Who's To Take Up The Baton In The Chinese High-End Smartphone Market After Samsung's Waterloo?

摘要: While iPhone 7 is unsatisfactory, Samsung Note 7 is unreliable. When two of the most promising high-end smartphones have failed consumers, many consumers may find themselves caught in an awkward situation where they can't find a smartphone satisfactory enough. On such occasion, who's to take up the baton in the Chinese high-end smartphone market after Samsung's Waterloo?

(Chinese Version)

Samsung has taken the drastic step to permanently discontinue the sale of Samsung Galaxy Note 7, after numerous reports around the world of both the original devices and their replacements spontaneously setting on fire as well as its stupid attempt to cover the scandal in China.

Without much analysis, we would find out how inappropriate Samsung’s remedy approach was. When reports about Note 7 spontaneously setting on fire began to accumulate, Samsung only replaced original devices with replacements, which are equipped with so-called “safe batteries”. All Samsung was thinking was to minimize loss instead of lowering risk for its consumers. Besides the still-unknown problem in Note 7, Samsung’s irresponsible remedy approach is also to be blame for the huge shame as well as loss it was going through right now.

The more urgent questions is: who’s to take up the baton in the Chinese high-end smartphone market after Samsung’s debacle?

As Samsung and iPhone failed high-end smartphone consumers, they might find themselves caught in an awkward situation where they can find no proper alternative

After Samsung put so much risk at its consumers, no wonder they will vote with their feet. Statistics suggest that after Samsung’s fire incident broke out, its sales performance dropped significantly in September. The following table from D.Phone, the largest smartphone chains in China, shows that Samsung’s sales volume in all channels dropped by 41 per cent year-on-year.

D.Phone’s data can basically reflect the situation in the Chinese smartphone market. According to the above table, not only Samsung’s sales volume and sales, but also its market share, has dropped significantly year-on-year.

Samsung Note 7 should have been very competitive before the fire incident broke out. Samsung also had expected to compete with Apple with Note 7. Since there wasn’t much innovation and improvement in Apple’s latest generation smartphone iPhone 7, it might have been the best opportunity for Samsung to surpass Apple with note 7. As can be seen in the table, Apple’s sales volume dropped by 9 per cent year-on-year as of this September. Even after Samsung’s Note 7’s fire incident, Apple’s sales performance also didn’t improve significantly as expected.

While iPhone 7 is unsatisfactory, Samsung Note 7 is unreliable. When two of the most promising high-end smartphones have failed consumers, many consumers may find themselves caught in an awkward situation where they can’t find a smartphone satisfactory enough.

Although VIVO and OPPO continued to grow rapidly, they are far from being the biggest winner of Samsung’s fire incident

So who will become the biggest winner of Samsung’s debacle? From the above table, the momentum seems to be gathering for VIVO and OPPO, especially the former one. While VIVO’s sales volume increased by 58 per cent year-on-year in September, its sales jumped by 88 per cent year-on-year. At the same time, OPPO’s sales also increased by 45 per cent. On the surface, it seems that they are two of the biggest beneficiary of Samsung’s fire incident.

However, this is far from being the truth. As a matter of fact, these two companies have started to develop rapidly since the end of 2015 and have managed to maintain such high growth for a long time. There are many reasons for such continuous growth. These two companies have focused much attention on offline marketing for many years, especially in third and fourth-tier cities as well as countryside. Smartphones became popular in these areas two or three years ago, and a wave of replacing old smartphones with new ones have befallen these areas. This is one of the major reasons why these two companies enjoy continuous growth since the end of 2015.

Besides, most of VIVO and OPPO’s smartphones are priced at around 2,000 RMB (around $297), so their target consumers and Samsung’s won’t overlap much. For sure, few of Samsung’s target users will turn to mid-end smartphones priced at around $297. Therefore, VIVO and OPPO’s continuous growth has nothing to do with the burst of Samsung’s fire incident.

For sure, VIVO also attempted to enter the high-end smartphone market. At the beginning of this year, VIVO released Xplay 5, so-called a representative of high-end smartphones made by Chinese smartphone makers. The Ultimate Edition of Xplay 5 is priced at as high as 4,288 RMB (around $628). When the model was first released, it drew much attention, especially due to its eye-catching dual-curved display. However, a fancy appearance is not enough to make a smartphone into a high-end one. Besides, VIVO is still widely-known as a mid-end smartphone brand, so no wonder the model soon pales into insignificance in the upcoming smartphone wave.

Huawei, the leading Chinese smartphone maker, is still unclear about its product line strategy

If there might be a smartphone maker that can develop a popular high-end smartphone, that would be Huawei. With the largest market share and strongest R&D power, Huawei’s ability is unquestionable.

Huawei also has its own high-end Mate series and has been drawing much attention as a high-end smartphone maker since it released Mate 7. With high-level design ability and craftsmanship, Huawei should have been the biggest beneficiary after Samsung’s fire incident.

However, according to D.Phone’s statistics, Huawei’s sales volume only grew by 7 per cent year-on-year, while its sales merely increased by 1 per cent. In other words, the growth in Huawei’s sales volume didn’t lead to similar degree of growth in its sales. Obviously, Huawei’s growth in sales volume must come from its low and mid-end smartphones.

As the leading smartphone maker in the Chinese smartphone industry, Huawei certainly aren’t satisfied with such little growth in sales. To maintain its position in the Chinese smartphone market and acquire higher profit, it will have to find a proper place in the high-end smartphone market.

However, there seems to be a huge gap between Huawei’s current product strategy and what we expect. For example, Huawei released a new model Nova on October, 14th, and even invited popular Chinese film stars Zhang Yixing and Guan Xiaotong to be the celebrity spokesperson. Obviously, Huawei wants to repeat the business model of OPPO and VIVO. However, OPPO and VIVO’s success is based not on celebrity spokesperson, but rather their huge offline marketing capability, which is exactly what Huawei is lacking in.

Besides, brand positioning of Nova and Huawei’s Honor series seems to be quite overlapping. Likewise, brand positioning of Lenovo’s own ZUK and its acquired brand Motorola is also overlapping. At present, ZUK and Motorola have already been competing inside Lenovo. Ultimately, Huawei might suffer a great deal from such competition from inside.

What about Huawei’s mid and high-end P series and Mate series, then?

For sure, Mate series should have been the high-end lines of smartphones for Huawei. However, while Huawei’s high-end smartphone Mate 8 has a Kirin 950 chipset, its mid-end smartphone Honor 8 has the the higher-end Kirin 955 chipset. It is expected that Huawei Mate 9 will have the even higher-end Kirin 960 chipset and be priced at around 3,500 RMB (around $520). If so, however, Huawei’s Mate 9 and P 9 will be competing with each other.

Huawei is certainly going to suffer from such complex product line design. When Huawei is still unclear about its product line, how can you expect consumers to be loyal to the brand?

The year 2017 might witness the boom of high-end smartphones, and smartphone brands that failed to expand their appeals in time might face huge challenge

Although Apple and Samsung fails to live up to people’s expectation in the high-end smartphone market, high-end smartphone consumers also can’t find any proper alternative. As we can see from the poor sales performance of Samsung and Apple, most consumers are still waiting and seeing.

2017 will witness the 10th anniversary of iPhone as well as the 20th anniversary of Steve Jobs’ return to Apple. Many pundits believe that Apple will significantly upgrade iPhone on iPhone 8. After the failure of Note 7, Samsung will certainly spare more efforts on Galaxy S8. Although Samsung suffered huge loss from the failure of Note 7, nobody can tell for sure that it can’t rise again with S8.

For sure, 2017 will be a booming year for high-end smartphones. If so, smartphone makers that have always stuck to the mid-end market will also face fierce competition. If Chinese smartphone makers such as Huawei fail to establish their own high-end brands, then they might face what should be called their doom day. If they are still laughing at the decrease in sales for Samsung and Apple and complacent about the temporary growth in their own sales, they might become the ones being laughed at next year.


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[The article is published and edited with authorization from the author @Old Tie please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.




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