As Apple slows, Chinese players make their move
Sluggish innovation at iPhone maker gives Asian rivals best chance
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.
The exhibition corner of Huawei at the 2017 CeBIT show in Germany in March.