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March 8, 2019

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Thinking smarter amid phone competition

Honor, the Huawei sub-brand targeting young consumers, opened a new flagship store in a Wanda Mall in northeastern Shanghai last weekend. Its competition is apparent. Rivals Vivo, Xiaomi, Oppo and Apple have shops within 500 meters of the Huawei store.

It’s a tough market environment nowadays, and the major players have to adopt strategies to try to put their brands at the top of consumer shopping lists.

They are also seeking new opportunities through investment on integrating brand and distribution, expansion in the overseas markets and developing technology innovation. The current industry buzz words, like 5G and fold-display smartphone, are long-term trends that will take one or two years to move to the forefront of the market in China.

“This year is filled with pressure and a test to all brands,” said Zhao Ming, Honor’s president.

Zhao’s pessimistic view isn’t groundless.

Chinese smartphone sales dropped more than 10 percent last year. Analysts attributed the decline to a slowing economy, longer replacement cycles and shrinking consumer budgets, researchers said.

In 2018, 398 million smartphones were sold in China. International Data Corp (IDC) said that was a 10.5 percent drop from a year earlier. Another researcher, Canalys, put the decline at 10.8 percent.

“The Chinese smartphone market looks hardly optimistic for 2019,” said Xi Wang, IDC China senior market analyst.

Top vendors in the domestic market last year were Huawei, including Honor, with 26.4 percent of the market, IDC said. Oppo had 19.8 percent; Vivo, 19.1 percent; Xiaomi, 13.1 percent; and Apple, 9.1 percent.

No. 3 Vivo has also unveiled a sub-brand targeting young consumers, especially game fans, with a modern design and relatively affordable price. Its name refers to “I Quest On and On,” and it’s sold mainly through online channels.

It’s “a new start of march and exploration” for Vivo, said Feng Yufei, vice president of IQOO.

Vivo also announced a partnership with Tencent on a game experience for the new brand. The first IQOO phone, which features Qualcomm’s 855 processor, fast charging and big memory and screen, starts at 2,999 yuan (US$448), a competitive price compared with the Vivo-brand flagship model often above 4,000 yuan.

In a market saturated with smartphones, vendors are resorting to in-depth user profiling and analysis of “age, gender, city tier, hobbies and interests, and brand perception,” said IDC.

The new brands will help firms like Vivo and Oppo, which have strong offline channels, find new opportunities online, analysts said.

Xiaomi, the No. 4 player in China, officially spun off its sub-brand Redmi recently to target the entry-level market. Xiaomi and Redmi now have separate operations and sales channels.

Huawei and Honor have operated separately for several years. Honor, which was born to focus on online channels, is actively opening offline stores like the new Shanghai shop to improve access to users.

Compared with the domestic scene, overseas markets — especially in emerging economies — retain great potential.

Honor has taken the No. 2 spot in the Russian market and become one of the top five brands in countries such as Italy and Finland.

In 2019, its overseas sales growth will surpass 100 percent, following a 170 percent surge last year, Honor’s Zhao said.

OnePlus, a Chinese brand focusing on overseas markets, is expected to kick off its first 5G smartphone in countries like Britain and Finland. It has developed links with tech firms like chip designer Qualcomm and carrier EE, said Liu Zuohu, chief executive officer of OnePlus.

At present, OnePlus has established a global tech community with 5.5 million users from 196 countries and regions.

But back to the future. Phone models that offer two screens able to be folded into one tablet-size screen and the emergence of 5G were the buzz words at the recent Mobile World Congress in Barcelona.

In China, 5G licenses haven’t been issued yet, and 5G networks are not ready, which makes it difficult for smartphone vendors to persuade consumers to replace phones.

“China is in a globally leading position with relation to 5G technologies, but 5G phones will remain a small share of overall smartphone sales by the end of 2019,” said IDC. “It will be a long time before 5G is adopted on a mass scale.”

Though China lacks 5G smartphones and applications now, the country should prepare for 5G in sectors like manufacturing, agriculture, smart driving and the Internet of Things, Lei Jun, Xiaomi’s chief executive, said during the annual “Two Sessions” now being held in Beijing.

Following Samsung announcement that its Galaxy Fold will cost US$1,980, Huawei unveiled its own foldable model called Mate X at the Mobile World Congress. It’s priced at US$2,600. Other brands are expected to follow suit.

“This will not be the year that foldable phones go mainstream,” said Canalys in its latest report. “They will remain exclusively ultra-luxury devices, with fewer than 2 million foldable phones shipped worldwide in 2019.”

Honor will also launch foldable phones this year, said Zhao, adding that he doesn’t expect them to become mainstream soon given the “technology and costs.”

Improvement in phone batteries and phone cameras is a more immediate reality.

Oppo is developing technology for a 10x (10 times) zoom lens, which will be used in smartphones for tele-photography. Also in Barcelona, Nokia launched a model with five cameras. The improved smartphone cameras are blurring lines between smartphones and amateur cameras.

Meanwhile, IQOO displayed its fast-charging feature in a kick-off event in the southern city of Shenzhen. It allows users to charge 50 percent battery capacity within 15 minutes.


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