China's Fancy Phone Makers May Squeeze the Air Out of Smaller Players, Experts Say
Li Na
DATE:  Sep 07 2018
/ SOURCE:  Yicai
China's Fancy Phone Makers May Squeeze the Air Out of Smaller Players, Experts Say China's Fancy Phone Makers May Squeeze the Air Out of Smaller Players, Experts Say

(Yicai Global) Sept. 7 -- China's biggest domestic smartphone makers of Huawei Technologies, Xiaomi, Oppo Electronics, and Vivo Communication Technology are about to crush smaller producers such as Qihoo 360 and ZTE amid fierce competition, market analysts said.

"Small and medium-sized brands can no longer turn a profit in this market and their market shares are continuously overtaken by other brands," Li Rui, Chief Executive for Navi Consulting said to Yicai Global, adding that this is why the upscale brands release new models more frequently and squeeze their profit margins to compete for chiefdom amongst each other.

Taking N7 Pro of Qihoo 360 and ZTE's Nubia Z18 as examples, both are priced at around CNY2,000 (USD292), Li said, adding that these small and medium-sized producers must find a way to balance their profits and losses in the future.

The average profit margin of the Chinese mobile phone industry is only about 3 percent, which is lower than the average of the electronics manufacturing industry, data released by the Ministry of Industry and Information Technology show.

"In a cutthroat market competition, these [upscale] brands have to increase their sales volume because falling behind in any market sector may bring opportunities to rivals," Wang Yanhui, secretary-general of China Smartphone Alliance, told Yicai Global.

Huawei has to ship over 10 million Honor 8X series smartphones if the company wants to reach a break-even point, George Zhao, president of Huawei's sub-brand Honor told Yicai Global in an interview. With the polished price, Honor-branded 8X series of products "may not have rivals in its market sector within a year," predicted Zhao.

The two pricing segments of the high-end smartphone market have both been aspirational this year, according to Li. In July, the market share of handsets priced from CNY1,000 to CNY1,499 rose 10 percentage points to 30 percent from the beginning of the year. The increase in even more expensive gadgets with price tags from CNY1,500 and CNY1,999 was 5 percentage points to 20 percent. Overall, such pricey handsets made up some 50 percent of the total.

Turning the quality up a notch comes with unforeseen benefits to the firms as they will have closer ties with their suppliers, which in turn gives long-term advantages against their rivals, Wang said.

This year, the CNY1,000 mobile phone market will show us where the real competition takes place, Li said. "Overall, small brands will try their best to guarantee profits and giants will occupy market shares as much as they can in the second half of the year."

Editor: Emmi Laine

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Keywords:   Smart Phone,Market Analysis,Low And Medium End Market,Cutthroat Competition,Lower Margin,HUAWEI,Xiaomi,OPPO,Vivo