Looking at Counterpoint Research’s estimates for smartphone shipments in Q3 of 2019, it is striking how many Chinese companies are at top of the list. Seven of the ten top companies are Chinese.
It gets confusing whether to call these manufacturers, companies or brands. Calling them manufacturers isn’t exactly correct because many smartphones are made by other OEMs and ODMs. Saying brands gets confusing, because Huawei includes the brand Honor, Xiaomi includes the brand Redmi, ZTE includes the brand nubia, and Motorola is a brand owned by Lenovo. TCL has a license from Nokia to use the Alcatel brand, and HMD Global also has a license from Nokia to use the Nokia brand. TECNO, itel and Infinix are all brands owned by Transsion Holdings, but Oppo, Vivo, Realmi and OnePlus are companies owned by BBK Electronics which is part of the BBK Group. Presumably Counterpoint’s estimates also include phones made by these companies for cellular network providers. Maybe it is better to say seven of top ten smartphone providers are Chinese, since even the market analysis firms can’t agree on what term to use to describe the entities that produce or subcontract the production of smartphones.
Unfortunately, none of the market research firms publicly release estimates for the shipments of the smaller smartphone providers, so I made some guesstimates of the next ten biggest providers in the world. I believe that six of the next ten smartphone providers are Chinese. This list is highly speculative since I don’t have any recent data for companies like Coolpad, Meizu and Asus, and it is hard to know how much sales have collapsed for companies like ZTE and HTC. What is notable is that Sony doesn’t even appear in the top 20. Its sales have fallen from 37.79 million in 2014 to just 6.5 million in 2018, and are expected to be a mere 4 million phones this year.
Adding up the production of the 20 top smartphone providers, 58.3% of smartphones in Q3 of 2020 came from Chinese companies, compared to 24.9% from South Korean companies. Countries that were historical powerhouses in the mobile phone industry, now play little role, with American, Taiwanese and Finnish companies only providing 13.6%, 1.9% and 1.4% of smartphones, respectively.
This current domination of the smartphone industry by Chinese and South Korean companies represents a dramatic shift in the balance of power in the mobile phone industry. Two decades ago, European companies produced over half of the world’s mobile phones, and American and Japanese companies produced most of the rest. When Apple introduced the first iPhone in 2007, European companies still produced the majority of the world’s mobile phones. South Korean companies (Samsung and LG) had a fourth of the market and the American and Japanese companies were losing market share. Today, European and Japanese companies provide only a tiny fraction of the world’s smartphones, and China has largely taken over the industry.
Below are the percentages of mobile phones provided by country, based on the top 5 companies reported by Gartner between 1997 and 2008, and the top 10 companies between 2009 and 2014. Unfortunately, Gartner stopped publicly reporting the shipments of mobile phones in 2015 by company, so the numbers between 2015 and 2019 are based on the top ten providers of smartphones reported by Counterpoint Research. Although these numbers only include the market leaders, they show how the mobile industry has shifted from European, American and Japanese to South Korean companies a decade ago and now to Chinese companies today.
Another sign that Chinese companies increasingly dominate the mobile phone industry is fact that Huawei displaced Apple last year as the second largest provider of smartphones in the world–a position that Apple had held in the industry since 2010. Apple is likely to keep losing market share in the future. Despite the US government banning Huawei from using American technology such as Android from Google and Snapdragon processors from Qualcomm, Huawei is shipped more phones than ever before and had a stellar 28.5% year-over-year growth in Q3 of 2019.
Even more significant than the dethroning of Apple is the future dethroning of Samsung as the largest provider of smartphones in the world–a position that Samsung has held since 2011. Most people in the West have never heard of the BBK Group, although they might have heard of its company OnePlus, which make premium phones costing significantly less than Apple’s iPhone and Samsung’s Galaxy S-series. BBK’s other companies–Oppo, Vivo and Realme–have focused principally on developing markets in Asia. Adding together all its companies, the BBK Group produced roughly 75 million phones in Q3, compared to 78.4 million by Samsung.
Although Samsung’s sales have been increasing due to the fact that Samsung has improved the quality of its A-series and launched a new M-series at the mid-range of the market, it has been losing ground to the BBK Group in the developing world. Samsung is still the number one producer of smartphones in Europe, Africa and Latin America, and the number two producer in North America behind Apple. However, in Asia where 59.6% of the world’s population lives, Samsung has fallen to the fifth position, behind Huawei, Oppo, Xiaomi and Vivo. Samsung’s smartphone market share in China has fallen from 20% in 2013 to 1.1% in the first quarter of 2019, according to Strategy Analytics. In Southeast Asia, Samsung still tops the smartphone market, but Oppo is likely to overtake the Korean company in the future, because it experienced 49% year-over-year growth in the second quarter of 2019, whereas Samsung only grew 5%. The BBK Group is now the largest smartphone producer in the region by a wide margin and all the Chinese brands together control 61.9% of the market in Southeast Asia.
The local smartphone brands are also losing ground to the Chinese brands. Indian brands, such as Micromax, Lava, Karbonn, Intex, iBall and S Mobility (now Spice), controlled 45% of the Indian smartphone market in 2015, but Xiaomi, Vivo and Oppo started advertising heavily in India in 2016 and have redisplaced the Indian brands. In Q3 of 2019, Xiaomi controlled 26% of the Indian smartphone market, followed by Samsung at 20%, Vivo at 17%, Realme at 16% and Oppo at 8%, according to Counterpoint Research. Apple barely made it into the top 10 providers of smartphones, and the top maker of premium smartphones in India was OnePlus. The local Indian brands no longer compete in the smartphone market. According to Counterpoint Research, Lava, Micromax, Karbonn and Intex controlled only 1.2%, 1.1%, 0.2% and 0.1%, respectively, of the Indian smartphone market in Q1 of 2019.
The same displacement of regional brands has occurred in other Asian countries. Like India, the Philippines had a number of strong local brands such as MyPhone, Torque, Cherry Mobile, Cloudfone and Starmobile that catered to the local market. MyPhone introduced one of the first phones in the world in 2007 with a dual SIM and included 800 e-books with prayers, recipes, first aid instructions, and jokes for a Filipino audience. Cherry Mobile introduced the first phone in the world that supported 4 SIM cards.
According to IDC, 57% of the smartphones sold in the Philippines in 2014 were local brands and only 15% were Chinese brands. Local brands held the first, third and fifth positions in the Filipino market in 2014, but only Cherry Mobile of the local brands has managed to retain significant market share. In 2017 and 2018, Cherry Mobile was the second largest provider of smartphones after Samsung. However, both Samsung and Cherry Mobile are now losing to the Chinese brands. According to Canalys, Oppo took the top spot in Q2 of 2019, and Cherry Mobile is no longer in the top three.
The same phenomenon has occurred in Indonesia. Not only have Oppo, Xiaomi and Vivo eaten the market of global brands like Asus and Motorola/Lenovo, but they have also cut the demand for the local brands Advan and Smartfren. In the second quarter of 2019, the Indonesian smartphone market was controlled by 1. Oppo (26%), 2. Samsung (24%), and 3. Xiaomi (19%).
A similar shift to Chinese brands has occurred in Africa. While most global phone brands largely disregarded Africa as having too many regional peculiarities and not enough rich consumers to worry about, Transsion Holdings, based in Shenzhen, China, saw opportunities and focused on mastering the complex rules of each African country and the needs of their consumers. This decision to focus on Africa was far-sighted considering that the continent contains more people than Europe and North America combined and only 44% of them have a mobile phone, so there is huge potential to grow in the future.
With the company motto of “think global, act local,” Transsion has focused on making phones that catered to African consumers since it first entered the continent in 2008. Transsion’s phones sport keyboards in local languages such as Amharic, Hausa and Swahili and use a lighter operating system to extend the battery life of its phones because not everyone has access to electricity to recharge every night. Transsion sells phones with 2, 3 and even 4 SIM slots, because poor telecom network infrastructure makes it necessary to use multiple cellular networks and it is expensive to dial between networks. Transsion phones include cameras with an AI which enhances the light on darker African skin to better capture facial features. Because electrification rates are low, Transsion has tuned its AI to process low-light pictures at night without electric lighting and has added up to two flash LEDs in the front and 4 flash LEDs in the back to take better phones in places which lack electric lights.
Transssion assembles phones in Ethiopia and employs 10,000 Africans to take advantage of lower wages. The company is willing to work at tighter margins that other phone manufacturers. It sells feature phones for as little as $15 and its smartphones range in price between $60 and $250. At an average price of $96, Transsion’s phones are priced at a level accessible to African consumers, unlike many of its competitors.
Over the last decade, Transsion has acquired the majority of the low-end phone market in Africa. Local and regional brands simply haven’t been able to compete with the marketing by Transsion or its low prices. According to the IDC, local and regional brands only comprised 14.3% of the mobile phones sold in Africa in 2018. Although Samsung is still the top smartphone brand in Africa, Transsion’s brands Tecno, iTel and Infinix combined overtook the South Korean company in 2017 in terms of unit sales. In feature phones, the only global brand that even attempts to compete with Transsion is Nokia (HMD Global), which has a sixth of Transsion’s unit sales in Africa.
Transsion is now expanding to growing markets such as India, Bangladesh, Indonesia, Nepal, Pakistan and Russia, and employing the same strategy of gobbling up market share at the lower-end of the market and focusing on local needs. In India, where people eat with their hands, Transsion has designed fingerprint readers which are able to function with oily fingers. Transsion hasn’t made many in-roads in the competitive Indian smartphone market, but within a year of entering the market, its iTel brand had become the second largest provider of feature phones on the subcontinent after Samsung, growing from 12% of the market in 2017 to 16% today.
Unlike in the US, which has kept Huawei, Xiaomi and the BBK Group (except for OnePlus) out of its market, Europe no longer has a domestic phone industry to protect and has allowed in the Chinese companies. Today, Huawei and Xiaomi are the second and fourth largest providers of smartphones in Europe and Oppo is expanding its marketing efforts to gain a foothold in the market. In Q3 of 2019, the European market share by units was 1. Samsung (35.7%), 2. Huawei (22.2%), 3. Apple (18.6%), 4. Xiaomi (10.5%), 5. Nokia (HMD Global) (1.8%) and 6. Others (11.2%).
While the Western European market has been shrinking for several years, it experienced 20% growth of unit sales in the $200 to $350 price range where the Chinese brands introduced mid-range models in 2018 with multi-lens cameras and excellent performance for the price. After years of losing market share at the mid-range because it was trying to maintain high operating margins, Samsung responded with competitive A-series phones in 2019 to match the Chinese brands. The mid-range competition between Samsung, Huawei, Xiaomi and Oppo is one of the reasons why European smartphone unit sales had a 8% growth rate in the last quarter, making it the fastest growing region in the world after years of declining sales.
Why the Chinese brands are winning market share
Local brands used to have an advantage in advertising and catering to local markets, but the Chinese brands have mastered the art of marketing in developing countries. Not only do the Chinese brands have larger budgets to spend on advertising, but they use local celebrities to endorse their products and they pay careful attention to local tastes.
The Chinese brands also undercut local brands on price, because they operate on a larger scale which means lower costs per unit and they can get the best prices on components and labor in China. Since they are the Original Design Manufacturer (ODM), they cut out that extra cost for the ODM which many non-Chinese brands have to pay.
Another reason for the rise of the Chinese brands is the simple fact that phone sales have generally been falling in the developed world where non-Chinese brands still hold sway, whereas the Chinese brands have focused their marketing in countries in the developing world where phone sales are still rising. Part of the reason why Apple’s sales are falling is the fact that phone sales have been falling in general in its traditional strongholds of North America, Japan and China. Samsung has been less effected, but its sales have been harmed by falling demand for phones in Europe and and a stagnant African market. The Chinese companies which have focused on developed markets, such as Lenovo (Motorola), TCL (Alcatel, Blackberry and Palm) and ZTE, have also not fared well in recent years.
Another factor is that buyers of smartphones have become more discerning. In the past, most consumers were just getting their first smartphone, so they weren’t as focused on the specs, so factors such as marketing, brand image and promotions by cellular providers were more important in buying decisions. Today, most consumers have already owned a couple smartphones, so they have a better idea what to look for when buying, and they are paying more attention to the processor, screen type, amount of RAM, amount of pixels in the camera and number of lenses, etc. In doing a comparison of the specs, consumers can see that they are getting better hardware for their money when buying a Chinese brand.
Now that Samsung has introduced its 2019 A-series and lower-priced M-series, the new Chinese brands don’t have as much of a competitive advantage any more at the mid-range, but smaller traditional brands such as LG, Motorola, HTC and Sony are likely to have trouble matching the prices of these competitive mid-range models because they don’t operate at these same economies of scale. Samsung has a special competitive advantage because it manufactures so many of its own parts so it doesn’t have to pay a markup on its components like it competitors. LG can make its own screens and Sony can make its own image sensors, but Samsung makes nearly every critical part in a phone from screens, image sensors, RAM, Flash memory and application processors. Unlike the other phone makers, Samsung has its own silicon fabs, which is critically important because nearly every other phone maker relies on processors fabbed by TSMC, which has limited capacity at its cutting-edge node sizes. TSMC has decided to give Huawei preferential access to its 7nm and its upcoming Apple and AMD are having to wait in Because TSMC so it isn’t dependent
A decade ago most phone manufacturers didn’t publicize the model number of the processor or the amount of RAM and Flash memory in a phone, but today it is impossible to sell a smartphone without putting that information on the box. This increased focus on specs has not only been caused by increasing consumer knowledge about the technology, but also by the increasing power and functionality of smartphones, which have gained the processing power, memory and storage capability to rival PCs, so they are now marketed more like PCs, with a focus on their specs, which is where Chinese brands like Xiaomi, Redmi, Oppo, Vivo, Realme, OnePlus, Huawei, Honor and Tecno have an advantage over the traditional brands.
In the developing world, a smartphone is a sizable proportion of one’s income and it often serves as the only computing device in the household, so consumers are more price conscious and they often have less brand loyalty than in the developed world, since they haven’t been owning smartphones for as many years.
Smaller local brands like Smartfren in Indonesia, MyPhone in the Philippines and Intex in India haven’t been able compete on the specs with Huawei, Xiaomi, Oppo, Vivo and Realme, since they simply don’t have the economies of scale to match the Chinese behemoths. The traditional global brands are able to compete in terms of scale, but they have a hard time matching the cut-throat pricing and thin margins of the Chinese brands.
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Although brands such as Apple and Samsung still command a premium in the market, the Chinese brands are establishing a reputation for quality. There isn’t much difference in terms of practical functionality between a phone from Huawei, OnePlus, Oppo, Vivo and Realme and one from Apple and Samsung, so many consumers are starting to question why pay the difference in price.
After over a decade of double digit growth, the global smartphone market started to contract in 2018. This was caused by a number of factors. As Apple and Samsung raised the prices of their flagship models to over $1000, many buyers of premium smartphones have started to question the value proposition of Apple and Samsung’s flagships.
Some consumers have responded to the higher prices by holding on longer to their existing smartphones, since they see little improvement in the practical utility of the latest flagship models over their existing phones. At a certain point, technology gets powerful enough that further improvement becomes imperceptible to the human eye. Just like global sales of desktop PCs, laptops and tablets peaked in 2010, 2011 and 2014, respectively, the global sales of smartphones peaked in 2017, because people stopped seeing enough improvement in practical utility to justify replacing their existing devices every couple years. buyers stopped seeing much reason to keep replacing their PCs and global sales of desktop computers peaked in 2007, the same hOnce Intel intr asmartphone buyers Most buyers of mobile phones already own a smartphone, and are they are becoming more discerning buyers are becoming more so they and they and the more established brands, because th other thinBecause the Chinese brands operate on a large scale
This shift in the mobile phone industry from European, American and Japanese companies to South Korean companies a decade ago, and to Chinese companies today significant because the mobile phone industry now represents over half of all electronic devices being produced in the world today.
Most of the technological innovation in the electronics industry is now geared toward smartphones. The most
Of course, just because a company’s headquarters is located in a country, doesn’t mean that its phones are made there. The American companies Apple and Google assemble their phones in China, as does the Finnish company HMD Global and the Taiwanese company HTC. Among the non-Chinese brands, only if buying The majority of the world’s mobile phones are assembled in China, but a growing percentage are assembled in India, Vietnam, Indonesia and Brazil. Google recently announced that it would move assembly of its Pixel phones from China to Vietnam.
-yet 95% of mobile phones sold in India are assembled in the country and it exported US$1.6 billion in mobile phones last year.
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China (Huawei, Oppo, Xiaomi, Vivo, Realme, Motorola): 185.9M, 58.7%
S. Korea (Samsung, LG): 86.1M, 27.2%
USA (Apple): 44.8M, 14.1%
Top 10: 316.8M, 100.0%
For the 63.2 million phones not produced by one of the top 10 brands, I would guess that the market leaders are TCL/Alcatel (China), ZTE (China), OnePlus (China), Sony (Japan), Google (USA), ASUS (Taiwan), HTC (Taiwan), so again China probab
BBK Electronics with its brands Oppo, Vivo, Realme and OnePlus shipped roughly 75 million phones in Q3 2019, making it the second largest manufacturer of smartphones in the world, compared to 78.4 million by the market leader Samsung. Apple has now
As smartphones have acquired increased functionality, they have gobbled up the market for personal digital assistants, MP2 players, portable DVD players, portable TVs, point-and-shoot digital cameras, consumer-grade camcorders, audio recorders, GPS navigation devices, portable gaming devices, small tablets, and even digital wristwatches. There is some evidence that the growth in the size and functionality of smartphones has been reducing the global demand for tablets, notebooks, printers, projectors and TVs, while increasing the demand for audio headsets.