SMARTPHONES: Apple Colonizes Beijing, Huawei Rules China

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Bottom line: Huawei’s strong sales for its Mate line of mid-range smartphones and positive coverage of Apple’s newest China store opening spotlight 2 of this year’s top Chinese smartphone trends, which should continue into next year.

Huawei aims high with Mate 8 launch

A couple of smartphone headlines are spotlighting 2 of this year’s top trends in the market, namely the rapid rise of Huawei and the remarkable turnaround in China for Apple (Nasdaq: AAPL). The first headline has Huawei announcing lofty targets for the latest model from its line of mid-range smartphones. The second has Beijing becoming Apple’s unofficial Asian capital, with the opening  of its fifth store in the city — more than any other in Asia.

Both of these stories are quite remarkable, as each represents a major shift from previous trends in 2014. Huawei has struggled for the last few years to differentiate itself from a crowded field of domestic smartphone makers, but finally emerged as a leader this year based on its better product designs. Similarly, Apple’s recent surge marked a major turnaround from the last few years, when its reputation took a beating in China due to poor relations with Beijing.

We’ll begin with Huawei, whose smartphone chief Yu Chengdong, also known as Richard Yu, was boldly predicting that some Chinese smartphone brands will finally start to leave the crowded market soon. (Chinese article) I’ve been making this prediction for quite a while, though it never seems to happen. But perhaps Yu’s forecast could carry more weight, since the market does finally appear to be consolidating around a few key local names like Huawei, Meizu and Xiaomi.

Yu made his remarks as Huawei launched its latest model, the Mate 8, which is very mid-market with a retail price of around 3,300 yuan, or about $530. After struggling for years for name recognition, Huawei has finally begun to gain traction on this kind of more mid-range model that draws on its years of experience in the telecoms sector. Such models differ sharply with the more common low-end products that have flooded the market, many costing less than $100.

Yu revealed that the earlier Mate 7 sold 7 million units, which seems like a relatively strong number but nothing too spectacular. He added he’s aiming to sell 10 million Mate 8 smartphones, which would represent a big increase though still a figure that looks modest. The reports also add that Huawei was the top selling brand on the popular Tmall online shopping mall during China’s recent November 11 Singles Day online shopping extravaganza, taking the crown from the fading Xiaomi.

New Beijing Apple Store

Next let’s look at Apple, which has just opened its fifth Apple Store in Beijing, making the city home to more such stores than any other in Asia. (Chinese article) Apple CEO Tim Cook made sure that everyone knew about the opening, announcing it on his microblog on Weibo, China’s equivalent of Twitter. (Chinese article)

Cook launched his Chinese microblog in May this year (previous post), as part of a larger campaign to improve his company’s image in a market that has grown rapidly to become Apple’s second largest after only the US. His efforts have included frequent trips to China, and this year the company also announced several environmental initiatives to promote solar power in the country.

All the PR seems to be working, and has given Apple a positive image as not only the maker of trendy iPhones but also a good corporate citizen. That marks a sharp reversal from just 2 years ago, when the company was labeled as arrogant by the People’s Daily, the mouthpiece of the Communist Party, at the height of a wave of negative publicity surrounding Apple’s after-sales service.

I expect that both of these trends will continue into 2016, with Huawei consolidating its place as China’s leading domestic smartphone brand and Apple continuing to build its reputation in the market. I concur with Huawei’s Yu that we may finally see one or two medium-size players bow from China’s smartphone market in 2016. Another big trend for the year ahead could see Google (Nasdaq: GOOG) create some buzz with a launch of its Nexus brand phones in the market.

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