18 November 2018
Huawei sold 8.4 percent more smartphones in the second quarter compared to a year earlier, but some other Chinese brands have slipped. Photo:
Huawei sold 8.4 percent more smartphones in the second quarter compared to a year earlier, but some other Chinese brands have slipped. Photo:

China smartphone makers face challenges

The smartphone industry has seen significant shift in market shares, particularly among the Chinese brands.

Globally, Samsung has kept the top spot and Apple is still the runner up. But Xiaomi, which was earlier in the No. 3 position, has slipped, as did some other Chinese brands such as Letv and Coolpad.

Meanwhile, three other mainland makers — Huawei, OPPO and Vivo — moved up to occupy the third, fourth and fifth spots.

Global handset shipments rose by a meager 0.3 percent to 343 million units in the second quarter of this year, according to IDC data. Developing countries such as India and Africa are still witnessing growth but markets in the West have shown a notable contraction.

Samsung remains the top smartphone vendor worldwide, thanks to its diversified smartphone offerings that cover the entire range of mid to high-end segments.

The company’s smartphone shipments increased by 5.5 percent in the second quarter to 77 million over the same period a year earlier, helping the Korean giant take 22.4 percent of global market share.

As for Apple, it recorded a 15 percent decline in second-quarter shipments to 40.40 million units, taking a hit due to the absence of new launches. 

In the mean time, three Chinese brands posted robust growth.

Huawei took over the third spot with 32.1 million units sold, up 8.4 percent from the year before. It was followed closely by fellow Chinese manufacturers OPPO and Vivo, at 22.6 million and 16.4 million units, respectively.

OPPO and Vivo registered whopping year-on-year growth of 136.6 percent and 80.2 percent respectively in second-quarter shipments.

Meanwhile, Xiaomi and once-popular brands like LeTV and Coolpad lagged behind.

Singling out the China market, Xiaomi’s shipments slid by 38.4 percent and its market share fell under 10 percent. By contrast, Huawei, OPPO and vivo recorded shipment gains of 15.2 percent, 124.1 percent and 74.7 percent respectively.

Xiaomi had been very successful with its low-price strategy, but that was until other low-end makers from China, India and Russia copied the same cut-throat pricing approach.

The outlook for Xiaomi is worrisome now given that it has been counting on selling smartphones on the cheap to gain a big customer base and monetize it through the cross-selling of other products such as software, games and home appliances, a business model that does not seem to work at all.

On one hand, the company is challenged by numerous makers that won’t hesitate to undercut Xiaomi for market share. On the other, the goal of achieving huge sales of other products appears very difficult.

Xiamoi has been burning cash raised over the past few years. Given the current tough market situation, the company may not find it easy to convince investors to put in more money.

Now, what about the three rising Chinese players? Are they doing a lot better?

Well, not exactly.

Huawei, OPPO and Vivo have done a good job in cost control. To expand market share, they even supply smartphones to telecom carriers under the carriers’ own labels.

But the sharp gains in sales may come at the expense of profit margin. At the end of the day, their businesses may not be that profitable.

This article appeared in the Hong Kong Economic Journal on Aug. 16.

Translation by Julie Zhu 

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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