Chinese smartphone brands - already eating into global market share numbers - are increasingly gaining traction in South Africa and are poised to make even further inroads, with huge implications.
Joseph Hlongwane, IDC's SA analyst, notes Chinese brands are growing in South Africa, with ZTE gaining 213% and Huawei growing 694% last year. "The reason for the huge growth is purely the low price points and the changing perception of Chinese brands."
Hlongwane believes such brands will continue to boost their South African bases, especially at entry-level price points, because there is an increasing appetite among local consumers for such brands. He adds, as Chinese brands improve in quality, technology, and look and feel, some of the well-known brands will be knocked out of the top spot, and Samsung is already being challenged by these brands.
The implications of the infiltration of low-cost handsets in emerging countries like SA are huge, adds Hlongwane. This is because a large portion of the population can own a smartphone, giving them access to social media and the Internet, making it possible for them to use vital resources such as job searches, he says.
Currently, there are around 23 million active smartphones in SA - meaning almost one in three active SIMs is in a smartphone, according to BMI-TechKnowledge director Brian Neilson. The IDC notes smartphones sold in the Middle East and Africa leapt 300% year-on-year in the third quarter of 2014.
Price competition
World Wide Worx MD Arthur Goldstuck says there is no question Chinese phones will take over the market at some stage, but will not compete with high-end devices such as Apple. Instead, he says, these phones are competing for market share based on price points, and an offering that spans the entire price point range. "They will take serious market share."
TechCrunch noted Xiaomi's Mi devices typically retail for around $300, while its affordable Redmi family is sub-$150, yet - by comparison - Apple's top-end iPhones sell for more than $1 000 off contract, while the Samsung Note and Galaxy S families are similarly priced.
Already, ZTE is making inroads in SA by white-labelling products, while Huawei has reached a local tipping point, says Goldstuck. Hisense also has plans to go big in the mobile segment this year, adding to its current Infinity range.
Yet, says Goldstuck, Xiaomi is unlikely to be a major player here for the foreseeable future, as the market is simply too small to justify the scale at which it operates. "However, sooner or later someone will see the opportunity to act as local agents."
Emerging market play
Liron Segev, CEO of Swift Consulting and tech blogger, says Chinese brands will "definitely" make tracks in emerging markets, but are not targeting the number one, or two position - just yet. He notes their strategy is to gain market share slowly, which will inevitably mean they own more of the market in the long-term. "There's no rush."
Already, Xiaomi has become the most popular brand in India, despite a looming court challenge over its patents. Xiaomi, which launched in 2011, had risen to the number three spot globally by last October, according to the IDC. It now has 5.3% of the global market, thanks to its strong China base. In number two spot is Apple, with 12%, while the leader remains Samsung at 23.8%.
The Chinese company, which recently revealed the Mi Note - boasting specs similar to that of Apple's iPhone 6 Plus - last year doubled its revenue and sold more than 61 million phones, a 227% year-on-year increase. Competitor Huawei, which is gaining traction locally, saw sales gain 40% to 75 million in 2014.
Contender ZTE has also seen good gains, with revenue gaining 40% year-on-year in the third quarter of last year. Segev says there is no doubt these handset makers are a force to be reckoned with in SA and Africa, and will "eat other people's lunches".
Consumers have reached a point where it is difficult to justify spending so much on a handset when cheaper versions are available that will serve the same purpose, says Segev. He notes, however, that the brands will still have to find their way into consumers' favour, and that their unwieldy names will not make this easy.
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