Brutally competitive Chinese phone makers outpace Apple

Beijing

TO most Americans, the names are unfamiliar, maybe a little hard to pronounce: Huawei, Xiaomi, Oppo, Vivo. They are China's biggest smartphone brands. Around the world - although not in the US - they are making the handset business brutally competitive.

Last week, after Apple warned of disappointing iPhone sales in China, industry observers said that devices from the Chinese brands were a major culprit. As the phone market in China reaches saturation and sales shrink overall, the country's hardware makers are pushing hard, and increasingly winning fans, in places such as France, Germany, India and South-east Asia, where consumers find that the phones can do just about everything an iPhone can do at a fraction of the cost.

Apple sits comfortably atop the market in many countries, including China, for the highest-end handsets. But companies such as Huawei have started to do elsewhere what they have done in China, competing with the iPhone on experience and value and luring customers with price comparisons that make them rethink buying Apple's signature product.

The cost difference is notable: in China, an iPhone XR starts at around US$950, while Huawei's top-end handsets start at about US$600, and Xiaomi's comparable models start at even less. The iPhone XS starts at around US$1,250.

Companies such as Huawei and Oppo have made improvements in features and overall quality that are enticing many wealthy Chinese people, said Mo Jia, an analyst in Shanghai for the technology research firm Canalys.

Chinese brands' aggressive marketing and sales campaigns in Europe indicate that the companies believe consumers there who have traditionally used iPhones will do the same thing.

In its pursuit of the European market, Huawei, which has its headquarters in Shenzhen and is now the world's No 2 seller of smartphones, has gone far beyond the phone store.

Huawei has sponsored summer concerts in Greece, teamed up with Lithuania's basketball federation and backed a "China Festival" in Cologne, Germany.

Vivo sponsored last year's World Cup in Russia. Xiaomi, which is based in Beijing and was founded in 2010, seemingly came out of nowhere to become the No 4 mobile brand in Europe early last year, according to Canalys. The gadget maker has also become the top seller of phones in India, in part by opening hundreds of stores in rural areas.

Chinese phone makers have not made similar inroads in the US. The US government has worked for years to stymie the sale of Huawei's smartphones and telecom-network equipment, after a congressional inquiry in 2012 deemed Huawei a potential vehicle for cyberspying by the Chinese government. The Trump administration has urged Western allies to do the same. Security concerns have not dissuaded some buyers across the Atlantic.

Apple still has a hold on consumers in many places. Announcing the sales slump in China last week, the company's chief executive, Tim Cook, said Apple expected to set revenue records in wealthier countries such as Germany, Italy, the Netherlands, South Korea and Spain, and in some emerging markets such as Malaysia, Mexico, Poland and Vietnam. In China, though, Apple's market share has been declining, and the company is clinging to the No 5 spot in smartphone shipments, according to the market research firm Counterpoint. An Apple spokeswoman declined to comment.

China became the world's largest smartphone market over the past decade as rising incomes coincided with an explosion in mobile technology. People in China rely on handsets in an all-encompassing way, using them to rent bikes, sign into gyms and pay restaurant bills. The market is increasingly saturated, and there are fewer people in China who do not have an advanced device.

But there are also new economic reasons to buy locally made goods: consumers who are replacing or looking to upgrade are dialling back in light of China's slowdown.

Apple products have long been seen in China as conferring on their owners the ultimate in cachet and cool. But Chinese companies have used slick marketing and celebrity endorsements in hopes of giving their products more personality, while promoting advances in camera technology, battery life and microchips.

Another factor working against Apple in China is the dominance of WeChat, a messaging, social media and payments app used by more than one billion people. It works on Google's Android operating system as well as Apple's, making a phone's software less of a differentiating factor.

"Why would people pay such a high price for an iPhone," asked Kiranjeet Kaur, an analyst for the industry research firm IDC, "if, from a hardware perspective, there isn't much of an upgrade from Huawei and, from a platform perspective, there's nothing to lock people in?"

In Europe, buyers of Chinese brands describe undergoing a sort of conversion. Irritating flaws in their iPhone or Samsung devices lead them to seek alternatives. Presented with unfamiliar Chinese products, they initially have doubts. But after a while, they get hooked. NYTIMES