4G and overcapacity to reshape China’s smartphone industry

4G and overcapacity to reshape China’s smartphone industry

Staff Reporter 

2013-10-09

On the eve of the release of 4G mobile phone licenses, indigenous mobile phone brands in China are in for a bumpy ride due to the vicious price competition arising from overcapacities, reports the Chinese-language Beijing Times. Although market leaders Samsung and Apple are still going strong in China’s mobile phone market, indigenous brands dominate the remainder of the market share. According to research firm Canalys, the leading domestic brands — ZTE, Huawei, Coolpad, Lenovo, and Xiaomi — account for 20% of the global shipment in the second quarter this year. On the global top-10 list for mobile phones, headed by Samsung and Apple, Chinese brands also take four spots, including Lenovo in third, Coolpad in fourth, Huawei in sixth, and ZTE coming in seventh.Insiders say that domestic brands are no longer satisfied with their low-end and thin-margin business, and have set their sights on the high-end and high-margin sector, which is currently dominated by Samsung and Apple.

In September, Chinese smartphone makers Coolpad, OPPO, and Meizu rolled out new models, mostly priced in the medium-range of 2,000-3,000 yuan (US$330-US$490), while Meizu also debuted a flagship model priced at 4,000 yuan (US$650). These new models boast high-spec hardware and target affluent consumers, competing head on with Samsung and Apple.

“The intensity of competition in China’s mobile-phone market is rare worldwide,” said He Youren, deputy CEO and head of mobile phone operations at ZTE. Despite the red-sea competition, new comers to the industry have continued to join the fray, He added.

Fu Liang, an independent telecom-industry analyst, said that conditions are ripe for indigenous brands to enter the nation’s smartphone market in the wake of the expansion of its capacity and overall improvement in their operations, including R&D, design, testing, manufacturing, brand image, and after-sales service.

Competition at the low-end sector will intensify further. Fu predicts that “Large numbers of mobile phone suppliers will exit the line by the end of next year,” adding “Some brands will go to heaven and others to hell in three years, when 4G mobile phones will hit the market on a massive scale.”

During a telecommunications exhibition in late September, Miao Yu, minister of Industry and Information Technology, ascertained the 4G licenses will be released by the end this year. Leading domestic brands have rolled out 4G mobile phones, ready to tap the 4G market once it takes shape. However, numerous small and medium mobile-phone manufacturers will be inevitably forced out of the market, due to lack of technological root, the paper said.