As Ap­ple slows, Chi­nese play­ers make their move

Slug­gish in­no­va­tion at iPhone maker gives Asian ri­vals best chance

Global Times - Weekend - - TECH -

Ap­ple on Septe­mer 12 un­veiled iPhones with wire­less charg­ing, an edge-to-edge screen and dual cam­eras – all fea­tures al­ready avail­able in Huawei, Oppo and Sam­sung phones.

While Ap­ple tries to con­vince buy­ers to fork out nearly $1,000 for its high-end model, chal­lengers are tilt­ing at the lux­ury mar­ket, of­fer­ing sim­i­lar fea­tures for less money.

Chi­nese ven­dors, for­merly seen as al­legedly churn­ing out cheap copy­cat phones, have upped their game and now con­trol nearly half the global mo­bile mar­ket. By cram­ming high­end fea­tures into af­ford­able de­vices and us­ing a canny mix of pro­mo­tion, ad­ver­tis­ing and re­tail reach, they have also won over some loyal Ap­ple users.

“Huawei is seen as a rel­e­vant com­peti­tor to Ap­ple and Sam­sung by cov­er­ing all ma­jor price points and plac­ing big in­vest­ments in mar­ket­ing and sales,” said a spokes­woman for Me­di­aMark­tSaturn, Europe’s big­gest elec­tron­ics re­tailer.

She said Huawei, ZTE, Len­ovo and TCL – all Chi­nese firms – were among the top-10 best­selling smart­phones in its stores.

Chi­nese man­u­fac­tur­ers’ rapid growth has been fu­eled by strong do­mes­tic sales, but they now ex­port 40 per­cent of their smart­phones, al­most dou­ble the num­ber of three years ago, ac­cord­ing to global bro­ker­age firm CLSA.

Huawei, whose smart­phone ship­ments to Europe jumped more than 50 per­cent in the first half of this year, is poised to over­take Ap­ple as the world’s second-largest ven­dor.

The Chi­nese firm’s con­fi­dence was on show in a short Face­book video ad ahead of its “RealAI­phone” launch next month, us­ing a clown to poke fun at Ap­ple’s fa­cial recog­ni­tion fea­ture that un­locks the new iPhone.

Huawei plans to un­veil its top-ofthe-line Mate 10 phone on Oc­to­ber 16, with ar­ti­fi­cial in­tel­li­gence-pow­ered fea­tures such as in­stant trans­la­tion and im­age recog­ni­tion.

And me­dia re­ports spec­u­late that the phone will have an edge-to-edge screen while un­der­cut­ting the iPhone price. Huawei de­clined to com­ment. With their grow­ing scale and flat­ten­ing of hard­ware im­prove­ments, other Chi­nese firms are also look­ing to crack the high-end smart­phone mar­ket.

Xiaomi, for ex­am­ple, un­veiled a full-screen phone this month that fea­tures a sleek, all-ce­ramic ‘uni­body’ de­sign and 12-megapixel front cam­era. The spe­cial edi­tion Mi MIX 2 re­tails for $720. Also, Xiaomi, Oppo and Vivo are work­ing with Qual­comm to em­bed ul­tra­sound sen­sors un­der smart­phone screens to im­prove the touch func­tion.

“Chi­nese brands with grow­ing scale, ac­cess to the same sup­ply chain, ris­ing com­po­nent buy­ing power, ag­gres­sive mar­ket­ing and value-for­money of­fer­ings have stalled Ap­ple’s growth rate and nul­li­fied the dif­fer­en­ti­a­tion points,” said Neil Shah, re­search di­rec­tor at Coun­ter­point.

Ap­ple de­clined to com­ment be­yond what their ex­ec­u­tives have said pub­licly about why they hold off on cer­tain tech­nolo­gies.

Still a big gap

To be sure, Ap­ple main­tains a healthy mar­ket lead over Chi­nese ri­vals in the premium seg­ment, and few ex­perts fore­see Ap­ple fans switch­ing from the iPhone X to Huawei’s Mate 10.

“The big­gest chal­lenge they [Chi- nese firms] face would be prov­ing to con­sumers their prod­ucts and brand are worth pay­ing that much for,” said Xiao­han Tay, an an­a­lyst at re­search firm IDC.

“Ap­ple has taken years to build that premium brand im­age, and Sam­sung too. If they can pay a lit­tle more to pur­chase an Ap­ple or Sam­sung phone, most con­sumers may still con­tinue to do that.”

In the $600-plus seg­ment, Ap­ple has a 63 per­cent share of the mar­ket, against just 3 per­cent for Huawei. The US firm en­joys a re­ten­tion rate of about 82 per­cent ver­sus Huawei’s 52 per­cent, sug­gest­ing it will be tough for Chi­nese firms to raise their prices, ac­cord­ing to UBS.

The av­er­age sell­ing price of smart­phones from the top three Chi­nese mak­ers – Huawei, Oppo and Vivo

– is $248, or two-thirds less than the cheap­est iPhone 8.

Yet ex­perts say the threat of com­pe­ti­tion is real, es­pe­cially as buy­ers in­creas­ingly fo­cus on apps more than hard­ware fea­tures.

“How much im­pact would a $1,000 iPhone re­ally have on the UX [user ex­pe­ri­ence] of What­sApp, or YouTube or Snapchat?” said Sameer Singh, founder of re­search firm TechThoughts.

“The most pop­u­lar apps be­ing avail­able on both plat­forms re­ally makes the ex­pe­ri­ence a bit of a wash, mak­ing it harder to jus­tify the price point based just on fea­tures. This isn’t all that dif­fer­ent from the PC in­dus­try 10-20 years ago. At one point, a PC was a PC ir­re­spec­tive of the man­u­fac­turer.”

An Ap­ple store in Nan­jing, East China’s Jiangsu Prov­ince in March 2017.

Photo: VCG

The ex­hi­bi­tion cor­ner of Huawei at the 2017 CeBIT show in Ger­many in March.

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