The rise of China's cheap smartphones

Inexpensive Chinese smartphones from Xiaomi, Oppo, Vivo, One Plus and Realme are gradually knocking out big names like LG, Samsung or even Apple.

The rise of China's cheap smartphones



"Even a pig can fly if it's in the center of a storm," Xiaomi CEO Lei Quan told foreign correspondents in an interview in 2015.

At that time, Xiaomi was like a Don Quixote fighting in vain with Apple or Samsung windmills.

But from a company with only $500 million in revenue in the beginning to $38 billion in 2020 with 396 million monthly users, Xiaomi has made the impossible possible, setting the stage for Chinese smartphone manufacturers to transform and hold one of the strongest growing markets on the planet.

Redefining smartphones

Xiaomi was founded in 2010 by Lei Jun and some experienced figures in the technology industry. Interestingly, Lei Jun himself had no experience in making phones.

Becoming Kingsoft CEO at the age of 29 and stepping down after nearly a decade, Lei Jun saw the next destination on his journey to build his own empire. Lei Jun invested heavily in technology, from social networks and web browsers to the mobile industry.

His final destination was a smartphone manufacturer, even though he was a novice in this industry. Lei Jun outlined new strategies and redefined the smartphone market in his own way.

Lei Jun abandoned the concept of traditional sales to focus on e-commerce. He did not consider users as customers but called them Mi Fans. He listened to ideas and improved products in a community of tens of millions of members.

Xiaomi also abolished the 365-day cycle of launching a new phone model. Xiaomi products are cheaper by half compared to products of competitors in the same segment with a shorter product cycle.

What did Xiaomi do?

The rise of China's cheap smartphones
Lei Quan, Xiaomi CEO, who once had no experience in smartphone manufacturing.
 



Selling cheap phones and accepting less profit is something everyone can think of, but not everyone can do it. Xiaomi used the two most basic methods to reduce the price of a smartphone: reducing raw material costs and cutting selling costs.

Xiaomi can buy cheap components because it is located in the 'world's factory'. But any company in the world can order outsourcing from factories in China, as long as it pays enough.

The secret is that Xiaomi orders large numbers of smartphone components to reduce the cost of raw materials to the maximum. Then, with the components, Xiaomi creates a product with a universal configuration, and a month later it has the same product with the difference only in the internal memory. A few months later, it again released a new model that only differs in screen size and camera resolution. Next year, it will launch a new model with a slightly larger and thinner battery.

But this strategy will not be successful if products are in stock. Therefore, Xiaomi sells goods online: customers place an order, pay for it, then Xiaomi produces and ship goods. It only sells flash-sale phones on e-commerce platforms.

No intermediary stores and no inventory, and newly launched phone models are sold out within seconds. Xiaomi has created an extremely effective crowd effect, from which its products are advertised verbally to new users with zero marketing costs.

Finally, having sold tens of millions of phones each quarter, Xiaomi profits from ads on apps for the Android operating system developed by itself called MIUI.

Xiaomi has developed from nothing to become one of the 500 strongest groups in the world, according to Fortune magazine.

Lessons for latecomers

Chinese firms have imitated Xiaomi’s approach and it works. From long-standing rivals to newcomers, all have learned from Xiaomi's method to turn smartphones into Chinese’s own playground.

Obviously, each of them has their own way and changes to suit the situation. In 2018, Realme was born and chose to attack the Indian market. Similarly, a year later iQOO also entered India.

Other competitors such as OnePlus, Oppo, and Vivo chose Europe, Southeast Asia or Latin America before being strong enough to confront Xiaomi directly.

As a result, Xiaomi witnessed a significant decline in market share in the smartphone segment under great competition. But it has turned to AIoT - Internet of Things (IoT) products integrated with artificial intelligence (AI).

With smartphones as the key, Xiaomi has opened up a wide path to young people's smart homes, from robot vacuum cleaners, fans, rice cookers, refrigerators, air conditioners, air purifiers, electrical outlets, water quality testers, and smart shoes to Bluetooth speakers, smart TVs, IP cameras, drones and even smart electric cars connected to the Mi ecosystem.

While its rivals are seeking to sell more smartphones, Xiaomi is selling everything it can at cheaper prices in a potential multi-trillion-dollar market, which will be decided by millennials, or people who were born in the 1980s and later.

In Vietnam, VinSmart once found a market with a similar approach, but it has stopped the game to focus on other areas. Meanwhile, Bphone is still struggling to find the right user segment.

History has shown that only the phone manufacturers that find the first breakthrough in price (Xiaomi) or camera (Oppo, Huawei) can make a difference. As slider, flip, VR/AR and 5G phones have all appeared, Vietnamese phone manufacturers need to think beyond that, in a game where non-innovative laggards will hardly survive.

Phuong Nguyen

2020 – unprecedented year for mobile phone retail chains

2020 – unprecedented year for mobile phone retail chains

With the sharpest revenue decrease in history, mobile phone retail chains in Vietnam experienced a memorable year in 2020.

The 3-year journey of Vsmart phones

The 3-year journey of Vsmart phones

Vsmart phones have seen milestones that have never been made by any Vietnamese phone company.

 
 

Other News

.
Fourth Covid-19 wave still raging, 80,000 businesses leave market
Fourth Covid-19 wave still raging, 80,000 businesses leave market
FEATUREicon  27/08/2021 

The Ministry of Planning and Investment's latest report found that production and business activities have been seriously affected by the Covid-19 pandemic.

Fighting the epidemic based on science
Fighting the epidemic based on science
FEATUREicon  27/08/2021 

At the national level, much more data in the health, economic and social fields is needed to make science-based rather than sentimental decisions for anti-epidemic and economic fronts.

Latest drastic moves in Vietnam’s vaccine diplomacy strategy
Latest drastic moves in Vietnam’s vaccine diplomacy strategy
FEATUREicon  26/08/2021 

Through vaccine diplomacy, Vietnam has so far received millions of vaccine doses from the support of the international community.

Vietnam-US relationship: comprehensive and strategic
Vietnam-US relationship: comprehensive and strategic
FEATUREicon  26/08/2021 

This is the time to review the relationship between Vietnam and the US, 

Hotels, private hospitals join fight against Covid-19
Hotels, private hospitals join fight against Covid-19
FEATUREicon  26/08/2021 

Many resources in society have been mobilized for testing, vaccination and medical quarantine, which has improved service quality and helped businesses earn revenue.

Teachers explain ’10.0 GPA phenomenon’ among primary school students
Teachers explain ’10.0 GPA phenomenon’ among primary school students
FEATUREicon  25/08/2021 

Two famous secondary schools for the gifted in Hanoi and HCM City have found it difficult to enroll students for the 2021-2022 academic year because there are too many students with a perfect 10.0 GPA (grade point average).

Directorate of Market Surveillance officials arrested for abuse of power
Directorate of Market Surveillance officials arrested for abuse of power
FEATUREicon  25/08/2021 

While many officials have been honored for their excellent fulfillment of official duties, many others have been prosecuted for their involvement in trade fraud.

Experts warn of high risks from real estate firms' corporate bond issuance
Experts warn of high risks from real estate firms' corporate bond issuance
FEATUREicon  25/08/2021 

Corporate bonds issued by real estate firms account for a high proportion of securities that mature in three years. Experts warn of high risks if the real estate market cannot recover by that time.

People lose everything as they fall into consumer-loan trap
People lose everything as they fall into consumer-loan trap
FEATUREicon  27/08/2021 

Some people who have not earned enough money because of Covid-19 and have had to borrow money have fallen into traps set by usurers.

State revenue from registration fees increases
State revenue from registration fees increases
FEATUREicon  24/08/2021 

The registration fees collected for the state budget increased from VND11,816 billion in 2012 to VND40,194 billion in 2019, up by 240% or VND28,378 billion.

Hanoi protects green zones from the core
Hanoi protects green zones from the core
FEATUREicon  25/08/2021 

Each residential area, commune and ward are considered the core level – the ‘cell’ that needs to be protected. Many places in Hanoi are effectively promoting the "green zone" model for safe residential areas.

More medical data needed to fight Covid-19
More medical data needed to fight Covid-19
FEATUREicon  24/08/2021 

Data from epidemiological studies using antibody tests to measure the proportion of the population who have acquired protective immunity will help to make more accurate assessments about the epidemic situation.

Street-front high-rise owners incur losses as renters leave
Street-front high-rise owners incur losses as renters leave
FEATUREicon  24/08/2021 

The long fourth Covid-19 outbreak and social distancing regulations have posed great challenges to the office leasing market.

Businesses seek interest rate cuts, banks worry about declining profits
Businesses seek interest rate cuts, banks worry about declining profits
FEATUREicon  24/08/2021 

Business associations and industries have repeatedly asked commercial banks to ease lending interest rates to share difficulties with them in the Covid-19 pandemic.

Six production options offered to companies amid pandemic
Six production options offered to companies amid pandemic
FEATUREicon  23/08/2021 

The HCM City Department of Industry and Trade has released guidance on safe production in the conditions of the fight against Covid-19 pandemic. There are six options:

Four-day campaign suceeds in stopping vegetable price chaos in HCM City
Four-day campaign suceeds in stopping vegetable price chaos in HCM City
FEATUREicon  21/08/2021 

A campaign deployed within four days helped rescue the vegetable distribution network in HCM City and stop price fluctuations during social distancing.

Discarded fruit peels recycled into valuable products
Discarded fruit peels recycled into valuable products
FEATUREicon  27/08/2021 

Many types of fruit peels, considered such as cocoa and shrimp shells and rice husks, can be processed into useful products, thus increasing product value, regenerating resources, and protecting the environment.

A breath of fresh air in literature textbooks for sixth graders
A breath of fresh air in literature textbooks for sixth graders
FEATUREicon  21/08/2021 

Teachers say sixth graders this year will be able to access literature works that their parents and grandparents did not have in their textbooks.

Highly contagious Delta variant lengthens outbreak in Vietnam
Highly contagious Delta variant lengthens outbreak in Vietnam
FEATUREicon  20/08/2021 

The Delta variant of the SARS-CoV-2 virus, with its rapid and strong spread in a very short time, has put huge pressure on the health system.

A midnight call from a pregnant woman, and return trips to hometowns
A midnight call from a pregnant woman, and return trips to hometowns
FEATUREicon  20/08/2021 

On the evening of August 15, Pham Thi Minh Hien, deputy director of the Phu Yen Department of Labor, War Invalids and Social Affairs, received a call for help from a young couple.

 
 
 
Leave your comment on an article

OR QUICK LOGIN