Just how much would you spend on a luxury smartphone?

China’s Gionee Communication Equipment recently unveiled an Android smartphone selling for a jaw-dropping 16,999 yuan

PUBLISHED : Friday, 03 February, 2017, 3:58pm
UPDATED : Friday, 03 February, 2017, 10:38pm

Just as Chinese smartphone makers are beginning to conquer their home turf and emerging markets such as India, some are also trying to enter the hugely competitive super-luxury market by copying what companies such as Vertu do – producing hugely expensive designer phones.

Vertu is a British maker of handmade smartphones, created by Finland’s Nokia originally.

China’s relatively little-known Gionee Communication Equipment recently unveiled an Android smartphone with a jaw-dropping 16,999-yuan price tag.

The Gionee M2017 boasts a 5.7-inch display with 2,560 x 1,440 pixel resolution, with prices going from 6,999 yuan up to 16,999 yuan for an Italian-made alligator-leather-backed device.

Typically, Gionee devices sell for between 399 and 2,999 yuan, but the company is certainly not alone in the rising trend of moving towards the ultra-high-end among China’s smartphone makers.

The Huawei Mate 9 Porsche Design range, for instance, starts at 1,395 (10,350 yuan) while another Beijing smartphone vendor, 8848phone, a company owned by Beijing Ereneben Information Technology, sells one limited-edition model for 19,999 yuan.

But the list of Vertu-type producers is growing and experts say many are setting their sights on creating record-priced designs.

Analysts say vendors are coming up with more and more pricey items and accessories to reshape their brand image as they wrestle with rising production costs and the mounting pressure to increase profits.

James Yan, Beijing-based research director at Counterpoint Technology Market Research, said smartphone producers were using the outrageously expensive devices to add value to their brands, so consumers would be encouraged to pay more for their higher-end products.

Yan predicted about 30 per cent of China’s smartphone sales would be taken by devices priced between 3,000 and 4,000 yuan by 2018, up from 25 per cent currently.

“It seems a small increase in shipment share, but the 3,000- to 4,000-yuan price category, which is deemed as high-end, could contribute 80 per cent of profit for smartphone vendors,” he said.

China, which boasts the world’s largest smartphone market, has seen its local brand sales rise rapidly despite cutthroat competition. The top four by share of shipments in China are domestic players but their combined profit are still far less than that of Apple, the maker of iPhones.

Apple, which ranked fifth in China in the third quarter with an 8.6 per cent share in shipment terms, captured 87 per cent of profit share during the period, Counterpoint said.

“As Chinese consumers get less price-sensitive and appreciate brand value more, it is high time for the brands to get rid of their cheap image and launch higher-end products,” said Jessie Ding, Shanghai-based analyst at market research company Canalys.

Its data showed the average selling price of a smartphone in China jumped from US$255 (1,754 yuan) in 2013 to US$321 in the third quarter of 2016. The firm predicted the trend was set to continue in 2017.

“But the challenge remains how to shed their old images as cheap product makers,” Ding said.

Many vendors have tried to do that through cooperation with brands that are regarded as luxury in their particular industries, just like what Huawei Technologies does with Porsche Design. Lenovo Group has also invited Hasselblad, the top-end Swedish camera maker, to join forces on its Moto Mod line-up.

As Chinese brands move up the value chain, they will inevitably come into closer combat with Apple and Samsung Electronics at the high end of the market.

But unlike Apple, which boasts its own iOS system, Samsung is expected to feel the most pressure as it has not yet recovered from the Galaxy Note 7 fiasco.

“It is going to be a difficult year for Samsung in China in 2017. The Note 7 fiasco aside, the company still lags local Chinese brands in marketing and sales channels,” said Jin Di, research manager at IDC China.

But she added that there was also a clear general trend among Chinese consumers to buy made-in-China smartphones.