Why are Chinese Smartphone Brands Winning? (TSB - Ep.2)

in the first quarter of this year three out of the five bestselling smartphone Brands around the world came from China where did companies like HTC LG and Sony go and how come Chinese smartphone manufacturers are suddenly so successful these are the questions that I'll will answer in the second episode of my new series called the story behind where I dive deeper into the tech industry let's [Music] go so Huawei takes the number one spot for Chinese smartphone makers with sales of 27.5 million phones in just the first quarter of this year in large part because of an obscene amount of products and advertisement not only do they have a Huawei branded line of phones with phones in each category from entry level to Flagship they also have a brand called honor which is their online brand and that 2 has an entire range of products and finally they also built the latest Nexus phone for Google basically whatever you're looking for there's a power for that and probably also an honor or maybe a Nexus then they also spent mountains of money on promotion like when they got cowgirl Scarlet Johansson as well as famous football player Lionel Messi to promote their smartphones and when they paid Leica to let everyone know that the latest Flagship is serious about photography while China is still huawei's biggest Market they're also the only one on the short list that has been selling their phones in most countries around the world for a number of years now not only in China the company that I previously worked in op quote takes the second spot with 18.5 million smartphones in the same quarter which is the result of an insane 153% year on-year increase 80% of those sales come from China though and most of the rest comes from Asia so there's a good chance that you've never seen an Oppo phone if you're from the West unlike Huawei Oppo recently only focuses on a single category the mid-range smartphone in China for example they make up half of the sales in that category opo is also sponsoring the world's arguably most successful football club FC Barcelona whose biggest star is weirdly enough huawei's Lionel Messi awkward Vivo comes in at number three with their 14.3 million devices and they're the ones that probably only ring a bell to Phone Geeks and people who live inside China awkwardly enough they're owned by the same investors as Oppo and yet they are each other's fiercest Rivals with the same sales channels phones that are clearly there to fight each other and with the same sort of promotional strategy of big ass media and celebrity gigs and whatnot and these are only three of the most successful companies but there's also Shi as well as Lenovo that bought Motorola not long ago and like a hundred more companies you've probably never heard of the Chinese smartphone industry is obscenely large and competitive and other than maybe Apple and Samsung it is driving basically everyone out of their business and to understand how all of this happened we have to look at it from multiple angles the EXP explation that kind of everyone has heard before is that foreign companies brought their manufacturing to China the locers learned from them and started their own companies that did the same thing just cheaper and faster it's this romantic picture of a super economy developing from scratch organically but of course it's a little bit more complicated than that and there are a lot of factors that these businesses like to forget about conveniently when they talk about their growth for Chinese companies to learn so quickly a very Dee rooted Chinese Cultural trade was necessary copying and I can already hear you typing in caps Martin you're a racist but hear me out while intellectual property right is something sacred in the west I mean we call it intellectual property theft you're a thief if you steal an idea and it's a criminal offense this has basically never been the case in traditional China an idea or a design isn't something you could own in traditional Chinese culture taking someone else's idea and then changing it bit to make your own thing out of it is a totally accepted way of doing things and while this sentiment is changing a bit nowadays people generally don't think it's a crime to copy accordingly their legal systems don't always punish it either here are a few examples in ancient China a large part of learning to paint consisted of learning and replicating the exact brush Strokes of famous painters until you mastered their style it's a similar story with calligraphy where people even today often simply replicate styles of Old Masters but even something as recent as learning English in most primary schools which is something I experienced myself is taught by making kids simply repeat texts until they themselves learn them and while there are signs of change lately imitating until one learns things is still the default way to progress in Chinese culture it's basically the opposite of a patent system wired made a fantastic documentary about the culture of sharing and copying in the Chinese Tech sector which I've Linked In the description below so make sure you check that out after you finish watching this video and when companies in China are selling more phones that copy the iPhone than they sell actual iPhones then it becomes obvious that it's not only the law but also most consumers who don't mind either so the first thing that was needed for this initial transfer of Technology was not just foreign companies Manufacturing in China but a culture a legal system and consumers that all encourage copying and now that Chinese companies have developed considerably they do come up with their own Technologies in turn now whether that approach is fair or not I'll leave that up to you the second important factor was the Chinese smartphone market itself it is the perfect breeding ground for strong domestic companies first of all it is the biggest smartphone market in the world by a long short in 2015 alone 434 million smartphones were sold which accounts for nearly oneir of all shipments that year and guess what other than Apple basically no foreign company managed to make a dent in China lately in the Chinese top five last year we had xiaomi Huawei Apple Oppo and Vivo Samsung isn't even on the list and I haven't seen an LG or an HTC in China since forever it's basically apple or domestic but why well first apparently Apple's brand is the only one that is so strong that most people buy iPhones because of its Prestige it's a fashion statement so most people who have the money in China would just buy the original one but the other brands weren't that lucky and anyone who had to fight against locals in China had a very hard time first of course locals always have the advantage of knowing the local market better that means moving faster and building stuff that better matches the local needs but second they also have what you could call an unfair Advantage they are allowed to copy intellectual prop property without getting sued most of the time environmental and labor regulations aren't as strict as they are for international firms and even the public kind of turns a blind eye to this people commit suicide in a factory that makes iPhones headlines around the world apple is terrible the same thing happens to any Chinese smartphone maker probably no headlines at all and it's kind of just accepted when Chinese companies don't recycle their waste or pollute in any other way like as if that's just how things are and while especially the top Chinese brands are actually improving their conditions considerably I mean I've been to oppo's factories and they are some of the best ones in the world it's clear that there is a huge double standard that makes things a lot easier for them and then at the fact that the government routinely harasses foreign companies if they become undesirable or bans them completely like they did with Google and Facebook and it's easy to see how the playing field isn't exactly even with with a bit of help from their government and much more aggressive pricing strategies Chinese companies had the world's arguably most lucrative smartphone market basically all for themselves it's absolutely huge it's rich and unlike places like Europe or India even quite homogeneous where people share more or less a single culture a single language a single currency and are watching the same TV shows and listening to the same music even that's what I call an opportunity it is no surprise then that this Market soon turned into the most competitive one on earth companies popped up everywhere started building their products and Brands and through this incredible level of competition soon became some of the best companies in the world all relying on this perfect combination of the incredibly lucrative market and their sort of unfair advantage in it but now we've come to kind of a turning point because the Chinese smartphone market has stopped growing it is saturated which means a lot of Chinese companies will have to go outside of China and that will be a challenge because intellectual property laws labor laws and environmental laws are strict in the west and consumer taste is quite different as well that means a lot will have to change Huawei is definitely ahead of the curve in this area as they have created a relatively unique design language and they have had quite some success in places like Europe which means their IP rights are probably mostly in order but other companies have found a way around this they have decided to not even care about the overly complicated West instead the next big Battleground for xiaomi Oppo Vivo and the others will be India it's already the world's second largest smartphone market and it's the only large one that is still growing fast to show you how crazy things will get just listen to this out of nowhere Oppo Vivo and La eeko three Chinese smartphone brands have become the largest advertisers in all of India last quarter and I don't mean the largest smartphone advertisers but the largest advertisers overall of any type three out of three so with Chinese companies pouring their resources into India it is pretty clear that that's where they see the brightest future for themselves so my suggestion is that if you want to see the future of smartphone Brands unfold then take your eyes off of the US and Europe and maybe even China for now and watch India instead whether Chinese smartphone makers will become successful outside of China or not is yet to be seen however one thing is for sure they can no longer be ignored I hope you like this video and there'll be a lot more coming to my The Story Behind series so if you want to know more about what's going on in the tech industry then be sure to subscribe and follow me on social media and I will see you in the next one goodbye

Channel: TechAltar

Views: 331,266

Keywords: China, Chinese, Smartphone, analysis, trend, growth, brands, chinaphone, winning, theory, the story behind, story, behind, development, huawei, oppo, vivo, xiaomi, lenovo, sales, market share

Id: 5DpQWlQNFp4

Length: 11min 2sec (662 seconds)

Published: Tue Jul 26 2016