While high-end smartphones from the likes of Apple and Samsung may have captured markets elsewhere in the world, SA is going the "second tier" route - a market that is going to prove lucrative for smartphone makers for at least the next two years.
With the high-end smartphone market saturated due to prices of certain flagship devices breeching the R10 000 mark, say analysts, there is now significant opportunity for second-tier brands like Huawei, Sony and HTC to sweep the market with less pricey, but high-spec, devices.
It is this opportunity that Huawei has spent time and money investing in and, if the Chinese multinational company's 2014 financial results are anything to go by, this has paid off handsomely.
Yesterday, Huawei reported record sales, with its strategy for the South African market lauded as one of its greatest payoffs in 2014. The company's total sales revenue increased 30% year-on-year to $12.2 billion, crossing the $10 billion mark for the first time.
"Our strategy of focusing on premium mid- to high-end products has borne fruit," says Richard Yu, CEO of Huawei Consumer Business Group.
Meanwhile, in terms of brand awareness, SA and China registered the strongest growth in the past year - an achievement the group puts down to the "growing popularity of mid- to high-end smartphones among consumers".
Huawei says it aims to sustain the momentum created in 2014 and further consolidate its position in the mid- to high-end smartphone market, with a 2015 shipment target of 100 million units globally.
Short-term gap
World Wide Worx MD Arthur Goldstuck says there has been a definite opening in the local market for second-tier players. "At the moment, there is a massive migration from feature to smartphones and this represents a big opportunity in terms of volume in the short term (about two years)."
In the longer term, he notes, there will also have to be a focus on margin. "That is where Apple rules the roost and is the definitive case study for margin as opposed to volume [driving strategy]."
In Huawei's case, says Goldstuck, the company has taken the gap and its success is largely due to its consistent approach to the market in terms of profile and relationships. "I have watched the company for three years and seen it building up its relationship with networks and on their value proposition. This cannot be done with one phone launch - it happens over time. Huawei has made all the right moves. It has been patient, rather than waiting for a big bang."
In terms of pricing, Goldstuck classes flagship phones under R7 500 as second-tier - although he notes this is not a formal definition, but a rough guideline. Huawei's Ascend P7 and Mate 7 would fit into this category.
Swift Consulting CEO and tech blogger Liron Segev says the reason some South African consumers are still willing to fork out top dollar for R10 000-plus phones is because of marketing and market education - but this is changing.
"Huawei's phones [to take the current example] are on par both from a hardware and software point of view and they cost much less than rival phones. So you get quality without paying top dollar."
2015 has been predicted as being a big year for mid-tier smartphone competition. Analysts still pin Samsung as tops, but the across-the-board brand faces some stiff competition as manufacturers leverage the mid-tier opportunity gap.
BMI-TechKnowledge director Brian Neilson says Samsung is likely to come out tops at the high-end, but BlackBerry and Nokia are still very strong at the low- to middle-end of the market.
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