Chinese Smartphone Brands Thriving in Emerging Markets

TMTPOST--In Nairobi, Kenya, businessman Li Fei sees immense potential in Africa's growing consumer electronics market, reminiscent of Huaqiangbei in China’s tech hub Shenzhen city a decade ago. Despite rising competition, the African market still promises substantial profits for those equipped with the right skills and perseverance.

"In 2022, I decided to follow my fellow villagers to Kenya. Although the profit of each mobile phone is not high, the total demand is huge. I work as an agent for some local brands, and the domestic supply channels are also very stable," Li told TMTPost.

Globally, the smartphone market experienced a downturn but is showing signs of recovery. Canalys predicts a 3% rebound in shipments for 2024. However, this growth is uneven, with emerging markets like Africa, the Middle East, and Southeast Asia driving the expansion, while mature markets such as North America and Europe lag behind.

Chinese brands have been particularly successful in these emerging markets. Transsion, known as the "King of Smartphone in Africa," leads with a 40% market share in Africa, which is attributed to its focus on low-end smartphones and effective brand promotion. Transsion ranked the fourth among global smartphone giants in 2023, with shipments of 194 million units and revenues of 62.295 billion yuan.

In the first quarter of 2024, smartphone shipments saw significant year-on-year growth in regions such as Latin America (26%), the Middle East (39%), and Africa (24%). This growth was fueled by economic recovery, demographic dividends, and increased technological penetration.

Brands like Xiaomi, Honor, OPPO, vivo, and realme are expanding rapidly in these markets. For instance, Xiaomi experienced over 100% growth in shipments in Africa and the Middle East, while Honor achieved a remarkable 293% increase in market share in Latin America.

The global smartphone market recorded a year-on-year increase of 10% in the first quarter of 2024, with sales reaching 296.2 million units, marking the first double-digit growth after ten quarters of contraction, according to data released by Canalys.

In a breakdown of shipments, the number of phone shipments in the European market grew by 2% year-on-year to 33.1 million units in the first quarter, after 12 consecutive quarters of decline, which is far less than the average growth rate; the Chinese mainland smartphone market shipments were 67.7 million units, the same as last year; the North American smartphone market had seen a continuous decline in shipments for four quarters, with a year-on-year decrease of 11.2% to 34.6 million units.

Compared to the lackluster performance of mature markets below the average level, emerging markets have delivered an impressive report and are the decisive force for the global mobile phone market to return to double-digit growth.

In the first quarter of 2024, the Latin American smartphone market reported 34.9 million units shipped, a year-on-year increase of 26%, marking the third consecutive quarter of double-digit growth.

Since the second half of 2023, the market has begun to recover, with overall inflation levels being controlled, strong consumer confidence, and a global economic recovery. Healthy inventory levels have been restored, and demand in sales channels increased before the holiday sales season.

Canalys Senior Analyst Miguel Perez told TMTPost that the high shipments to the region in the first quarter of 2024 correspond to the restocking demand after the year-end sales season, and also to the suppliers' impulse to obtain the maximum inventory share from the sales channels with increased demand.

In the first quarter of 2024, the smartphone shipments in the Middle East region (excluding Turkey) reached 12.2 million units, a year-on-year increase of 39%. This is mainly attributable to the reduction in inflation rates and the continuous investment in economic diversification by oil-exporting countries, bringing strong growth in non-oil industries. Economic and social reforms have also stimulated investment in the private sector and an increase in the expatriate population, especially in the Gulf Cooperation Council economies.

"This diversification has attracted a large number of expatriates, especially in markets such as Saudi Arabia and the United Arab Emirates. The mass market in the Gulf Cooperation Council region is experiencing significant growth, thanks to the demand for smartphones from newly arrived blue-collar workers. Suppliers like Transsion are taking advantage of this demand by offering smartphones that are affordable and powerful in performance," said Canalys Senior Analyst Manish Pravinkumar.

In addition, the growth momentum in the African region remains strong, with shipments in the first quarter jumping by 24% year-on-year to 18.2 million units, ranking third in the global smartphone market.

In particular, Nigeria delivered stellar performance, with a year-on-year increase of 42%. Egypt's growth rate also reached 39%, and Algeria grew by 16% driven by strong consumption and investment. However, there are also declining markets, such as Kenya, with a decline of 7%.

Regarding this, Li explained to TMTPost that this is more due to the increase in import duties and value-added tax, adding that it had a minimal impact on him.

Chinese brands including Huawei, Xiaomi, OPPO, vivo, Honor, and realme have increased their investment in emerging markets in recent years.

In the first quarter, Xiaomi ranked first in eight countries/regions such as Bangladesh among the 74 surveyed countries/regions. In the first quarter, Xiaomi's shipments in Africa and the Middle East grew by more than 100%, at 132% and 115% respectively, according to the latest report on the smartphone shipment of countries/regions released by Counterpoint Research.

Xiaomi entered the African market years ago, with the establishment of the Africa Regional Department in 2019. Canalys data shows that thanks to the high sales of the Redmi digital series and A series models, Xiaomi achieved a 333% growth in the ultra-low-end market.

Xiaomi Group President Lu Weibing said that the combination of personnel adjustments and strategic adjustments will accelerate Xiaomi's efforts in overseas markets.

The same is for Middle East market. In the first quarter, Xiaomi's market share in the local area increased by 7.1% year-on-year to 20.9%, becoming the second overseas market after the European market to occupy over 20% of market share.

"I believe that in the global market, as long as it is a market we are in, we should secure a market share of 20%," Lu said at the first quarter performance meeting.

In addition to Xiaomi, Honor is another Chinese brand that has performed well in emerging markets. In the first quarter of 2024, Honor entered the top five brands in Latin America for the first time, with a market share of 7%, a year-on-year increase of 293%, and Latin America has become Honor's second largest global market after Chinese mainland.

At the end of April, Honor CEO Zhao Ming also shared the company’s achievements in Latin America on Chinese social media platform Weibo. "In one week, I visited the markets of Mexico, Panama, Colombia, and other countries. In 2023, Honor's mobile phone growth in Latin America increased by 200%, and the first quarter also saw a growth rate of over 100%."

A Mexican retailer pointed out to the TMTPost App that Honor's achievements should be attributed largely to the solid foundation laid by Huawei. "With the help of Huawei, Honor has a tried and tested business structure, distributor resources, and strategy, which enable it to perform well."

Manish Pravinkumar, a senior analyst from Canalys based in Dubai, noted: "With mass-market manufacturers strengthening product supply, it is expected that the ultra-low-end market (below $100) will grow by 13% in 2024."

According to the rankings of smartphone makers, it can be seen that in addition to Samsung and Apple, the rest are all Chinese brands. "It is indeed a good thing where there are Chinese manufacturers, because consumers benefit and can buy high cost-performance products," said a channel merchant from Saudi Arabia.

However, it is also important to recognize Samsung's absolute advantage in emerging markets. In many emerging markets, Samsung has secured the number one spot, and although it is not as dominant in the African market as Transsion, it still ranks a high second.

Samsung maintains a strong presence in many emerging markets with its affordable A series phones. Chinese brands must navigate local customs, economic disparities, and diverse channel operations. Additionally, the gray market for smartphones, policy uncertainties, and the need for localization pose significant hurdles.

In the Middle East market, many consumers who can't afford new high-end phones choose second-hand devices, especially the second-hand phones of Apple and Samsung. Although new phones still account for 70-80% of sales, second-hand phones are gaining popularity, especially in the mass market and online areas, Pravinkumar told TMTPost.

Meanwhile, unfair practices under the guise of supporting local industries, as seen in India with Xiaomi and vivo, can create a challenging business environment for Chinese companies. Despite these obstacles, Chinese brands are adapting by understanding local market demands and avoiding impractical, flashy approaches. They are positioning themselves as local brands, offering comprehensive services, and building reputations through quality products and after-sales support.