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Hungry Chinese smartphone makers eye world market
by Staff Writers
Barcelona (AFP) Feb 23, 2014


China's smartphone makers are on a global expansion drive that could transform the market, analysts say, and one day challenge the titans Samsung and Apple.

The mightiest manufacturers, Huawei, Lenovo and ZTE, are battling for attention at the four-day World Mobile Congress opening Monday in Barcelona, Spain, as their ambitions grow well beyond China's borders.

Already, China is the world's largest single smartphone market, with sales soaring 86.3 percent last year, according to technology research group Gartner Inc.

Indeed, Chinese smartphone manufacturers make the most sales at home, said Melissa Chau, senior research manager for the Asia Pacific at technology analysts International Data Corp.

But early signs are emerging that the boom in China is set to slow, with IDC reporting a 4.3-percent quarterly decline in smartphone shipments in China at the end of 2013, the first hiccup in more than two years of uninterrupted growth.

The sales slowdown in China was caused by short-term factors such as a slower-than-expected rollout of super-fast 4G networks, Chau said.

But longer term, too, she predicted, growth in the smartphone market within China will slow as more potential customers -- people able to afford entry-level phones at about 1,000 yuan ($165/120 euros) -- own a device.

With the low-hanging fruit in China already plucked, Chau said: "Chinese players are looking beyond their own borders to scale up."

Eventually China's manufacturers could take a dominant position in the smartphone market worldwide, she said.

"They have a lot of challenges to overcome, that is true, but if I look longer term in the three-to-five year timeframe I could see that as entirely possible," Chau said.

- 'Chinese to compete with Samsung' -

Chinese telecommunications groups such as Huawei are already major world players in the business of building mobile networks for operators.

They have also carved out a space in developing markets where they offer affordable smartphones, the fastest-growing segment of the industry.

But now the Chinese are seeking a place in more mature markets such as the United States and Europe, where potential profit margins are greater but competition may be fiercer.

Indeed, though smartphone sales leapt by 42 percent to nearly one billion units worldwide in 2013, most of that growth came from developing countries, according to Gartner.

In the fourth quarter of last year, smartphone sales in mature markets actually fell, it said, citing limited growth potential in countries "saturated with smartphone sales".

Nevertheless, Chinese smartphone makers clearly believe there is space in those markets for them.

Lenovo struck a dramatic blow in its international campaign in January, agreeing the $2.9 billion purchase of the loss-making Motorola Mobility from Google to grab a strong platform in the Americas and a foothold in Europe.

After announcing a 30-percent leap in quarterly net profit this month, Lenovo chairman Yang Yuanqing threw down the gauntlet, saying: "We will become the number three smartphone player in the world."

Already, the global rise of Chinese device makers has been impressive.

In the last quarter of 2013, Huawei ranked as the world's number three smartphone maker behind Samsung and Apple, according to Gartner.

"Huawei has moved quickly to align its organisation to focus on the global market," said Gartner principal research analyst Anshul Gupta.

Lenovo took the world number four spot.

Smaller Chinese manufacturers are showing off bigger ambitions, too, with upstart Xiaomi, for example, famously hiring then Google executive Hugo Barra in August 2013. It launched a new, low-priced smartphone brand, Redmi, this month.

Companies such as Huawei and Lenovo will start to invest in promoting their brands in developed markets, predicted Lawrence Lundy, analyst at technology consultants Frost & Sullivan.

"If you want to make an entrance into the Western market, what better way than with a personal device in everyone's pocket," Lundy said.

"You will certainly see them coming with a very low cost offering, at the bottom, eating up some of the market share. Once they are established, they will move up the value chain and start actually competing, I guess, with Samsung."

Ian Fogg, senior principal analyst of electronics and media for research house IHS, said Chinese smartphone companies were of growing importance.

"They were already significant players in China. They are becoming significant out of China," he said.

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