SHANGHAI (Reuters) – Smartphone retailers in China say that it is a hard sell with consumers reluctant to upgrade, deterred by the chill economic winds.
FILE PHOTO: Xiaomi founder and CEO Lei jun attends a launching ceremony of the new flagship phone Xiaomi Mi 9 in Beijing, China, February 20, 2019. REUTERS/Jason Lee/File Photo
Even as domestic brands, led by Huawei have made great progress, wooing consumers with top-notch hardware and innovative features as they move upscale in the $500-$800 price range. The result: a loss of market share in an important segment for Apple Inc and fresh price cuts for iPhones by the Chinese retailers.
“Of those people who are upgrading, there are a lot of switch over from Apple to the Chinese brands, but very few switch from Chinese brands to Apple,” said Jiang Ning, who manages a Xiaomi shop in the northern province of Shandong.
Huawei Technologies Co Ltd, Xiaomi Corp, Oppo and Vivo once sought to seize share in the world’s largest smartphone market with value-for-money devices, but the consumer demand for better phones has prompted strategic rethinks.
“People are more attached to their phones than ever and have higher expectations for the position and the experience it offers. The answer is the constant upgrade of hardware specs,” Alen Wu, global vice president at Oppo, told Reuters.
He Fan, CEO of Huishoubao who buys and sells used phones, said that he has seen a consumer shift to Huawei, Apple, driven by the Chinese love of selfies and the emphasis on the camera quality. Huawei has a tie-up with German camera manufacturer Leica since 2016.
“Huawei’s cameras are significantly better than Apple’s in that they are to the taste of Chinese consumers,” he said.
In comparison with dual-cameras is used in most smartphones, Huawei’s P20 Pro device has three cameras at the back, with the additional improvement of the zoom capabilities.
It is one of the many new devices in the P20 and Pairs 20 lines, which helped Huawei’s share of the $500-$800 segment in China surge to 26.6 percent last year to 8.8 percent, data from research firm Counterpoint.
Apple, by contrast, saw its share of the segment in the dryer to 54.6 percent from 81.2 percent, also hurt by its decision to continue to chic with the iPhone-X-series.
“Most of the Chinese smartphone buyers are not ready to shell out $1,000 for a phone,” said Neil Shah, research director at Counterpoint. “This left a hole in the under-$800 segment, which the Chinese suppliers grabbed with both hands.”
(For a graphic on Chinese smartphones to increase share-of-home market’ click tmsnrt.rs/2HvsyQi)
Shipments of phones priced over $600 in China grew by 10 percent in 2018, data from research firm Canalys shows. By contrast, the overall market has shrunk 14 percent, marking a second year of contraction.
The weaker cachet for Apple in China was underscored this month when several large retailers simultaneously the iPhone prices for a second time this year.
A 64GB iPhone 8 sold Suning.com Co Ltd now costs 3,899 yuan ($580), about 25 percent less than in December. That is also lower than the $599 price tag in the United States, where iPhones are usually cheaper to buy than in China. Most of the iPhone models of the iPhone 8-series, you have seen the prices in China cut, albeit not to the same extent.
In the income also, it seems to be a story of divergent fortunes. Apple’s October-December revenue from the greater China region fell by about a quarter from a year earlier. China currently accounts for 15.6 percent of its total revenue.
Huawei, the world’s No. 2 smartphone maker, has an estimated turnover for 2018 increased from 21 percent, which analysts attribute in large part to robust smartphone sales.
More generally, less revenue for Apple means less customers for the App Store and media streaming services. The shift to higher-end phones by Chinese brands also meant a larger attack in the overseas markets.
Huawei’s shipments in Europe jumped 55 percent in the last quarter and it now has a share of 23.6 percent market share, according to Canalys. That is not too far behind Samsung and Apple, which saw small decreases in the shipments.
If Huawei is taking the lion’s share of the turf that Apple ever in China, Oppo and Vivo brands are owned by electronic hardware conglomerate BBK – are the newest threats.
In June, Vivo started with the Nex begins 3,898 yuan ($610) and in July, Oppo launched the X, priced at 4,999 yuan ($755).
The models mark the first time that the brands priced is a phone above $600, a sharp departure from their roots to the sale of $300-$500 models to young consumers in second-tier cities.
The devices come with functions that are not available in the iPhone, including the under-the-glass fingerprint sensors and “notchless” shows, both of which increase the size of the usable screen.
Xiaomi to move upmarket, with the announcement that in January it would split off its low-budget Redmi range of mobile phones in a sub-brand. This is taking a leaf from Huawei’s book, that has been in for cheaper devices sold under the Honor brand, helping to differentiate its products.
Redmi will focus on the international markets and e-commerce sales, while the flagship Xiaomi brand will focus on China and offline retail markets, the founder of the company Lei Jun told reporters.
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Last month, Xiaomi unveiled the Mi 9, the latest flagship device with a price tag of 2,999 yuan ($450). But the company also said that it might be the last time a Xiaomi flagship phone would be priced under 3,000 yuan.
“Xiaomi’s flagship series phones were always set at 1,999 yuan,” said Lei. “This was a contributing factor to our rise, but it was also an obstacle to our growth,” he said.
(For a graphic on Chinese smartphones to increase share-of-home market’ click tmsnrt.rs/2Hx2KD4)
Reporting by Josh Horwitz; Additional reporting by Stephen Nellis in San Francisco, Paul Sandle in Barcelona, and the Shanghai newsroom; Editing by Jonathan Weber and Edwina Gibbs