Funny old business, mobile handsets.
A decade ago, there were dozens of phone makers. Europeans will remember Bosch and Sendo, while Americans may choke back a tear thinking of Palm Pilots. Meanwhile, the Japanese market was a world apart – dominated by Fuji, Panasonic, Sanyo and others.
Then it all got a bit boring.
The business got expensive and consumers aspired to a small number of premium brands. For years there was Nokia, Motorola, Sony Ericsson, RIM and Samsung. In time, they were displaced by Apple, Samsung, HTC, RIM and LG.
Now, it’s all up for grabs again.
The emergence of cheap components, open source Android and rampaging emerging economies has shaken everything up.
Chinese phone makers, so long regarded as cheap and disposable, are on the rise. They’re crushing it in their own market, driving hard into new economies and even making headway in mature regions.
According to a study by Trendforce, Chinese phone makers represented six of the global top ten in smartphones. The brands are: Lenovo, Xiaomi, ZTE, TCL/Alcatel, Huawei and Coolpad.
It’s a remarkable turnaround. And it may just be the beginning, with brands like Gionee, Tecno and Oppo all working hard to break into the top ten.
Here’s a rundown of the Chinese phone makers aiming to displace Apple and Samsung from your pockets and handbags…
The formerly French phone maker was bought by Chinese television giant TCL in 2013, which re-branded it as Alcatel OneTouch. It’s actually the world’s sixth-largest handset maker, according to Gartner, thanks to its longstanding budget prepaid phone business. The firm is currently among the Chinese phone makers targeting the US and Canada hard, having increased its marketing investment by six times. Most eye-catching, it bought up the assets of the once-loved US brand Palm. This led to the launch of the Pixi 3 line of smartphones. The firm has even launched a smartwatch, running on proprietary Alcatel software that works with iOS or Android.
According to IDC, China’s Coolpad sells more devices in its home market than either Apple or Samsung. It is second only to Xioami and Lenovo, and commands 11.5 per cent of the smartphone market. It’s the world’s seventh largest. Coolpad has actually been around since 1993, making white label devices for big operators like T-Mobile. But it emerged as its own brand on the back of the Android boom. However, it hasn’t been plain sailing for the OEM. Late last year, there was a PR storm when it was revealed that Coolpad ‘deliberately’ introduced a security flaw that inadvertently allowed hackers full control of the device.
You can’t fault Gionee for ambition. The Chinese firm sells around 25 million handsets a year compared to Samsung’s 400 million, but it still thinks it can be top five inside five years. The firm has a long history in consumer electronics, starting out in 2002 in video and DVD. By 2005, it was a phone maker with its own manufacturing facility in Dongguan. Now, Gionee competes at the high end on features like photography. It’s also making waves in India and is aiming to capture a 10 per cent share over the next two three years.
It must be galling for Huawei to observe the unstoppable rise of its compatriot Xiaomi. By all logic, its should be Huawei sticking it to the world. In the early part of the decade, the giant telco firm set out to challenge the likes of LG, HTC and Sony and gain a slot in the smartphone top five. It launched flagship brands like Ascend and spent big on marketing. It did OK. But it’s been a slog, and the truth is that Huawei still has more cachet in emerging markets than the US and Europe. Today, Huawei ranks fifth in global smartphone shipments behind Samsung, Apple, Xiaomi and LG. Recently, Huawei confirmed a shift away from the low margin ‘cheap’ handset biz to renew its focus on the high end. It expects to boost smartphone shipments by a third this year to more than 100 million units.
It’s hardly a new or unfamiliar name, but in 2013/14 Lenovo finally broke away from its PC roots to become recognized as a serious player in mobile. Lenovo had bought IBM’s laptop business to put down a footprint in computing, and it did something similar when it acquired Motorola from Google for $2.9bn. The swoop helped it increased global smartphone shipments by 38 per cent in the third quarter of 2014 to 16.9 million units, making it fourth worldwide after Samsung, Apple, and Xiaomi, according to IDC.
It’s easy to characterise the new Chinese phone makers as unimaginative – a group that makes boring functional devices from identikit components. You can’t throw that at OnePlus – which is an independent spin-off of Oppo. The company is a genuine innovator in two ways. First, its phones run on CyanogenMod, a reworking of Android that looks like the raw stock Android OS but lets users configure for their own needs. Second, OnePlus distributes its phone by personal invitation. The latter strategy has come in for a lot of criticism, but at least OnePlus was trying to do something different. And users love its sleek stylish devices. Mind you, there may be trouble ahead. Cyanogen made a deal with Micromax to exclusively support its Yu phones, which may prevent OnePlus from using the OS.
So thin it can cut through a watermelon. That was the claim made for the Oppo R5 last year. The race to be the world’s skinniest was hotly contested, with both Vivo and Kazam making a claim on the territory. But the battleground reveals Oppo’s desire to compete on the basis of design and innovation rather than price. This led to firsts such as the swivelling top-mounted camera on its N1 device. The Chinese phone maker shipped an estimated 25-30 million devices in 2014 and expects to double that this year. Most sales will be domestic, though Oppo does well in India, Indonesia and Australia.
The major Chinese phone makers are all targeting Africa as the next great growth market for smartphones. Interestingly, it’s Tecno that’s making arguably the most headway. This smaller firm has taken Nigeria in particular by storm, and currently sells around 12.5m handsets across the African continent every quarter. That’s more than BlackBerry and Nokia. The firm appears to have succeeded by making cheap and reliable phones with astute pre-loads such as Facebook and the Spinlet music app. It also manufactures devices in Africa.
Of all the new Chinese phone makers, Xiaomi is undoubtedly the biggest. The firm began flexing its muscles in 2013, hiring ex-Google Android VP Hugo Barra to spearhead its charge domestically and across Asia. It worked. Two years ago, Xiaomi didn’t trouble the top 10 Android market share list. Now, it’s third with 5.3 per cent. It expects to sell 60 million smartphones this year. Xiaomi’s secret weapon is essentially price. It sells high-end reliable product (with a premium Android ‘skin’ called MIUI) for about half the cost of a Galaxy or an HTC One. Also, it mostly sells online – so no retail margins: famously it shifted 150,000 phones in 10 minutes on WeChat. Xiaomi sells primarily in Asian markets, but is now targeting India, Latam and Africa.
The handset subsidiary of the giant ZTE Corporation is actually the US’s fourth biggest phone maker. It’s reached this point by making budget smartphones for all the major carriers – indeed, it’s the US’s second-largest supplier of prepaid devices. The firm has been trying to establish itself as a maker of aspirational devices for many years. Like its close rival Huawei, ZTE made a big push in 2011 with premium devices like the Skate, but these efforts fizzled out. Still, ZTE is expected to ship 60 million smartphones in 2015, up from 48 million units last year.