Chinese giants pit high-end smartphones against Apple and Samsung

Huawei spin-off Honor had one of the most prominent booths at Mobile World Congress in February 2023. It was right next to Samsung’s booth, a sign that Honor is targeting the South Korean company in the premium end of the smartphone market.

Arjun Kharpal | CNBC

Chinese smartphone makers are trying to break into the high-end device market to challenge the dominance of Apple and Samsung after one of the worst years for the market on record.

At Mobile World Congress — the world’s largest mobile trade show — held in Barcelona, ​​Spain last week, Chinese smartphone makers had some of the most prominent booths and displays, fresh from new product launches.

Last month, Oppo, the fourth largest smartphone maker in the world, launched its foldable smartphone called the Find N2 Flip, which was priced at over $1,000. His greater rival xiaomi followed with the launch of the $1,000 plus Xiaomi 13 and Xiaomi 13 Pro.

Honor, a company spun off from Chinese telecom giant Huawei, then launched its $1,690 foldable smartphone called the Magic Vs.

These pricey smartphones represent a shift in strategy from Chinese companies, which have gained prominence over the years by offering lower-cost devices with flagship-like specs.

“A multitude of companies such as Oppo, Xiaomi, OnePlus, Vivo, RealMe and others are keen to flex their muscles as they attempt to carve out a place in the market alongside Apple and Samsung, which are increasingly dominating global sales.” said Ben Wood. Research director at CCS Insight, CNBC shared via email.

Chinese giants go premium

This change of pace by Chinese firms comes after shipments in the smartphone market last year hit their lowest level since 2013. But the share of high-end smartphones priced above $800 rose from 11% in 2020 to 18% in 2022. Apple and Samsung together have almost all of the market.

Still, the opportunity is lucrative as Chinese vendors look to boost their margins.

No doubt Wood said there is “a push for the premium market that is demanding higher average selling prices and margins.”

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The high-end push also coincides with China’s reopening after the country abruptly dropped its strict Covid prevention rules in December. This has made it easier for executives, who have mostly been stuck in China since early 2020, to travel abroad.

And it also coincides with a renewed impetus from Chinese companies to expand their global reach. In 2022, Chinese smartphone makers Realme, Oppo and Xiaomi saw their market share decline in Europe, while Apple and Samsung remained relatively stable. Chinese companies are hoping to change that now that the domestic economy has reopened.

“The ease of lockdown is a ‘fresh start’ for the companies that are manufacturing and exporting to customers worldwide to meet in person and expand relationships and business opportunities,” Neil Shah, a partner at Counterpoint Research, told CNBC via email .

“So over the next 12 months we will continue to see an increase in Chinese companies as well as tourists from China, which will strengthen their global strategy.”

future challenges

Chinese smartphone manufacturers have yet to conquer the premium segment of the market. The exception was Huawei, which managed to thrive in the high-end space and eventually became the number one smartphone player globally in 2020 before US sanctions wrecked its cellphone business.

According to analysts, Xiaomi, Oppo, Honor and other Chinese contenders in the premium segment face a number of challenges.

Xiaomi presented its new smartphone Xiaomi 13 at the Mobile World Congress 2023. The $1,000 phone signals the Chinese company’s intention to challenge Apple and Samsung in the high-end smartphone market.

Arjun Kharpal | CNBC

The first is brand awareness, according to CCS Insight’s Wood, who said Chinese firms are spending “amazing amounts of money” on advertising campaigns to raise awareness.

But the biggest problem, according to Shah, is sustainable profitability.

He said that Apple and Samsung dominate most premium markets like the US and Europe. While Chinese brands have also been unable to build profitable software and services businesses like Apple has, resulting in higher margins.

“Profitability is the biggest challenge as their size decreases because the segments they target (affordable entry-to-mid-range) have shrunk,” Shah said.

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