Content
- Boredom in numbers
- What was once different?
- Advertisement, one advertisement
- Engineering progress
- Coronacrisis
- Artificial competition
- What will happen next?
Recently, many of our readers and our colleagues have noticed that the smartphone market has become incredibly boring. Endless models of the same type, characteristics that do not change over the years and even degradation of a number of parameters from year to year. New ideas almost never appear on the market, and bloggers who want to show the audience at least something unusual are forced to shoot reviews on phones that no one buys at all – like Fairphone , Balmuda or Punkt . Read the headlines on Helpix – whatever is new is either a clone, or a clone of a clone, or just some kind of incomprehensible game. But how did it happen that the market for one of the most sought-after products in the world became so gray and boring? I’ll try to tell.
Boredom in numbers
If you look at the analytical reports on the smartphone market, it may seem that life is in full swing: the market leader is constantly changing, some manufacturers are rapidly fading away, some are rapidly rising to the top. But if you look closely, in fact, none of this happens: the change of market leaders is just cyclical surges in iPhone sales, the only manufacturer that has fallen in recent years is Huawei, and it fell far from market reasons, but in the category of rapid rises is always mentioned only Realme, which is actually part of OPPO, which is part of BBK, but analysts carefully pretend not to know this.
Counterpoint Report on Realme’s “Rapid Growth”. Analysts have repeatedly called it the fastest growing manufacturer, although it is not a manufacturer at all.
I will not try to explain why analysts in their reports talk about a rapidly changing world, when in fact nothing is happening. Let’s take a better look at what the smartphone market really looks like. In my opinion, all manufacturers can be divided into five groups:
- Leaders. These are four companies – Apple, Samsung, BBK (OPPO, OnePlus, Realme, Vivo, iQOO) and Xiaomi (Redmi, POCO, Black Shark, Qin) – which collectively control 75-80 percent of the smartphone market. Their market shares are comparable, they often change places in the ranking: of the four, only Xiaomi has never taken the top line. In any case, if you’re buying a smartphone, it’s almost certainly from one of these companies.
- Catching up. These are four more companies – Lenovo (Motorola), Honor, Huawei (NZone, TD Tech, U-Magic, Maimang, Hi nova) and Transsion (Tecno, itel, Infinix), which control another 10-15% of the world market, also with comparable shares. Perhaps this is the most interesting category for technology lovers: these manufacturers have the resources to produce cool devices and are even forced to do so in order to find their place in the sun.
- Boutiques. This is a fairly broad category of manufacturers who build their business on the production of premium smartphones with high margins. They can also make budget models, but they do not form the basis of their range. There have been quite a few such manufacturers in recent years: Sony, Meizu, ASUS, Google; recent debutants include Balmuda, Carbon Mobile and, all of a sudden, Microsoft .
- Cellars. The largest group is companies that, on the contrary, have concentrated on the production of budget devices. There are dozens, if not hundreds. And these are not only endless Chinese brands like Ulefone and Newman, but also quite eminent ones, like Nokia, TCL and Fujitsu (FCNT). Sometimes such companies release quite expensive smartphones (most often protected ones: Nokia XR20 , Kyocera DuraSport , Umidigi Bison GT2 ), sometimes there are models with quite interesting hardware ( Coolpad Cool 20 Pro , Reliance Orbic Myra ), but the basis of sales are gadgets that you can use – you don’t want to.
- Outsiders. These are companies that continue to offer a wide range of products from budget to flagships with almost no sales. This category actively feeds the previous two; now, perhaps, there are only two manufacturers left in it: ZTE and Sharp. If they decide whether they should be boutiques or cellars, there will be four groups left.
Chinese and American smartphone markets. Only Apple is visible here and there
Well, okay, you say – for example, boutiques and outsiders on a market scale cannot influence anything, basements are stewing in their own juice of poor budgets, and those who are catching up with their 10-15% are also not so hot. But we somehow don’t have a monopoly, we have as many as four leaders, and there must be a squabble between them! Alas, no: Apple separated itself from the rest on the basis of price (somewhere in the region of $500 there is a border, below which there is almost no iPhone and above which there is almost no Android), while other manufacturers were divided by geographical principle. For example, of the two largest markets (USA and China), Samsung is present in one, while BBK and Xiaomi are present in the other. Yes, BBK has OnePlus that made its way to America, and some Galaxy are also sold in China, but that’s about nothing. In this sense, we were even lucky – all four leaders were actively working in Russia before the well-known events.
What was once different?
To put it mildly, yes. For a long time, there were two leaders in the smartphone market – Samsung and Apple. And we even got used to the fact that there are these two, and there are all the others. At the same time, all the rest were not at all as miserable as the current boutiques, basements and outsiders, and fought for 60-70 percent of the market! They offered a wide range of products, including a variety of budget models and flagships. And these devices sold well – some only in China or other local markets, some around the world.
Everything changed dramatically at the turn of 2016-2017 – I can prove it for a long time, but just compare the lists of models on Snapdragon 820/821 and on Snapdragon 835 . It was then that the current market landscape began to take shape, in which there is no place for small producers, and the majority of sales are accounted for by a very narrow group of leaders. At the same time, their list was determined, which has practically not changed to this day (only Huawei was kicked out of there). Since then, we have only seen the development of this trend, which led to the sad situation that we now see. But what exactly has changed?
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Quite simply, sales mechanisms have changed. Two Chinese companies – Xiaomi and BBK – have revolutionized how smartphones are sold. First of all, within China; but this allowed them to gain power to begin to take over other markets and destroy everything in their path.
Let’s deal with China first. Before the rise of Xiaomi and BBK, it was largely carrier retail country—phones were sold in carrier stores, and those who had contracts with them had the biggest sales. It was the Chinese “big four” (Huawei, ZTE, Lenovo, Coolpad), many smaller companies (Lephone, Gionee, Uniscope, etc.), as well as some foreign manufacturers. In addition, a huge number of phones were sold, to put it mildly, in the bazaars, which allowed tens of thousands of small manufacturers to “enter the market” – some of them grew into something.
In the early years of Xiaomi, we constantly wrote how the next batch of smartphones was sold out in seconds. Here, for example, Xiaomi Mi 3 ended in 86 seconds
Xiaomi and BBK went the other way, each in their own way. The first company relied on direct small-scale wholesale sales via the Internet – they threw in small batches of their phones on their website, and the lucky resellers bought everything in a matter of minutes. Small wholesale and direct sales made it possible to reduce prices (retail is always very expensive), while flash sales generated excitement and interest from the audience. In addition, Xiaomi was very active in talking about itself on the Internet – at a time when some competitors did not even have a list of models on their websites.
BBK went to build its own retail, opening tens of thousands of stores. The OPPO brand alone had 200,000 retail stores by June 2016. This is an average of 300 stores for each city of provincial or district significance! In order for people to come to these stores, BBK began to invest in advertising – but not through the Internet, but through TV. Look on YouTube for recordings of Chinese TV shows from 2016-2017: in absolutely every host, OPPO or Vivo is written on the microphones, and on the walls of the studio there is an advertisement for brand new BBK smartphones.
The heroes of some Chinese TV show are checking out the Vivo X27 selfie camera. There is nowhere to escape from this on Chinese TV
Of course, the strategies of Xiaomi and BBK were obvious to everyone around, and many companies tried to repeat the success. However, most of them never managed to match their budgets and reach comparable turnovers, and therefore they lost. Although two have become quite prominent: Meizu, following the path of Xiaomi, and Gionee, following the BBK strategy. But, unfortunately, the first one could not continue its development , having lost its main investor, and the second one lost money in the casino to its own CEO .
Those companies that remained true to the previous strategy simply lost the market – where their smartphones were sold, buyers no longer went. Later, most of these manufacturers, who did not die, nevertheless switched to online sales, but were already completely forgotten, and now they vegetate, releasing miserable UniSoC phones for 300-600 yuan. Prominent examples of such companies are Newman, Doov, Xiaolajiao and Sangfei (owner of the Philips brand).
Netflix free ads didn’t help BQ deal with Xiaomi
Well, Xiaomi and BBK went to conquer the world. Somewhere one company is more successful, somewhere else, but the general principle is always the same: when they come to some country, they quickly destroy local leaders. When redmics appeared in large quantities in Russia, brands like Fly and Highscreen quickly lost their positions. Another striking example is how Xiaomi, having come to Spain, destroyed the popular local brand BQ. He produced cool smartphones and led a very competent marketing policy – for example, he distributed devices to film studios for free without any conditions, thanks to which all the heroes of Paper House went with BQ. But it took Xiaomi a couple of years to dump in Spain, and there was no trace of BQ left. It was the first step towards the current state of affairs.
Engineering progress
Another important circumstance is that it has become more difficult to create smartphones. In 2013-2014, you could take a flagship processor, put a good screen and camera, come up with a couple of fun features, stick your own skin on Android, and the flagship is ready. And it turned out no worse than Samsung, LG, HTC and Sony. Dozens of small companies, without thinking twice, released real flagship smartphones. And people bought them.
But over time, something has changed. It’s hard for me to say what exactly – I’m not well versed in the engineering side of the issue. But for some reason, the development of smartphones, especially advanced ones, has become a very difficult task. Cooling? Camera algorithms? Component layout? I have no idea where exactly in this process the plug is located, but it no longer works like that. Remember AGM X3 from 2018 : having all the flagship hardware on hand, it was perceived rather as a mid-budget shock-resistant smartphone, on which for some reason games do not lag.
Screenshot from the review of Microsoft Surface Duo 2 from Mobile-Review. Find the “Timer” tab
Or a more striking example – Microsoft Surface Duo 2 , over the jambs of which only the lazy did not joke. And this is no longer an AGM basement, but one of the big tech corporations, having almost unlimited resources, for the second generation in a row produces the most ridiculous device with a bunch of problems and imperfections. It turns out that without a lot of experience (or a lot of money to buy this experience), it is impossible to create a modern smartphone. You can say that two examples in four years is not enough, but try to find at least one counterexample?
Of course, this primarily applies to the flagship segment, but the situation with the middle peasants is a little simpler. Do you think the Sony Xperia 10 III or HTC Desire 21 Pro turned out so plain because the manufacturers wanted it that way? I strongly doubt it. So it turns out that the only refuge for small producers is the budget segment, where they hang out. Yes, there are still boutique brands, but they simply exploit their experience and partnerships, and ultimately they are also doomed, especially if there are no related activities through which the manufacturer is ready to keep the smartphone business afloat.
Coronacrisis
Everything that I have just described is the deeds of bygone days and the traditions of ancient times. But even in 2018-2019, when BBK and Xiaomi were already everywhere, the situation was much more fun than it is now. The coronavirus crisis has certainly played a role. His influence consisted of two stages. The first is the lockdown in China and the countries of Southeast Asia, which has brought the smallest and most unstable companies to the brink of bankruptcy. Many of them could not survive several months of inactivity and ceased to exist. But they are not particularly sorry – these are very small basements that still did not release anything interesting.
I googled the relevant illustration and I liked the picture. Who came up with this?
Those who survived soon faced what analysts called the “chip shortage.” The coronavirus crisis led to a sharp increase in demand for electronics, but manufacturers were unable to respond to it with an increase in supply, primarily due to the fact that component manufacturers were unable to increase volumes. Almost everything that smartphones are made of has become in short supply.
Smartphones are so out of nothing to make that they began to be made from UniSoC chipsets
Now, if you are not a market leader, or at least not catching up, you simply have nothing to produce smartphones from. Your orders for components will be pushed into the queue, because it is more profitable for everyone to work for large wholesale lots. This circumstance put small companies in a very difficult position. As a result, those of them who remained an “outsider” became “cellars” – there are components for cheap budgets, even if you are HMD Global or TCL. But the devices of the middle class and flagships have nothing to do at all.
Artificial competition
So, aggressive innovative marketing has helped Xiaomi and BBK rise and clip the wings of most of the local brands in the world, the complexity of engineering has made it difficult for new companies to enter the market without large resources, and the corona crisis has deprived small manufacturers of access to components. At this point, the smartphone market faced a very unexpected problem: a lack of supply variability.
What is the difference between OPPO and Vivo smartphones? I’ll explain now
The fact is that smartphones are very personal gadgets. Your smartphone must fit you. There is not and cannot be any universal recipe. Apple tried to prove otherwise, but now it releases five models a year itself. Do you know what is really the key difference between OPPO and Vivo brands? OPPO has the volume buttons on the left , while Vivo has them on the right . It sounds ridiculous, but check: there are practically no exceptions. But this is reasonable: people are roughly divided in half into those who are more comfortable with one option, and those who are more comfortable with the other. So BBK decided to reach both audiences by releasing almost identical phones with different button layouts under two separate brands. And they follow this division so carefully that even in the foldable OPPO Find N, the volume buttons ended up on the left!
>Indeed, the buttons on the left of the clamshell, how else could they come up with this?
It is clear that this is a somewhat absurd example, but it perfectly illustrates the fact that the four leading brands are unable to provide the smartphone market with everything necessary. Instead of a horde of vendors, each of which is trying to find its own niche, we got a market full of niches waiting for someone to finally come there. Therefore, manufacturers began to create sub-brands for all occasions – from Xiaomi’s “advanced dialers” Qin to the “gaming Internet brand” iQOO from BBK. Somehow, Samsung is holding on without this, using parallel lines instead of sub-brands, but I won’t be surprised if it follows this path.
Xiaomi’s “competition” looks like this. BBK and Huawei have a similar picture
But the different brands of BBK and Xiaomi, although they try to occupy different niches with the help of marketing, in fact remain only different brands of BBK and Xiaomi. There is nowhere for them to go from this. Therefore, instead of real diversity, we get dozens of almost identical phones. And BBK and Xiaomi themselves are not averse to saving money by releasing the same phones under different names, thus trying to close several niches with the same phone. Of course, all these surrogates of competition cannot work as effectively as real competition – here we see the most boring market in which no one can find a really suitable phone.
By the way, about the release of identical phones under different names. Ever wondered why companies so quietly turn one phone into another literally in a neighboring country? It seems to me that this is a direct consequence of the “Great Chinese Firewall”: in China, information cannot cross the state border. And the Chinese are so accustomed to it that they can’t even think that it doesn’t work like that in other countries. So they think that we don’t know that they have a much cooler Redmi Note for sale in China for the same money and with the same name.
What will happen next?
I don’t know how to predict the future, so let’s leave it to the professionals. Here is a table from an analytical report by Credit Suisse , which is actually dedicated to the prospects of TSMC, but “for context” there was also a fairly thorough analysis of the smartphone market. And here is what Credit Suisse says about our immediate prospects:
As you can see, nothing fundamentally changes. In 2023, BBK, Samsung, Apple and Xiaomi will remain leaders with shares of 23.1%, 22.1%, 17.1% and 16.5%. Huawei / Honor will shrink a little more, but it will also go up, Transsion will grow rapidly, Lenovo will slow down; as a result, they have 4.9%, 7.1% and 3.9%, respectively. And small producers will continue to sink: their total share will fall to 4.5%. It is not clear why Credit Suisse singles out ZTE among them, which is expected to grow rapidly, thanks to which it will almost reach 1% of the market.
The chip shortage is obviously dragging on. Inflation in America and Europe (including Russia), of course, can reduce the demand for electronics, which will somewhat alleviate the situation, but will not solve it. The engineering complexity of smartphones is growing, and new attempts to enter the market will increasingly turn out not luxury products like Essential, but absurd products like Balmuda. And, of course, no one will be able to compete with the market leaders in advertising budgets (and it is unlikely that HTC’s strategy will be repeated with its quietly brilliant).
Tecno Camon 18 Premier
The only ones who can make a difference are the consumers. It is you and I who can start voting in rubles, yuan, dollars, hryvnias and any other currencies for smartphones that do not copy each other, but are individual and suit us. In this regard, the catch-up category is the most interesting – and my recent experience with Tecno , Motorola and Honor confirms that very interesting smartphones can be found in this group. So we will win.
© Oleg Lazarev. mobile phone
