Chinese Smartphones
China has been famous for fake products, but now Chinese smartphone manufacturers are pushing into the local market. It proves that they have grown rapidly such that they are ready to penetrate the home ground of Korean handset makers, who are dominant players in the worldwide smartphone market.
In fact, Xiaomi Tech nabbed the top spot in the Chinese market in the second quarter of this year, beating Samsung Electronics. The reality is that Chinese smartphone sellers have grown to the extent that they can threaten the position of Samsung and Apple in the global market.
As Chinese smartphone makers are sharpening their competitiveness, their competitive advantage in price cannot be ignored. Korean consumers are buying Chinese smartphones at low prices through Internet group purchases, since they can purchase Chinese handsets at half the price of local smartphones. That explains why local smartphone vendors are nervous at the prospect of losing market share.
ZTE first launched a new offensive to dominate the Korean entry-level smartphone market. Last year, the Chinese firm introduced its ultra-low-cost phone called “The Z” to the Korean market. 3,000 units were sold. Next, it released the ME in July 2013, and the model was also sold out. The two models were priced in the range of 200,000 won (US$193.23) per unit.
ZTE's success is motivating other Chinese smartphone sellers to enter the Korean market. Huawei is also scheduled to launch the Honor 6 through LG U+. The Chinese Android device manufacturer is in third place, following Samsung and Apple. In particular, its competitive advantage in entry-level smartphones is putting local companies on edge. Xiaomi, which snatched the fifth spot in the global handset market, is making local firms nervous as well, because it is said to penetrate the Korean market soon in the form of a group purchase.
What is interesting is that Korean consumers have different attitudes about Chinese smartphones. In a blog for a group purchase of Xiaomi's Mi 3, one blogger said, “You can search for information about the technical specifications of the new model on the Internet. It has a lot of advantages.” It indicates that local consumers no longer consider Chinese smartphones to be low-quality products. An increasing number of Koreans think that the quality of Chinese phones in the range of 200,000 to 300,000 won (US$193 to US$289) is not bad.
An industry analyst said, “Chinese Android phone makers are making inroads into the domestic market using low prices and better quality. So, they are threatening the position of Korean smartphone makers in the market.” The analyst added, “If Samsung, LG, and Pantech make a mistake, Chinese firms could eat away the market share of the three major companies.”
Local firms are preparing to respond to the offensive of Chinese smartphones with price competitiveness and a growing competitive advantage in products. An increasing number of consumers are expected to buy low-priced smartphones instead of premium phones, owing to the contraction of the local smartphone market stemming from mobile phone subsidies.
An official at a local smartphone manufacturer remarked, “It is a worldwide trend that consumers prefer low-cost smartphones to high-priced ones.” The official went on to say, “In the latter half of this year, local companies will prepare for the entry of Chinese smartphone makers into the local market by increasing the number of mid to low-range models.”
Given that the power of Samsung and LG, it will not easy for Chinese smartphones to comprise a large proportion of the Korean market. Jang Se-jin, a professor of the KAIST College of Business, said, “Frankly speaking, the growth of Chinese smartphone vendors in the Korean market will be limited, since their rapid growth is based on the Chinese market.”
Nevertheless, Chinese smartphones makers are interested in the local market. The reasoning behind the interest is that if recognized in Korea, they will be in a more advantageous position in the global market. The acknowledgment in Korea, famous for mobile telecommunications technology, has a different meaning to them.