with the launch of its $1,000 plus Xiaomi 13 and Xiaomi 13 Professional.

Honor, an organization spun off from Chinese language telecommunications big Huawei, then launched its $1,690 foldable smartphone known as the Magic Vs.

These costly smartphones symbolize a shift in technique from Chinese language corporations, which have risen to prominence over time by means of providing lower-cost units with flagship-like specs.

“A large number of corporations corresponding to Oppo, Xiaomi, OnePlus, Vivo, RealMe and others are eager to flex their muscle tissue as they attempt to safe a spot out there alongside Apple and Samsung who more and more dominate gross sales world wide,” Ben Wooden, chief of analysis at CCS Perception, informed CNBC by way of e mail.

That change in tact from Chinese language companies comes after shipments within the smartphone market final yr reached their lowest stage since 2013. However the share of high-end smartphones, these priced above $800, rose from 11% in 2020 to 18% in 2022. Apple and Samsung mixed have almost all of that market.

Nonetheless, the chance is profitable as Chinese language distributors look to spice up margins.

Unquestionably, Wooden mentioned there may be “a push for the premium market which instructions greater common promoting costs and margins.”

The high-end push additionally coincides with China’s re-opening after the nation abruptly dropped its strict Covid prevention guidelines in December. This has made it simpler for executives, who’ve largely been caught in China since early 2020, to journey overseas.

And it additionally coincides with renewed impetus by Chinese language companies to develop their international attain. In 2022, the market share of Chinese language smartphone makers Realme, Oppo and Xiaomi declined in Europe, whereas Apple and Samsung remained comparatively secure. Chinese language corporations are hoping to vary that now that the home financial system has re-opened.

“The benefit of lockdown is a ‘reboot’ for the businesses manufacturing and exporting to international prospects to fulfill in particular person and develop the relationships and enterprise alternatives,” Neil Shah, associate at Counterpoint Analysis, informed CNBC by way of e mail.

“So, for the following 12 months we are going to proceed to see a surge of Chinese language enterprise in addition to vacationers flocking exterior of China which is able to increase their international technique.”

Chinese language smartphone makers have but to crack the premium phase of the market. The exception was Huawei which managed to seek out success within the high-end, finally changing into the primary smartphone participant globally in 2020, earlier than U.S. sanctions crushed its handset enterprise.

Xiaomi, Oppo, Honor and different Chinese language challengers face a lot of challenges within the premium phase, in accordance with analysts.

The primary is model recognition, in accordance with CCS Perception’s Wooden, who mentioned Chinese language companies are spending “eyewatering quantities of cash” on promoting campaigns to boost consciousness.

However the largest problem, in accordance with Shah, is sustainable profitability.

He mentioned Apple and Samsung are dominating many of the premium markets such because the U.S. and Europe. Whereas Chinese language manufacturers have additionally not been capable of construct worthwhile software program and providers companies as Apple has, which yields larger margins.

“Profitability is the largest problem as their scale declines as a result of the segments they’ve been focusing on (inexpensive entry-to-mid-tier) has been shrinking,” Shah mentioned.