Market Watch | CHINA Research Institute Park, Han-Jin _ Director of China Department, KOTRA ([email protected]) The Power of China’s Smartphone China’s Big Four smartphone makers have emerged as dark horses Big Four: Big Four Listed in in the global mobile phone market. Global Top Ten However, with the exception of Apple and Samsung, the combined operating profit of all Chinese mobile phone manufacturers stands at only 2%. Grow 119% in First Quarter China’s mobile phone brands, which sparked the popularity of smartphones in China, the world’s largest smartphone market, have begun to make their mark on the global stage. Among the world’s top ten smartphone manufacturers, four are Chi- nese, and two of these are in the global top five. The four Chinese brands that have emerged as dark horses in the mobile phone market are ZTE, Huawei, Coolpad, and Lenovo. Chinese Mobile Phone Companies Take Local Market The four companies’ combined share of the Chinese market is as high as 70%. With the exception of Ap- ple and Samsung, eight of China’s top ten smart- phone makers are local. Chinese firms estimate their smartphone shipments will increase more than 50% this year. In the first quarter, they shipped 69 million units, a 119% increase over the same period last year. Smartphones shipped from China account for a third of all smartphones distributed worldwide. If this trend continues, the market share of Chinese The world is eyeing the rapid growth of Chinese smartphone manufacturers, which could shift the dynamics of the mobile phone market. China’s Huawei exhibition booth at the Mobile World Congress held in February 2012 in Barcelona, Spain. (Joongang Photo) 86 AUTUMN 2013 VOL.11 POSRI - Chindia plus Quarterly 87 Market Watch | CHINA Research Institute mobile phone brands will grow further. drawing great interest not only from China but companies such as Nokia and Sony. Considering erating profit of almost all Chinese mobile phone It’s not the first time for Chinese mobile phone from the rest of the global mobile phone market. that as many as three Chinese brands including manufacturers using Android operating systems makers to enjoy a golden age. From 2002 to 2003, Chinese brands are clearly more competitive ZTE, Huawei, and TCL are listed among the global stood at only 2%. This is surprising considering Chi- Chinese companies such as Ningbo Bird, Amoi, than in the past. While Chinese manufacturers top ten mobile phone makers in terms of sales in- nese manufacturers’ high market share not only in Xiongmao, and Lenovo grew rapidly with their do- once competed with approximately ten foreign cluding feature phones, China seems strong China but internationally. Seen in this light, Chinese mestic market share exceeding 50% for the first companies including Motorola, Nokia, Sony, Erics- enough to measure up to foreign brands. smartphone makers with a high market share and time. Since 2004, however, many Chinese firms son, Samsung and LG, most foreign firms have low profit might be compared to paper tigers. have gone bankrupt due to the arrival of foreign been surpassed by Chinese firms. Only Samsung Even though China’s big four companies are companies that entered the Chinese market and Apple, which are much stronger than Nokia Beware of High Market Share world-class in terms of shipments, they have the through strategic partnerships. Nearly all Chinese and Motorola at their height, are ahead of the Chi- without Profit stigma of making cheap products. According to mobile phone manufacturers have disappeared nese brands. Ten years ago, Chinese companies data released by D.Phone, a Chinese mobile except for Lenovo, whose main product was not adopted Korean production methods because The problem is Chinese mobile devices do not phone retailer, the market for smartphones priced mobile phones. they did not have the ability to design products on make much profit. According to the research firm over CNY 3,000 is dominated by global brands their own. However, they now can design and Strategic Analytics, in the first quarter of this year, such as Samsung, Apple and HTC, with Chinese produce high-quality products themselves. net profits for the global smartphone industry stood brands maintaining a single-digit market share. Chinese Brands Can Now In viewing the current situation, we must exam- at USD 12.5 billion. Apple recorded an operating Market entry for high-priced products over CNY Rival Foreign Brands ine two groups of mobile phone manufacturers in profit of USD 7.1 billion from the iPhone (57%) and 3,000 is still a glass ceiling for Chinese companies. the global smartphone market. The first consists Samsung’s operating profit from its smartphones While Chinese manufacturers have attempted to Will Chinese companies fail again as they did ten of the so-called G2 of the smartphone market, was USD 5.1 billion (40.8%), indicating the two enter the high-end market, most have failed. Last years ago, or will they emerge as strong players Samsung and Apple. The second is composed of companies accounted for 97.8% of the global smart- year, ZTE launched the sub-brand Nubia as a high- on the global market? This is a question that is Chinese manufacturers that have beaten foreign phone market share. In contrast, the combined op- end smartphone brand. Its first product, the ZTE Nubia Z5 equipped with high-class hardware, was launched in regular and titanium versions at CNY 3,456 and CNY 7,890, respectively. However, it was Market Share in the shunned by the market. Huawei’s flagship product, Chinese Smartphone Market (Unit:%) the Huawei Ascend P6 was sold at EUR 449 (CNY 10.8 3,600) in the European market. However, it was Samsung 16.3 sold for CNY 2,688 in China. Huawei said it cannot 8.0 make a profit with a price lower than CNY 3,000. Lenovo 15.615.6 Chinese mobile phone makers must be wary of increasing market share without making profits. 10.8 Huawei Without profits, technological innovation and in- 10.6 vestment in brand building is impossible. If the 13.0 current situation continues, Chinese mobile device Apple 9.7 companies could face the same difficulties they had ten years ago. 88 AUTUMN 2013 VOL.11 POSRI - Chindia plus Quarterly 89.