Chinese smartphone makers are increasing their presence in the global market. This year, we’ve already seen Lenovo Group and Huawei Technologies gain global market share, posing a threat to market leader Samsung Electronics 005930.SE +0.97%. Now, other lesser-known Chinese players are also trying to expand overseas.
Coolpad, a smartphone maker based in Shenzhen, plans to spend millions of dollars this year to promote its brand in Southeast Asia, Europe and the U.S., its senior executive told The Wall Street Journal in a recent interview.
So why are the Chinese players all focusing on overseas?
“China’s smartphone market is getting saturated,” said BNP Paribas analyst Peter Yu. “If you want to keep growing, you have to look outside.”
Between 2011 and 2013, smartphone shipments in China nearly quadrupled, according to research firm IDC. Now, the rate of annual growth is expected to slow. Meanwhile, smartphone sales are rising sharply in emerging markets like India, Southeast Asia and Latin America, where many consumers are still replacing basic cellphones with smartphones. According to IDC, 89% of all mobile phones shipped in China in the first half of this year were smartphones. In India, smartphones accounted for only 28% of shipments in the same period.
For Chinese players, overseas expansion is a way to keep up their growth and, possibly, to make their business more profitable. “Price competition is too intense in China,” says IDC analyst Kiranjeet Kaur.
In a recent interview with The Wall Street Journal, Lenovo Chief Executive Yang Yuanqing described China as the most competitive smartphone market in the world. “There are so many local players, and some of them are not logical in how they do business. They don’t want to make money in the short term,” Yang said.
Lenovo, the world’s largest personal-computer maker, and Huawei, one of the world’s largest supplier of telecommunications equipment, both have resources to compete globally. And they are already growing fast in emerging markets. Last week, Lenovo said its smartphone shipments in the quarter through June jumped nearly fourfold in Southeast Asia and sixfold in Eastern Europe. Huawei said last month that its smartphone shipments in the first half of the year increased more than sixfold in the Middle East and Africa, and nearly fourfold in Latin America.
Still, not all Chinese players have what it takes to expand overseas, analysts say. While Lenovo and Huawei have the financial resources to ramp up marketing and enhance their distribution channels abroad, other players with more limited resources, like Coolpad and Beijing-based upstart Xiaomi, may face more challenges.
Another potential hurdle is intellectual property. Some Chinese companies that lack a vast library of international patents face risks of lawsuits if they expand overseas, especially in the U.S. and Europe.
“In China, they don’t have to worry as much about patent litigations,” Yu said.
Lenovo earlier this year bought Japanese technology firm NEC’s mobile-related patents. It is also in the process of completing a $2.91 billion acquisition of Google GOOGL +0.02%’s Motorola Mobility handset business, a move that will give Lenovo access to new distribution channels as well as patents.
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