China smartphone makers at crossroads as high-end handsets target Apple’s iPhone X

Chinese smartphone brands are challenging their budget image with premium models costing more than US$1,000, taking aim at a segment that is dominated by Apple’s iPhone X.

Oppo, China’s second-largest smartphone brand, unveiled its Find X phone in Paris on Tuesday, priced at 999 euros (US$1,156) for the ordinary edition and 1,599 euros for a special Lamborghini edition, both of which feature the market’s highest screen-to-body ratio to date, at 93.8 per cent.

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Oppo’s new phone is equipped with a sliding camera module that can be slipped in and out of the phone body when needed without compromising front screen space.

The revolutionary design has allowed the Chinese company to price the handset at the top end of the market, a luxury space that only Apple and Samsung have been able to occupy so far.

Oppo’s Find X launch also marks another step by Chinese smartphone makers to distance themselves from the iPhone X’s screen design, which features a curved notch to accommodate the front camera and sensors.

Last week Vivo, China’s third-largest smartphone vendor, also bucked the notch screen trend by introducing a pop-up camera solution for its latest NEX series, which is priced at 4,998 yuan (US$780) for the premium edition.  

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Amid a saturated smartphone market in China and higher expectations from Chinese consumers, there has been an increase in higher-end models priced above 3,000 yuan.

The new demand is driving local vendors to step up design and innovation to grab greater market share, said Zaker Li, a senior industry analyst with IHS Markit.

Smartphone shipments in China suffered their biggest ever decline in the first quarter of 2018, coming in at 91 million, down 21 per cent from the same period last year.

Huawei, Oppo and Vivo led domestic smartphone shipments, with 24 per cent, 19 per cent and 17 per cent market shares respectively, according to data from independent industry analysis firm Canalys.

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The push towards the higher end of the market comes at a time when local brands have squeezed international brands in the mass market segment.

The top four smartphone vendors in China – Huawei, Oppo, Vivo and Xiaomi – own a combined total domestic market share of 73 per cent, while Apple has slipped into the “rest of” category of brands, which owned a combined 27 per cent in the first quarter, according to Canalys.

Profit margins at the Cupertino, California-based Apple have long been the envy of its peers. It captured 87 per cent of smartphone industry profits by selling roughly 18 per cent of total units worldwide in the fourth quarter of 2017, according to Canaccord Genuity, a Wall Street financial services firm.

During this year’s June 1-18 online shopping festival in China, Honor and Xiaomi – the two Chinese smartphone vendors that have traditionally offered budget and low cost handsets – were the top two smartphone brands in terms of sales volume on JD.com, according to China’s second-largest e-commerce platform.

But Apple, which only ranked third in terms of handset sales volume, was top in terms of sales value, said JD.com.

“Sales in the above-4,000 yuan handset category have long been dominated by foreign brands and Huawei.

Oppo and Vivo, which make most of their sales from the domestic Chinese market, n

eed to strengthen their premium handset offerings by upping technological innovation and design, not just lifting price,” said Li from IHS Markit.

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Apple’s flagship iPhone X was the first phone from the company with an average price above US$1,000.

Huawei, China’s largest smartphone brand and the world’s third-largest vendor, has also launched a premium P20 Pro series, featuring the first triple camera in the industry to compete in quality with digital single-lens reflex (DSLR) cameras.

“Expensive handsets also reflect large investments by the smartphone vendor in product development, and this can in turn lift brand image,” said Hattie He, a research analyst from Canalys.

Huawei said its focus on better quality photography for smartphone users seems to be paying off, with shipments of the P20 series reaching six million units – up more than 80 per cent in less than three months.

The P20 Pro sells at up to 6,288 yuan in China, right at the top end of the market.