Bloomberg News published an article today saying that as economic growth slows and the market becomes saturated, China's smartphone industry is about to undergo a reshuffle. In the process, half of the more than 300 local brands may disappear. The following is the full text of the article: When the first mobile phone was launched in the Chinese market four years ago, the startup Dakele seemed very smart. The market size was doubling every year, and Dakele used branded components in its mobile phones, but the price was only a fraction of the iPhone. Four months after Dakele was founded, the company launched the $160 product. Subsequently, the company launched a fierce competition with Huawei and Xiaomi. Last year's Dakele 3 mobile phone caused a heated discussion, and some online comments believed that it was the best product to imitate the iPhone. However, the hype was soon drowned out. Huawei poured $300 million into marketing, and Xiaomi cut prices and copied other products on the market. Dakele closed last month after running into difficulties with suppliers and financing. It now appears that Dakele will not be the only company like this. Industry executives and analysts believe that half of China's more than 300 local mobile phone brands may disappear due to market competition, slowing sales growth and a slowing economic growth rate. Ding Xiuhong, CEO of Dakele, said on the official Weibo account: "The speed of development and the cruelty of competition in the mobile phone industry are beyond imagination. As a startup company, we can't find more strategies and methods to achieve breakthroughs." Smartphone sales in China exploded in the early 2010s as Chinese incomes grew, prices for components such as chips and display panels fell, and carriers provided heavy subsidies. Hundreds of brands emerged, including giants such as Huawei, Lenovo and Xiaomi, as well as smaller players such as Dakele, Gionee and TECNO. According to market research firm Canalys, smartphone shipments doubled every year in the three years to the end of 2012. Xiaomi's valuation quickly rose to $45 billion and it began selling phones in India, the world's fastest-growing major economy. Lenovo spent $2.91 billion to acquire Motorola Mobility, becoming a "global company." In 2011, only four of the top 10 brands in the Chinese market were local. Last year, that number was eight. However, in China, smartphones are no longer a novelty, and most local manufacturers are targeting low- and medium-priced products. Compared with users of high-end Apple and Samsung phones, these users do not upgrade their phones very frequently. Jack Ding has been selling mobile phones and accessories in his store on Beijing's Third Ring Road for about two years. His store displays about 20 mobile phones, most of which are from local brands such as Huawei, Lenovo and ZTE. "I don't expect to make money from selling mobile phones," he said. In 20 minutes, only one customer came into the store and bought a memory card for 120 yuan. China’s economic growth is also slowing, falling last year to its slowest pace since 1990. Last year, smartphone sales in China grew just 2% year-on-year, the lowest rate recorded by Canalys, compared with 150% in 2011. James Yan, an analyst at Counterpoint Research in Beijing, said that these factors combined could wipe out about half of China's smartphone manufacturers. "The market will probably consolidate to about 150 manufacturers," he said. "Some small manufacturers may survive, but most of the big Coke-like manufacturers will go bankrupt." As small manufacturers disappear, large companies will take more market share. Xiaomi and Huawei, China's two largest brands, had a combined market share of 30% in China last year, higher than Apple and Samsung's 22%. "Even for first-tier manufacturers like Huawei and Xiaomi, this is a difficult market because the market is saturated," said CK Lu, an analyst at Gartner in Taiwan. "When faced with a saturated market, they need to expand downward. These markets were previously occupied by small manufacturers." According to Canalys, Xiaomi shipped 181,000 smartphones in China in 2011. Last year, that number grew to 64.9 million, leading the country. During the same period, Huawei's smartphone shipments grew sevenfold to 63 million. Last year alone, Huawei invested $1 billion in smartphone research and development. Huawei spokesman Joe Kelly said: "We have expected and seen consolidation in the Chinese market over the past period of time. You need to develop differentiated phones, otherwise you will become a non-featured supplier." The Dakele 3 phone is aimed at the Xiaomi 4 and Huawei Mate. It uses a sapphire screen, Sony's image sensor, and a MediaTek processor. The price is $230, which is about one-third of the basic iPhone 6. Online, Dakele has attracted 1 million fans. Ding Xiuhong said: "It's sad to fail in entrepreneurship." The Dakele website has been closed, and Ding Xiuhong would not comment further. OnePlus, a Shenzhen-based company, has also failed to keep up with its imitators. The company has cut jobs at home and shifted its focus to foreign markets, such as the UK, where it recently hired six senior executives. "It seemed like all the smartest entrepreneurs in China had set up their own smartphone companies," said Pei Yu, co-founder of OnePlus. "We need to invest a lot to make a breakthrough." Pei Yu predicts that the number of local Chinese smartphone brands will decline in the next five years. "There will be a few manufacturers in the Chinese market and a few manufacturers in the global market, and there will be some overlap between the two." The strategies of market survivors often focus on going abroad. According to Bloomberg Intelligence, Xiaomi has a 3.2% market share in India, higher than Apple's 0.9%. At the same time, Chinese smartphone manufacturers are also targeting the African market. Transission Holdings has become the most popular smartphone manufacturer, with 8,000 employees and brands including Tecno Mobile, Itel Mobile and Infinix Mobility. Jason Liu, the company's chief marketing officer, said fierce competition in the Chinese market has led to the company's strategy. The company does not intend to develop into a high-end brand, but hopes to occupy the mid-priced market. Currently, the company has 2,600 employees in Africa and plans to ship about 80 million mobile phones this year, of which about 35% will be smartphones. Starting at the end of this month, Transission Holdings will also sell products in India. Jason Liu said: "We have a first-mover advantage. If we stayed in the Chinese market, we might have died." As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity. |
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