Niche-Focused Approach by Chinese Brands May Fragment the Smartphone Market

Apple’s competitors in China have been quietly courting consumers with specialized smartphone offerings that cater specifically to their artistic needs, writes Xiaochen Su.

Niche-Focused Approach by Chinese Brands May Fragment the Smartphone Market

Apple’s competitors in China have been quietly courting consumers with specialized smartphone offerings that cater specifically to their artistic needs, writes Xiaochen Su.

The latest ad released by Apple on May 8 drew swift criticism from some in the creative community as well as consumers. In trying to depict how the newest iPad crams all imaginable artistic functionalities into one small device, the ad shows a massive steel compression machine destroying game consoles, musical instruments, and painting utensils.

Detractors pointedly interpreted the ad as a sign of Apple’s hostility toward creative art, especially in light of the tech giant’s investment in generative AI that could possibly threaten the livelihoods of many in the artistic community.

The criticism of the ad is symptomatic of the headwinds facing the firm. The latest sales figures released by the firm on May 2 showed a 4% year-on-year decline in quarterly revenue, continuing the downward trend from 2023, when sales declined by 2.8% from 2022.


 

Particularly notable is the fact that iPhone sales, making up more than half of the firm’s total revenue, decreased by more than 10% in the quarter, dragging down the firm’s overall performance. 

Apple’s China woes

Apple has been especially vulnerable in China, its second-largest market after the US. In the same quarter, iPhone’s sales in China declined by 19.1%, sending Apple’s market share to third place behind Vivo and Honor with 15.7% and just ahead of Huawei’s 15.5%. The market share continued to languish despite Apple’s extensive discounts in March in an attempt to shore up flagging sales, sacrificing revenue in the process. 

“While Apple upset some art producers and consumers with the “Crush” ad, its Chinese competitors have been quietly courting the same crowd with specialized smartphone offerings that cater specifically to their artistic needs.”

Commonly blamed for Apple’s performance in the Chinese market is the increasingly hostile Sino-American relations. After the US decision to publicly blacklist Huawei and prevent the firm from purchasing cutting-edge semiconductors abroad, the firm has been riding a wave of resurgence, as patriotic Chinese consumers snapped up its Mate 60 and Pura 70, both powered by China-made chips. The Chinese government’s decision to ban foreign smartphones in state-related agencies late last year also hit iPhone sales.


 

However, Apple’s widely-cricized iPad ad also shows that the firm’s woes, particularly in China, may not simply be due to politics. While Apple upset some art producers and consumers with the “Crush” ad, its Chinese competitors have been quietly courting the same crowd with specialized smartphone offerings that cater specifically to their artistic needs.

Whereas Apple is trying to fit all artistic endeavors into one device, whether it be the iPhone or the iPad, some Chinese smartphones are doing the opposite, focusing on one functionality while sacrificing the others to gain a more niche following.

Image by Rob Hampson

BBK Electronics: a case study in specialization

A firm that found particular success with the more tailored business model is Guangdong-based BBK Electronics. As a holding company, it launched a series of smartphone brands including Vivo, Oppo, iQOO, OnePlus, and Realme. Vivo, Oppo, and Realme all rank among the top ten smartphone brands in the world, while Vivo, Oppo, and OnePlus are among the top ten in China. BBK has managed to create multiple successful brands that do not cannibalize each other’s sales through a diversification functionality strategy.

The iQOO website, for instance, specifically calls the brand a gaming smartphone maker, tailoring its offerings as gaming consoles with additional smartphone functionalities.

A Times of India ranking of the top 10 gaming smartphones available in the country places includes two of iQOO’s products (as well as two from OnePlus and one from Realme) alongside those of Samsung and Apple, even though the firm was only founded in 2019. Its gaming credentials were further burnished by being the official device provider for the eSports competition of the 2023 Asian Games and the professional eSports tournament King Pro League.

“A Times of India ranking of the top 10 gaming smartphones available in the country places includes two of iQOO’s products alongside those of Samsung and Apple, even though the firm was only founded in 2019”

In contrast, the Vivo website specifically highlights the brand as a provider of smartphones for photography lovers. In multiple independent reviews, photographers provided glowing reviews of the pictures taken with Vivo phones, calling them high quality unexpected of the price tag.

Like iQOO with gaming, Vivo has managed to burnish its photography-centered brand, through a partnership with 178-year-old German optical devices maker Zeiss to co-engineer cameras specifically for its smartphones.

A functionality-based fragmentation of the smartphone market?

BBK is by no means the only Chinese firm seeking to establish a niche-based presence within the smartphone market. In the US, where iQOO has little presence, Apple and Samsung have to contend with Chinese newcomers Nubia and Black Shark. Vivo’s sister company Oppo is also establishing its name as a maker of camera phones in the competitive US market, alongside Apple, Samsung, and Google. Chinese-owned Motorola, Honor, Xiaomi, and TCL also managed to find themselves in various top ten lists of best smartphones for recording videos, doing graphic design, and creating music

The emergence of different brands for different functionalities may represent a major shift in how both their manufacturers and consumers think about the smartphone. In the not-so-distant past, the market consisted of high-end flagships like the iPhone, towering over their cheaper “mid-range” and “entry-level” devices in all aspects of functionality. But the near future may see similarly priced phones that are geared toward different purposes, making the simple apple-to-apple comparison in functionality impossible.

Led by BBK, Chinese smartphone manufacturers appear to be at the forefront of this evolution of the smartphone market. Their willingness to establish different brands that fill different niches, offering products reasonably priced due to having only one or a few strengths, is creating a more fragmented smartphone market. In this world, Apple’s ad, claiming to fit all functionalities in one device, might not only be potentially viewed as arrogant, but anachronistic. 

 

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