SHANGHAI (Reuters) – Smartphone dealers in China say it's a tough sale late with consumers reluctant to upgrade, chilled by chill financial winds.
FILE PHOTO: Xiaomi founder and CEO Lei Jun participates in a launch ceremony of the new flagship Xiaomi Mi 9 in Beijing, China February 20, 201
Nevertheless, domestic brands led by Huawei have done Big advances, wooing consumers with state-of-the-art hardware and innovative features as they move upmarket into the $ 500- $ 800 price range. The result: A loss of shares in a key segment for Apple Inc and fresh price reductions for the iPhone by Chinese dealers.
"Of those who upgrade, there are many switches from Apple to Chinese brands, but very few switch from Chinese brands to Apple," said Jiang Ning, who manages a Xiaomi store in Shandong province in the north.
Huawei Technologies Co., Ltd, Xiaomi Corp., Oppo and Vivo, once tried to get the world's largest value-for-money smartphone market, but consumer demand for better phones has led to strategic feedback.
"People are more attached to the phone than ever and have higher expectations of the functionality and experience it offers. The answer has been the constant upgrading of hardware specifications," said Alen Wu, global vice president at Oppo, to Reuters.
He Huishoubao CEO Fan, who buys and resells used phones, said he has seen a consumer change to Apple's Huawei, driven by the Chinese love of selfies and emphasis on camera quality, and has been linked to German camera maker Leica since 2016.
"Huawei's cameras have become noticeably better than Apple's because they suit the Chinese consumers more," he said.
Compared to two cameras common in most smartphones, Huawei's P20 Pro device has three rear-facing cameras, with the extra enhanced zoom feature.
It is one of several new devices in its P20 and Mate 20 lines, which helped Huawei's share of the $ 500- $ segment 800 in China increased to 26.6 per cent last year from 8.8 per cent, data from research company Counterpoint shows.
However, Apple saw its share of the segment room at 54.6 percent from 81.2 percent, also damaged by the decision to move even more exclusively with the iPhone X series.
"Most Chinese smart phone buyers are not ready to distinguish over $ 1000 for a phone," said Neil Shah, research director at Counterpoint. "This gave a gap in the segment below $ 800, which the Chinese vendors grabbed with both hands."
(For graphics on "Chinese smartphones increasing share of the domestic market" click tmsnrtrsrs / 2HvsyQi)
Shipments of phones priced over $ 600 in China grew 10 percent in 2018, data from research firm Canalys shows. On the other hand, the total market shrank 14 percent and marked a second year of contraction.
The weaker cache for Apple in China was underlined this month as several major retailers at the same time cut iPhone prices for the second time this year.
A 64GB iPhone 8 sold at Suning.com Co. Ltd now costs 3,899 yuan ($ 580), about 25 percent less than it did in December. It's also lower than the $ 599 price in the US, where iPhone usually costs less to buy than in China. Most iPhone models through to the iPhone 8 series have seen prices in China cut, though not equal.
In revenue, it appears to be a narrative of divergent fortunes. Apple's October-December revenues from the Great China region fell by about a quarter from the previous year. Great China currently represents 15.6 percent of total revenue.
Huawei, the world's No. 2 smartphone manufacturer, has estimated sales for 2018 increased by 21 percent, as analysts largely attributed to robust smartphone sales.
More generally, fewer sales for Apple mean fewer customers for App Store and media streaming services. The shift to higher-end phones of Chinese brands has also meant major break-ins in overseas markets.
Huawei's shipments in Europe jumped 55 percent in the last quarter, and now has a 23.6 percent market share, according to Canalys. It's not far behind Samsung Electronics and Apple, which saw small shipments.
If Huawei takes the lion's share of turf as Apple once had in China, the Oppo and Vivo brands are owned by the electronics goods conglomerate BBK – the latest threats.
In June, Vivo launched Nex, starting from 3,898 yuan ($ 610) and in July, Oppo Find X launched, priced at 4.999 yuan ($ 755).
The models mark the first time the brands have priced a phone over $ 600, a sharp departure from their roots that sell $ 300- $ 500 models to young consumers in other tier cities.
The devices came with features that were not available in the iPhone, including fingerprint sensors under the glass and "nonchless" displays, both of which increase the size of the usable display.
Xiaomi also goes busy and announces in January that it would split its low-budget Redmi range of phones into a submarket. That way, it takes a leaf out of the Huawei book, which for years has sold cheaper units under the Honor brand, and helps differentiate its products.
Redmi will target international markets and e-commerce sales, while the flagship Xiaomi brand will target China and the foreign market, the company's founder Lei Jun told reporters.
Last year, Xiaomi Mi 9 presented its latest flagship with a price tag of 2,999 yuan ($ 450). But the company also said it could be the last time a Xiaomi flagship would be priced below 3,000 yuan.
"Xiaomo's flagship series phones were always set at 1,999 yuan," Lei said. "This was a contributing factor to our increase, but it also became an obstacle to our growth," he said.
(For a graphic on "Chinese smartphones increase share of the home market" click tmsnrt.rs/2Hx2KD4)
Reporting by Josh Horwitz; Additional reporting by Stephen Nellis in San Francisco, Paul Sandle in Barcelona and Shanghai newsroom; Editing by Jonathan Weber and Edwina Gibbs