After Chinese smartphones reported a sharp decline in shipments, smaller companies like Maize and Gionee have suffered greatly in order to retain their share in the domestic market that is under the domination of Huawei, Xiaomi, OPPO, Vivo, and Apple.
Last November, Lei Jun, the founder and Chairman of Board of Xiaomi, said in a statement that the Chinese smartphone market has been saturated by the “powerful four”- Huawei, Xiaomi, OPPO, Vivo - and Apple.
The last five months seem to have proven him right.
On March 9, the Chinese Academy of Information and Technology (CAICT) released March 2018 Operational Analysis and Reporting about Chinese Smartphone Market, showing that from January to March 2018, shipments of Chinese smartphones decreased by 26.1% to 81.37 million, among which signature brands showed a 27.9% decline to 75.86 million.
(Image from http://huxiu.com)
The sharp drop was the result of a saturated domestic market which was foreseen in Canalys’ latest analytical report.
(Image from http://huxiu.com)
The data highlighted the first decline in 2017 as shipments fell to 459 million, a 4% decrease as compared to 2016.
(Image from http://huxiu.com)
The reality behind the data indicated a “shuffling of cards” in the Chinese smartphone market in which the domination of giant companies such as Huawei, Xiaomi, OPPO, Vivo, etc., has become increasingly obvious, whereas Coolpad, Maize, Gionee and other smaller brands struggled for survival.
Smartphone shipment market under the top 5 corporations
The Chinese smartphone industry has demonstrated a Matthew Effect.
According to Counterpoint Research’s statistics, Huawei, Xiaomi, OPPO, Vivo, and Apple were sequentially ranked the top 5, boasting a total share of 77% in the smartphone shipment market in 2017, a 10% increase compared to 2016’s 67%.
Such a Matthew Effect might be reinforced as Lei Jun forecast in iceo.com.cn, “Chinese market has been dominated by the “four + one” (Huawei, Xiaomi, OPPO, Vivo, and Apple). I believe that the top 5 companies’ market share will surpass 90% in the future.”
The five giants, in comparison, have employed different marketing strategies to increase market share and have successfully prevailed.
Huawei, for example, has targeted the urban population in recent years, aiming at manufacturing luxurious domestic products, while Apple stayed unparalleled in the global deluxe smartphone brands market, appealing to the Chinese youth via its constantly improved new iPhones.
To avoid fierce competition with powerful rivals, OPPO and Vivo turned to profitable suburban and rural markets, establishing a large network of offline stores.
Unlike the other four, Xiaomi has consistently positioned itself as “the king of online retailers” in the Chinese smartphone industry, regardless of its decline in shipments. The company attributed its revival to well-designed marketing tactics that underscore the integration of online and offline stores.
A narrow market for struggling non-giant companies
As the five behemoths enjoyed their triumphs, Chinese non-giant ventures, including Gionee, Coolpad, and Maize, strived to survive under harsh conditions.
At the end of 2017, Gionee was exposed to “a heavy inventory backlog along with a financial crisis”. In early 2018, the company’s economic conditions deteriorated as the Chinese Court of Justice forcibly froze CEO, Liu Lirong’s equity of 41.4% for two years.
In addition, the corporation got embroiled in several lawsuits and was accused by a succession of individuals and organizations in Shenzhen and Shanghai.
Liu Lirong said that Gionee would appeal to investors and sell assets to deal with the economic collapse. Furthermore, he would sacrifice personal control of the company if and when it was required.
If Gionee gets back on its feet, 50% of its workers might have to face unemployment.
According to Caijing magazine, the company has disbanded the employees union since March 2018. Although Gionee’s vice president, YuLei tweeted that “the crisis is unexpected and our company has actively found solutions”, the outcome was that the majority of employees were suspended from work and subsidiaries saw their phone business shrivel.
Apart from Gionee, Coolpad, the company previously reputed as one of the most prominent Chinese smartphone brands, has been removed from the top 10 list.
In 2016, the Chinese multinational conglomerate, LeEco invested HKD 1.05 billion in Coolpad, becoming the company’s largest single shareholder. However, as LeEco’s crisis broke out, Coolpad found itself deeply in debt.
Insiders revealed to International Financial News that banks have stopped lending money and have demanded repayment of a debt amounting to HKD 240 million from Coolpad, thrice within a month.
Moreover, according to the Hong Kong Exchanges and Clearing Limited (HKEx), Coolpad officially announced that at the end of July 2017, sales revenue declined 52% to HKD 2.71 billion. “We are now in sustained losses and feel overwhelmed by the debt.”
In the first half of 2017, Coolpad withdrew from its contract with hundreds of new graduates and 50% of its employees were permanently removed from their positions, including many experts and prominent individuals like the CEO,Liu Jiangfeng.
Although Meizu is still ranked 6th in smartphone shipments, threatening competition in the Chinese smartphone industry has diminished its popularity.
A report in bjnews.com.cn suggested that Meizu has consistently been reducing staff for three years since the founder, Chairman of Board, and CEO, Zhang Huang set a goal of “increasing steadily, growing profits and focusing on IPO.”
In order to achieve the goal, Meizu has implemented a plan to weed out employees with poor performance. The size of annual layoffs increased from 5% to 10%. A recent article pointed out that there is to be a mass layoff in the near future which may result in thousands of unemployed personnel.
Fu Liang, an analyzer in the IT industry said, “Meizu has so far defended its position by relying on loyal users. However, as an increasing number of powerful counterparts offer competitive products, the company is gradually losing its attractiveness and popularity.”