Is There Room for Another Smartphone Company in China?

Chinese Smartphone Market

The People’s Republic of China, is no more the haven for cheap and plentiful mass-produced products. It is now ground zero for the smartphone revolution. In fact, the Chinese smartphone market now hosts six of the global top-10 smartphone manufacturers, based on production capacity and popularity. It has built up infrastructure, support services and knowledge to prompt non-Chinese smartphone giants to interact with and invest in this dynamic market. Amid the possibilities, however, there have been concerns as well.

Booming global smartphone market looks to China for reinforcements

At the start of 2018, the number of smartphone users around the world was pegged at approximately 1.86 billion. Global revenue from smartphone sales has hit over USD 479 billion. And, a slew of well-organized and technologically sound smartphone manufacturers have set up shop across China’s economic centers like Shenzhen, Dongguan, Hong Kong and the suburbs of Beijing. These manufacturers are immediately targeting the local Chinese market that is 626 million users strong. And also, branching out to high-worth markets like India, Europe, the United States and Brazil.

Thankfully, the global markets are receptive, and appreciative of the Chinese smartphone industry’s newfound affinity for quality and cost-effective manufacturing. Within the country, the mobile phone penetration rate is 77.3%. This ensures that there is still a massive market to annex considering that China’s population stands at 1.41 billion people. Interestingly, while the gross penetration rate of internet users in China is just 53.2%, the corresponding penetration rate of mobile internet users is a staggering 95.1%. This points to the role that the Chinese smartphone market has played in popularizing internet connectivity in the country.

What’s the Chinese smartphone market’s fail-safe against overcrowding?

As already mentioned, the smartphone market in China is home to a number of world-class manufacturers. These include Lenovo, ZTE, Huawei, Xiaomi, Coolpad, and TCL/Alcatel, and accounts for the 4.8% year-on-year growth in this dynamic market. That growth rate alludes to the fact that in recent times, Chinese buyers aren’t replacing their smartphones as frequently. They are strategically choosing to wait for significant OS upgrades before doing so. Naturally, the market has slowed thanks to this unexpected development.

Overcrowding may be to blame for this. Subject to a wide range of choices, the average Chinese buyer is easily confused and determined to ignore less significant iterations. Holding out also ensures that when it is eventually time to buy, most will likely choose a premium device that costs more and sports a refined set of features. Unfortunately, this spells trouble for smaller players.

Experts agree that the world’s largest mobile handset market is a very chaotic place. In 2018, amid declining sales and inability to venture outside China, lesser-known manufacturers in the Chinese smartphone market will be forced to close shop. Huawei, Xiaomi, Oppo, Vivo, and Apple — cumulatively accounting for 77% of the Chinese market — will continue to innovate and challenge. However, smaller brands will either be forced to exit the race or will be absorbed by their larger competitors. An almost nature-like solution for the problem of overcrowding.

Strategic innovation is key to survival and success

In a landscape that’s as challenging as the Chinese smartphone market, bold strategies will separate the winners from the also-rans. A fine example for this is the Shenzhen-based OnePlus. This four-year-old smartphone innovator releases one or two phones each year, while ensuring an almost stock Android configuration, highly competitive pricing and universally tempting specs. Backing the hardware is a strategic marketing campaign that relies on clever referral systems, thoughtful social media campaigns and good old word-of-mouth promotion. OnePlus has managed to enlist a faithful global following with these strategies. Potential customers are lining up in Paris, London and Bangalore just to check out the phones at OnePlus’s plush showrooms. All in all, the company represents the formula that best delivers success in the global smartphone market.

Eventually, it boils down to innovation, strategy and customer outreach — attributes that the Chinese mobile companies of 2018 are well versed in. All it needs is a bit of brushing up, maybe.