Xiaomi and OnePlus (a convincing rebrand of Chinese firm Oppo / 广东欧珀移动通信有限公司) are two darlings of the technology industry. Their handsets, loaded with flagship hardware, sell for half the price of their major rivals. With compelling industrial design and the latest (forked) distributions of Android, Chinese upstarts are effectively threatening long-established rivals such as Apple, Samsung and HTC.
The most commonly cited reason for their success is they offer more value than their rivals. Exactly how they offer this value is commonly misunderstood. Both brands have innovated unique supply-chains that forgoe the warehousing-and-inventory-accumulation model, and replaced it with a direct-from-manufacturing-to-shipping model. Reviews and analyses often point to limited stock / unavailability as shortcomings of these brands, when in fact, it’s the very basis for their success. In an industry where the latest-and-greatest has a maximum shelf-life of twelve months, Xiaomi and OnePlus have built scalable businesses that reach the future faster (and cheaper).
Why we’re seeing Chinese smartphone startups
A decade of “Designed by Apple in California | Assembled in China” has, according to Benedict Evans, created a “firehose of cheap, low-power, ever-more-sophisticated smartphone components” in Shenzhen and surrounding regions in China
Continuing, these components are:
available for anyone else to use – it’s as though someone dumped a shipping container worth of Lego on the floor and we’re working out what to make. (1)
Xiaomi and OnePlus were founded—2011 and 2013 respectively—in a market where the production of critical components, and the logistics of production, had already been established by their forbearers, HTC, Apple and Sony.
In a manufacturing economy where Qualcomm, Corning and TSMC ‘Legos’ are available to any brand looking to put together a smartphone, the material barriers to market-entry are lower than they’ve ever been. At the same time, Apple spent more than 1.2 billion USD on advertising in 2014, suggesting that the cost to play is prohibitively high.
How does a firm like Xiaomi or OnePlus leverage to the availability of affordable ‘legos’ despite the prohibitive ad-spend of market rivals?
The Smartphone Industry: How to Sell the New
Smartphone companies sell the idea of the ‘new’—more storage, faster processors, better scratch-resistance, bigger cameras—yet the ‘legos’ that constitute smartphones are widely available in a free and open market. As Android and iOS (now even WeChat and Facebook messenger) further establish themselves as the only smartphone platforms, any significant difference between smartphone companies, either in hardware or in software, is quickly eroding. Let’s call this the Shenzhen-Market-Problem.
In an industry (technology) that depends on the ‘newest’ and ‘best’ for success, this inability to successfully differentiate raises significant problems that heretofore have been solved in two key ways:
- branding, through advertising and industrial design
- Exclusive ‘killer features’
Stay updated on the go with our mobile app.
Get latest insights with smoother, more personalized experience through TIA mobile app.
