China's smartphone makers look to take on Apple and Samsung overseas
Xiaomi, Huawei and ZTE adopt different strategies to sell affordable premium models outside their home market, writes Jamie Carter
Is the world ready for the Chinese smartphone takeover? Home-grown brands such as Xiaomi - often called "the Apple of China" - Huawei, and ZTE are aiming to take their handsets and tablets overseas and supplant the likes of Apple, Samsung and LG.
From imitating foreign designs to becoming some of the best-value handsets in the world, China's smartphones are changing fast. Xiaomi, which has become country's No1 smartphone vendor after just four years, is at the forefront of the country's staggering growth in global smartphone sales. But how significant is Xiaomi's latest gadget, the Mi Note?
"Mi Note is basically a response to the iPhone 6 Plus, but the focus on refined features will help Xiaomi achieve bigger market share and charge a premium," says Elspeth Cheung, head of BrandZ Valuations at Millward Brown in Beijing.
The launch of Xiaomi's Mi Note, which starts at 2,299 yuan (HK$2,900), is challenging the iPhone 6 Plus (from HK$6,388).
"It has a screen that's 0.2 inches larger, a body that's 0.15mm thinner and is 11 grams lighter," says Li Ma, international business director for Honey LLP, a social creative agency specialising in exporting Chinese brands.
High-end smartphones from Samsung and LG sell for around HK$6,000. Price is key to Xiaomi's success. "Xiaomi has been offering products with high-end specs at a low price and is able to convert a lot of people using lower-end Samsung, LG or Sony [models] into Xiaomi users," says Matt Champion, client services director at Hong Kong-based mobile agency Fetch.
The Mi Note is the latest salvo against criticism that China copies Western creations.
"With China producing 2.5 billion phones - more than half of the mobile phones sold around the world annually - are these Chinese mobile brands simply imitating foreign designs, or are they becoming some of the best-value handsets in the world?" says Ma.
The jury is still out, but there's no doubt that the marketing is first class. "The way they are marketed - and this could be the most amazing thing - is revolutionary," adds Ma. "In marketing terms, China now leads in innovation."
But haven't we seen all this before? The founder of Xiaomi, 45-year-old CEO Lei Jun, is often compared to the late CEO of Apple, Steve Jobs.
During product announcements, Lei Jun often wears blue jeans, black shirts and sneakers, just like Jobs did.
"There's no doubt that Lei Jun is trying to follow the same road map as Steve Jobs," says Cheung. "Xiaomi's product pages are always accompanied by the keynote speech video of Lei Jun."
"Xiaomi customers love him - the events feel more like rock concerts than product launches," agrees Ma, adding that, "Even the tactics he uses reminded us of Jobs."
Introducing Xiaomi's Mi4 last summer, Jun used the "One more thing" tactic at the end of the presentation, something Jobs was famous for when launching a second "surprise" product at the end of an event.
It may have imported, though tweaked, the marketing, but there's a perception that Xiaomi's technology could begin to threaten established brands like Apple, although Samsung is probably the main target.
No discussion of Chinese smartphones can leave out telecoms giant Huawei, despite it playing second fiddle to Xiaomi. Says Cheung: "While Xiaomi is perceived as aspirational by Chinese consumers, Huawei is perceived as a mainstream brand. Huawei's mobile handsets continue to be weaker in differentiation than Xiaomi and other global brands."
Huawei - the world's largest telecoms equipment maker - is beginning to make waves in foreign markets with its Honor 6 Plus Android smartphone (from US$389.90 via Huawei).
"Its Honor 6 is claimed to be 'the world's fastest smartphone', thanks to a combination of a custom octa-core CPU and next generation LTE connectivity," says Ma.
"Huawei has also managed to fit in active dual-SIM support as well as 4G, which is often sacrificed for the second SIM slot." Huawei's position as a huge telecoms company has helped it push its handsets, too, as it's not starting from scratch.
"Huawei has been a few steps ahead in terms of global expansion with its established relationship with leading telecoms providers worldwide through its world-class B2B telecoms equipment business," says Cheung. "This distribution network can help the Huawei mobile handset penetrate local markets more quickly."
Both companies have very different sales models. While Huawei has been busy offering its phones via mobile operators in specific countries, online "flash sales" have been key to Xiaomi's success, and its "just for fans" motto has helped create brand loyalty.
A recent online-only sale in India of Xiaomi's Redmi 1S smartphone sold exclusively on the Flipkart website lasted just four seconds before stocks ran dry. "Consumers are more emotionally engaged … Xiaomi has been successful in meeting the continually changing functional and emotional needs of consumers," says Cheung.
Xiaomi's decision to only sell online is unusual, but effective. "That saves Xiaomi from the high cost of partnerships with distributors, retailers and network operators.
"But more importantly, this unconventional approach gives Xiaomi better control over the timing of market entry," says Ma.
It's not just a straight fight between Xiaomi and Huawei. In 2015, handset maker ZTE aims to ship 60 million smartphones globally. The brand already sponsors the New York Knicks basketball team in the US, where its "affordable premium" Nubia phones have climbed to second place in the non-contract market. It's likely planning a similar strategy in India and Southeast Asia.
In the Asia-Pacific region, ZTE is going for the high-end, recently launching the ZTE Star 2 (2,499 yuan in China), a smartphone with voice control in the phone itself, rather in the cloud, which is an industry first. ZTE also has its eye on Hong Kong sales.
"Smartphone penetration in Hong Kong is high - almost 100 per cent - and there is an increasing demand for devices with bigger screens," says Waiman Lam, senior director of technology and partnership, ZTE Mobile Devices, ZTE Corporation.
Its latest phone is the ZTE Grand X Max+, which has a six-inch HD screen.
"According to a recent ZTE-sponsored consumer insights survey, 83 per cent of respondents said they would like a bigger phone, but only 22 per cent were willing to pay a higher price for it," says Lam.
That phone is priced accordingly.
There are other success stories in the making - such as OnePlus, a six-month-old Chinese company that already has thousands of "brand evangelists" across the globe - as well as Oppo, Gionee, IUNI, Coolpad and up-and-coming brand Meizu.
But years of playing the imitation game comes at a cost. "People are still questioning Chinese phones' quality and whether the phones are stable and reliable; hence, they haven't reached the international standard," says Champion.
"Without quality control that merges with international standards, Chinese phones will have a hard time challenging international brands like Apple and Samsung."