Chinese smartphone giants are making a high-end play against Apple and Samsung

Chinese smartphone makers need to push into the high-end system market to problem the dominance of Apple and Samsung after one of many worst years for the market on file.

At Mobile World Congress — the world’s largest cellular present — in Barcelona, Spain final week, Chinese smartphone makers had among the most distinguished stands and shows, contemporary off the again of launching new merchandise.

Last month, Oppo, the world’s fourth-largest smartphone maker, launched its foldable smartphone known as the Find N2 Flip which was priced at greater than $1,000. Its greater rival Xiaomi adopted with the launch of its $1,000 plus Xiaomi 13 and Xiaomi 13 Pro.

Honor, an organization spun off from Chinese telecommunications big Huawei, then launched its $1,690 foldable smartphone known as the Magic Vs.

These costly smartphones signify a shift in technique from Chinese firms, which have risen to prominence through the years by way of providing lower-cost gadgets with flagship-like specs.

“A multitude of companies such as Oppo, Xiaomi, OnePlus, Vivo, RealMe and others are keen to flex their muscles as they try to secure a place in the market alongside Apple and Samsung who increasingly dominate sales around the world,” Ben Wood, chief of analysis at CCS Insight, informed CNBC by way of e-mail.

That change in tact from Chinese companies comes after shipments within the smartphone market final 12 months reached their lowest stage since 2013. But the share of high-end smartphones, these priced above $800, rose from 11% in 2020 to 18% in 2022. Apple and Samsung mixed have practically all of that market.

Still, the chance is profitable as Chinese distributors look to spice up margins.

Unquestionably, Wood mentioned there’s “a push for the premium market which commands higher average selling prices and margins.”

The high-end push additionally coincides with China’s re-opening after the nation abruptly dropped its strict Covid prevention guidelines in December. This has made it simpler for executives, who’ve largely been caught in China since early 2020, to journey overseas.

And it additionally coincides with renewed impetus by Chinese companies to broaden their world attain. In 2022, the market share of Chinese smartphone makers Realme, Oppo and Xiaomi declined in Europe, whereas Apple and Samsung remained comparatively secure. Chinese firms are hoping to vary that now that the home financial system has re-opened.

“The ease of lockdown is a ‘reboot’ for the companies manufacturing and exporting to global customers to meet in person and expand the relationships and business opportunities,” Neil Shah, companion at Counterpoint Research, informed CNBC by way of e-mail.

“So, for the next 12 months we will continue to see a surge of Chinese business as well as tourists flocking outside of China which will boost their global strategy.”

Chinese smartphone makers have but to crack the premium phase of the market. The exception was Huawei which managed to seek out success within the high-end, finally changing into the primary smartphone participant globally in 2020, earlier than U.S. sanctions crushed its handset business.

Xiaomi, Oppo, Honor and different Chinese challengers face various challenges within the premium phase, in response to analysts.

The first is model recognition, in response to CCS Insight’s Wood, who mentioned Chinese companies are spending “eyewatering amounts of money” on promoting campaigns to lift consciousness.

But the largest situation, in response to Shah, is sustainable profitability.

He mentioned Apple and Samsung are dominating many of the premium markets such because the U.S. and Europe. While Chinese manufacturers have additionally not been in a position to construct worthwhile software program and companies companies as Apple has, which yields greater margins.

“Profitability is the biggest challenge as their scale declines because the segments they have been targeting (affordable entry-to-mid-tier) has been shrinking,” Shah mentioned.