By SAMSON AKINTARO
The International Monetary Fund (IMF) rates China’s socialist market economy as the world’s second largest economy by nominal GDP, and the world’s largest economy by purchasing power parity. But those are not just the leading indices for China, being also the most populous country in the world.
As of June 19, 2016, China’s population stood at approximately 1.38 billion, equivalent to 18.72 per cent of the total world population, according to United Nations estimates.
Interestingly, Chinese companies are also topping the tables in terms of innovations and technological prowess. Indeed, Chinese mobile manufacturers have kept the top global brands like Samsung and Apple on their toes, as they (the Chinese brands) perfect strategies to overthrow the hitherto global torchbearers.
Coming from its niche area as number one network equipment vendor, where it displaced other major brands, Huawei is leading the Chinese brands on a mission to topple the current leaders, South Korea’s Samsung and the United States’ Apple Inc.
As of the third quarter of 2015, Huawei stood as the third largest vendor of smartphones, with 7.5 percent of the market share. The company shipped more than 27 million units in that quarter. Curiously, Huawei is followed by two other Chinese brands: Lenovo and Xiaomi who also have over five percent of the smartphone market share; as each company sold about 17 million mobiles phones to end users in the third quarter of 2015.
Similarly, in a Q4 2015 IDC mobile shipment report, the three Chinese mobile vendors maintained the third, fourth and fifth positions, coming behind Samsung and Apple. According to IDC, among the key brands, originating from China, Huawei has consistently expanded its presence and share on the back of affordable handsets in emerging markets, combined with increasingly competitive flagship models.
“Usually the conversation in the smartphone market revolves around Samsung and Apple, but Huawei’s strong showing for both the quarter and the year speak to how much it has grown as an international brand,” said Melissa Chau, Senior Research Manager with IDC’s Worldwide Quarterly Mobile Phone Tracker.
“While there is a lot of uncertainty around the economic slowdown in China, Huawei is one of the few brands from China that has successfully diversified worldwide, with almost half of its shipments going outside of China. Huawei is poised to be in a good position to hold onto a strong number 3 over the next year.”
Huawei Eyes the top spot in Mobile
Currently, Huawei is the world’s largest manufacturer of telecommunications equipment having overtaken Ericsson in 2012. Samsung and Apple are neck-to-neck in the smartphone business as the two leading manufacturers after Nokia slipped into oblivion. While Samsung holds an apparent global lead, Apple leads mostly in the North American market.
But Huawei, which has before now not shown any serious marketing strategy on the smartphone market but preferring to weigh in heavily on the network equipment segment, has now removed the mask, to attack both Samsung and Apple – for the number one spot.
With so much control in several markets across the world already as the default network equipment supplier, Huawei stands a greater chance of becoming also the global smartphone leader if it adopts a strategy of standardising its smartphones to run cheaply on networks as either add on to the equipment sold or as bundled offers at much lower costs that can undermine and undercut competition.
In fact, Huawei has appointed an executive to lead the company’s consumer electronics business to champion the campaign to take over the number one position in smartphone from both Samsung and Apple, with a target time frame of five years by grabbing no less than 25 per cent of the global market.
“We want to be the number-one smartphone maker in the world. It’s a long distance race, and we have the patience,” said Richard Yu, the head of the company’s consumer-electronics business, at the Converge technology conference hosted by The Wall Street Journal and founders.
Over the past few years, the Chinese company has been growing rapidly as a handset maker.Huawei has been narrowing the gap with Samsung and Apple in the global smartphone market, whose growth is slowing. In the first quarter, Huawei’s smartphone sales volume increased 59% from a year earlier, while Samsung’s sales were little changed and Apple’s sales declined 14%, according to research firm Gartner Inc. Huawei’s market share in the quarter rose to 8.3%, behind Samsung’s 23% and Apple’s 15%.
While increasing its market share, Huawei has also been focusing more on high-end products, such as its latest flagship phone, the P9, which features a dual-lens camera it developed with German optics company Leica Camera AG.“Our growth is mainly coming from the high-end, premium segment,” Mr. Yu said. “If you want to be the leading vendor, you have to lead in the high-end.”
Mr. Yu said that Huawei’s partnership with Leica is an exclusive long-term alliance and he expects the collaborations to continue at least for the next five years.Huawei is also pushing further into new technologies such as virtual reality. Based on its partnership with Alphabet Inc.’s Google, which provides a VR software platform, the company plans to release a new VR-compatible smartphone this fall, Mr. Yu said.
While Huawei smartphones are finding buyers in many parts of the world, the company has a minimal presence in the U.S. market.Huawei’s telecom networking equipment, such as base stations and antennas, has been effectively banned in the U.S. after a 2012 congressional report recommended that U.S. carriers avoid Huawei’s gear, citing concerns that it could be used by Beijing to spy on Americans. Huawei has repeatedly denied such allegations.
Mr. Yu said that the U.S. cybersecurity concerns about Huawei’s networking equipment won’t affect the company’s efforts to sell smartphones in the market. “Consumers only want to have better products,” he said. Mr. Yu said Huawei is in discussions to sell smartphones through U.S. telecom carriers, without disclosing any specific product launch plans.
At home, Huawei and other Chinese smartphone makers are grappling with a slowdown in domestic sales as the market becomes saturated. The country’s smartphone shipment growth slowed to 2.5% last year, compared with 63% in 2013, according to market research firm International Data Corp.The cutthroat competition has also been fuelled by the entry of new players hoping to replicate the success of Huawei and Xiaomi Inc. Speaking at the Converge conference, Pete Lau, founder and chief executive of smartphone maker OnePlus, said China is “a very cruel market.”Mr. Lau said OnePlus, a small player by volume in China’s smartphone market, has taken a hard look at its product strategy and decided to keep a narrow focus on its strength: high-end smartphones.
China’s R&D Strategy
To better understand the fast paced progress being made by the Chinese brands across the world, a look at the country’s disposition to and spending on research and development (R&D) will suffice. In 2012 China’s total spending on research and development was one trillion yuan ($164 billion), just under 2% of its gross domestic product. The same year, the U.S. spent $447 billion, or 2.8% of its GDP. But as China’s economy continues to grow rapidly, so does its R&D spending — and it’s projected to overtake that of the United States by 2022. Scientific advances contributed 51.7% to China’s economic growth in 2011, and the country is betting that technical innovations can help it address many challenges, including the need to upgrade its industrial base, reduce air pollution and address growing inequality.
The Chinese government unveiled its “indigenous innovation” campaign in 2006, with a goal of turning the country into a “science powerhouse” by 2020 through an emphasis on human capital. Approximately 7 million Chinese citizens will graduate from college in 2014, up from just 1.1 million in 2001, and the country wants to lure back Chinese-origin scientists working abroad. China’s increasing number of academics has pushed China up in global rankings of published science and engineering papers: The country was 14th in 1995 and by 2007 was second only to the United States.
By the same token, the Chinese companies are investing massively in R&D, hence their capacity to overtake other top global brands through innovation is never in doubt. For instance, Huawei has been investing heavily to beef up its patent portfolio in order to compete with Samsung and Apple in overseas markets. Last year, Huawei spent $9.2 billion in research and development, higher than the $8.1 billion Apple reported spending but below Samsung’s $12.5 billion.
In 2014, Huawei invested 40.8 billion Yuan, about $6.6 billion in R&D. By the 2014 standard alone, Huawei was said to have outpaced American giants such as Apple, Oracle and Facebook in R&D investment.
The Affordability Edge
Chinese products have many things in common, but the biggest that set them apart from other brands is affordability. At the beginning of the Chinese inroad into the mobile market, competition had mischievously labelled the mobile phones coming out of China as inferior due to their cheap prices, even while they would want to discountenance the fact that labour is cheapest in China compared to any other country of the world, hence, products coming out of the country cheaper. Today, the competitive price of the Chinese phones is giving them the edge, even as they have picked up the pace when it comes to innovation.
A look at the chart of the world’s biggest phone makers in 2015, interestingly, indicated that 7 out of the top 10 are from China. This is no coincidence: the Chinese market has grown hugely, and the international buyers are appreciating the good works done by the Chinese phone makers.Chinese phones are reputed to offer excellent value for money, with specs to rival flagship phones from top manufacturers such as Samsung and Apple often sold at less than half the price, hence they are becoming increasingly popular worldwide.
The Chinese Brands in Nigeria
Just as the Chinese phones are gaining acceptability across the globe, the situation is not different in Nigeria, where another Chinese brand, Tecno, a subsidiary of the Transsion Group in China, is leading mobile sales. Unconfirmed reports has it that Tecno is now the highest selling mobile brand in Nigeria. Although the company has yet to release official figures of its sales so far, the frequency of its mobile launches in the Nigerian market shows wide acceptability.
In Nigeria, Tecno is believed to have pioneered the release of affordable smartphones. With array of devices from low range to high end, Tecno has captured all segments of the market with affordable smartphones of similar specs with that of Samsung and Apple. Huawei has also reinvigorated its mobile push in the Nigerian market with the launch of its various flagships in the country. Other Chinese brands such as Infinix, Lenovo, are also making bold statements with their devices becoming the toast of many Nigerians.
Last Line
Obviously, the world is in the Chinese brands’ hands to be captured: They have the technology, the man-power and of course, their government’s backing to explore every possibility in the world. For the current top global mobile brands, it is definitely going to be a tough battle as the Chinese brands are coming well equipped to take over. May the best hand wins.