Chinese brands ready to tap SA’s ‘lucrative’ smartphone market

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South Africa’s high smartphone penetration rate makes it a lucrative market for smartphone producers.

This is the view shared by analysts, commenting on the recent influx of Chinese smartphone brands into the South African market.

With a smartphone penetration rate of 91.2%, according to the Independent Communications Authority of SA’s latest State of the ICT Sector report, SA is witnessing new Chinese smartphone providers entering the market.

BBK Electronics-owned brands Vivo and Oppo have officially established their presence in the country, with the former having launched six smartphones, to date. Oppo’s A72 will go on sale on 7 October.

In March, Chinese smartphone provider Tecno announced South African consumers will be able to purchase Tecno smartphonesfrom major retail stores and online outlets. Taiwanese consumer electronics and smartphone manufacturer HTC also recently announced its re-entry into the market, with plans to rollout devices from mid-October.

“The market has been driven by entry-level smartphones and mid-range phones which have made it possible for many people to own a smartphone,” says Arnold Ponela, research analyst at IDC. “Most Chinese smartphone brands are able to provide quality entry-level smartphones, hence they have seen tremendous success in South Africa.

“Coupled with the increased access to broadband connections and decreasing data prices, smartphone ownership has significantly improved. South Africa is also lucrative due to its postpaid market structure, which has seen telco operators play a key role in providing subsidies to smartphone vendors.”

South Africa is a very healthy smartphone market, says World Wide Worx MD Arthur Goldstuck, adding it has both a high proportion of people using basic feature phones but ready to move to smartphones, and entry-level smartphone users ready to move up the value curve.

“As users become familiar with the possibilities of smartphones and apps, they want to get more out of them, and begin migrating to devices with more storage, better cameras and better performance.

“South Africa is the most mature smartphone market in Africa, which, as a region, is regarded as the smartphone market with the highest growth potential over the next five years. All major manufacturers, aside from Apple and Motorola, want a piece of that action. Apple because it still targets the high-end and is not interested in the entry-level market, and Motorola because its owner, Lenovo, is still too heavily focused on the PC and laptop market to take the smartphone market seriously enough, even though its devices are highly competitive.

“The only surprise is that the likes of Oppo and Vivo did not enter this market sooner. If they succeed, we can also expect to see their sister brands, OnePlus and RealMe, enter this market.”

Is it a coincidence?

As Huawei faces restrictions in the US, the analysts think this will likely play a role in local consumers opting for other Android-powered Chinese brands.

Google is banned from doing business with Huawei, which has meant no Google Mobile Services (GMS) for the Chinese technology giant’s latest devices. GMS are the apps by Google that often come pre-installed on Android devices.

Huawei devices such as the P40 flagship series have launched without popular services like Google Maps, Music, YouTube and Assistant.

The Chinese technology gianthas introduced its native ecosystem, Huawei Mobile Services, and plans to rollout smartphones running on its operating system, HarmonyOS, sometime next year.

Ponela says Huawei has built its brand equity in the South African market and most consumers love the brand; new Chinese entrants still have a lot of work to do before they can dislodge Huawei from their position.

Lack of GMS will play a role in some people opting for other brands; however, it will not be the only factor that consumers consider before switching.

“Huawei's chances of creating a third OS will be most successful in its home country of China. In other countries, Huawei has a mountain to climb in terms of selling their own Play Store app. Even competitor Samsung, which poured money into its own open source Tizen operating system, could not make a meaningful dent.”

Goldstuck believes it's no coincidence that two major Chinese brands, Vivo and Oppo, are entering the South African market at a time when Huawei is having to fight hard to maintain its user base.

“It is an opportunity for them to gain market share from Huawei, among those users who want the value for money and strong feature set that Huawei offers, but also want to remain in the Android fold. We can also expect Xiaomi to start marketing more aggressively across Africa.”

Arthur Goldstuck, MD of World Wide Worx.
Arthur Goldstuck, MD of World Wide Worx.

According toLiam Faurie, business head of GTM operations at Oppo South Africa, the Chinese brand wants to build an iconic tech brand that connects with people and moves them forward.

“We intend to appeal to the local market through our support of local creators,” he says, commenting on the opportunities the company sees in the local market. “We will undoubtedly compete against all the well-established smartphone brands in SA.”

To show its commitment to the local market, Faurie says Oppo has opened an office in the country. “We moved into the Oppo SA office on 1st of September 2020, and our workforce currently consists of five Chinese expats and 12 local team members.”

On whether the South African market has space for another smartphone maker, Ponela and Goldstuck both agree that there is always space for new brands in any technology market.

“If one or two dominant market players convinced the rest not to enter a market, we would all still be using BlackBerry,” notes Goldstuck.

Ponela concludes: “The market is diverse, and it has huge growth potential as the demand for digital devices continues to expand. The insurgence of local brands in the mobile phone industry is encouraging progress for South Africa and Africa as whole for a continent viewed in the tech world as one of the untapped markets.”

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