A look at the Chinese smartphone market as new brands rise

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In a lot of developed countries, the penetration ratio of smartphones is equal to or even higher than 100 percent, as some people own more than one device.

In recent years, China’s mobile phone penetration ratio is almost equivalent to its population. In fact, in 2015, there were more than 1.3 billion mobile users, a number slightly less than the total amount of the entire Chinese population. According to Statista, more than 560 million are using smartphones in 2016. This number is forecast to grow to around 640 million in 2018.

Smartphones in China represent a fundamental tool for people’s everyday lives, and according to China Internet Network Information, about 92.5 percent of the entire country’s internet users use them to access the web. The number of users that access the internet from mobile devices is 656 million (42 percent of the population), and 173 million of them access the internet only and exclusively through their phones (24.5 percent of the population).

The spread of smartphones has been followed by a significant expansion of 4G technology across the country. In 2016, according to China Mobile, a telecommunications company in the country, there are about 510 million 4G users, a number higher than Europe and the United States combined.

Worldwide smartphone sales in 2016 registered at 6 percent growth, but it’s necessary to stress the crucial role that the Chinese market is playing. In fact, the Chinese smartphone market alone has registered a 24 percent year-on-year growth regarding units produced between 2015 and 2016 (88.8 million and 109.7 million, respectively), and a corresponding increase of 20 percent in sales total value (from US$26.9 billion to US$32.4 billion).

Therefore, it is interesting to have a closer look at the smartphone market both worldwide and in China. If in the global level, Samsung (21 percent market share) and Apple (12.5 percent) are dominant, followed by Chinese brands Huawei (9.3 percent), Oppo (7.1 percent), and Vivo (5.8 percent), it’s the exact opposite in the local level, with Oppo in the first place (16.8 percent), followed by Vivo (16.7 percent), then Huawei (16.4 percent) and Apple (9.6 percent).

The scenario in China, however, has never been this way. On the contrary, we can affirm that the most significant changes happened in the last 2 years. BBK Electronics Group, an electronics company owned by billionaire Duan Yong Ping that produces mobile phones in Dongguan, owns the Oppo and Vivo brands and has conquered the Chinese smartphone market very quickly.

Between 2015 and 2016, Oppo has year-on-year growth of 122 percent, gaining the leadership in market share (16.8 percent) and increasing its smartphone units sales value from US$35.3 billion to US$78.4 billion. In the same way, Vivo has registered year-on-year growth of 96.9 percent. On the contrary, Apple saw a 23.2 percent drop, decreasing its market share from 13.6 percent to 9.6 percent and total value units sold from US$58.4 billion to US$44.9 billion.

Chinese brands advance

Even if they belong to the same group, Oppo and Vivo, are competitors. However, it is possible to notice many similarities between these brands, their products, and business strategies. Both of them focus on the development of a low-price product that could also have enough technological features to satisfy consumers needs.

The chance to buy a phone with a similar design and features as Apple phones, but at a lower price, is a reason why Oppo and Vivo are growing so fast in China.

Oppo’s R9, its flagship product, is priced from US$239 to US$539, has a design very close to iPhone 6 and iPhone 6 Plus, a 16MP retro camera, and became the most purchased smartphone in China in 2016, solely wining 4 percent of the market. The chance to buy a phone with a similar design and features as Apple phones, but at a lower price, is one of the key reasons why Oppo and Vivo are growing so fast in the Chinese market.

But considering the selling strategy, these two brands are being sold in rural, and fourth and third tier cities in China, areas where the disposable income is lower than the metropolis like Beijing or Shanghai. In addition, an important business strategy is not to be on ecommerce channels and online markets in general. They instead went old-fashioned, focusing on offline stores and selling in brick-and-mortar shops.

It is estimated that Oppo alone has opened more than 200,000 stores across the country, boosting its sales with in-store promotions. The only digital marketing effort exerted was asking influencers on social media to endorse the brand.

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