Chinese smartphone brands are dying off fast as market consolidates

China loves its smartphones; that’s as true as it ever was. But as smartphone penetration reaches higher levels and the market cools off some, we’re starting to see some winners – Huawei, Oppo, Vivo, Xiaomi – emerge. And as those companies grab up more and more market share, the number of losers stacking up in the dead pool is growing, too.

In fact according to Peng Zhen, a senior engineer at the China Academy of Telecommunication Research, more than 30 percent of China’s domestic smartphone brands bit the dust between 2014 and the end of 2015. In 2014, Peng says, China had 445 different domestic smartphone makers operating. By the end of 2015, that number had dropped to 309, meaning that 136 different Chinese smartphone brands died over the course of 2015.

That’s a trend that has continued into 2016, and even higher-profile brands like Dakele – once considered the finest iPhone clone maker in China – are shutting down.

China’s weaker smartphone makers are dying off in the face of strong competitors.

What’s the cause of the culling? Natural selection. Just as deer that have bred beyond their ecosystem’s carrying capacity will see their weakest starve and die off during the wintertime, so too are China’s weaker smartphone makers dying off in the face of strong competitors and a market that isn’t big enough to support all the companies that want a piece of it. Even now, in the first few months of 2016, Chinese smartphone makers have been launching new handsets at a rate of about three every day. As recently as 2013, the rate of new handsets coming out each day was twice that.

Many companies also spread themselves too thin, pouring money and resources into developing both completely new hardware products (the handsets) and their own Android-fork operating systems.

Dakele, for example, had its phones but also its proprietary KeleUI OS. Xiaomi invested in making both hardware and software, but its first handset was a huge hit. When you make that kind of investment but your product doesn’t make a major impact in the market, it can be difficult to recover from. And few companies can afford to maintain the high R&D budgets needed to churn out new handsets and new software year after year without sales revenue coming in to offset the cost. The big die-off rate over the past year or so has been mostly caused by companies that haven’t seen sales success hitting the ends of their runways and going out of business or pivoting in another direction.

Given that, it may be wise to expect this trend of consolidation to continue moving forward, as successful brands see their name recognition and sales rise, while failed brands run out of money, patience, or both and are forced to drop out of the race.