Combined Profits of Chinese Smartphone Brands Grew at 24% YoY in 2018

The combined profits of Chinese brands grew 24% year-on-year (YoY) as the premium segment grew faster in 2018 than the overall market. The likes of Huawei, OPPO, and Vivo were quick to take advantage of the gap created within the premium segment as prices of Apple’s devices soared above US$1,000. This gave Chinese brands a headroom to increase prices of their 2018 flagships. This, in turn, drove up the average selling price (ASPs) for them.

Apple, on the other hand, had record revenues and ASPs in 2018. This is despite its unit shipments declining YoY for the first time ever in Q4 2018. Below are some of the key takeaways from the performance of Chinese brands: –

  • Pricing Strategy: The ASP of Chinese smartphone brands increased by 14% YoY in 2018. Their 2018 flagships introduced some new features like punch-hole display, ultrasonic in-display fingerprint sensor, super-fast charging, and hardware-based AI capabilities to target the maturing smartphone user base. Additionally, Chinese smartphone brands were aggressive in terms of promotions including upgrade offers, trade-ins, and cashbacks.
  • Market-specific competitive portfolio: Chinese brands have a good track record of sensing the market trend faster than the competitors. They are delivering world-class competitive products across different price bands, giving consumers enough alternatives for an upgrade. For example, Chinese brands are preferring Huawei Mate series over super expensive iPhones. Xiaomi and OPPO launched new smartphone brands Pocophone and Realme respectively, in the Indian market. The ability to leverage deeper access to the Shenzhen-based manufacturing and supply chain ecosystem is helping Chinese brands to plan their product portfolio much earlier. It also helps them to maintain profit margins across price segments.
  • Global expansion and growth: Chinese brands are dominating the Chinese smartphone market. However, this is now saturated and driven by replacement users. For growth in 2019, Chinese OEMs are eyeing overseas markets. Huawei and HONOR expanded in markets such as Indonesia, Vietnam, Argentina and Peru with new launches priced higher than previous variants. OPPO entered the European market.

As the premium market expands in 2019, we believe Chinese brands will have a good chance of improving their profits. Targeting replacement buyers with flagships priced at the right levels will help them succeed.