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Chinese phones go global after pushing aside Apple, Samsung

  • ASSOCIATED PRESS

    A man holds his smart phone at the Mobile World Congress wireless show, in Barcelona, Spain, Monday.

SEOUL » Move over, Apple and Samsung. The next big smartphone might be from little-known Chinese brands such as TCL and OPPO.

Along with other Chinese phone makers such as Huawei and Xiaomi, Chinese brands have surpassed Samsung in China and are encroaching on Apple’s turf. In the coming years, analysts forecast that these cheap Android phones with not-so-cheap features will likely attract more budget-conscious customers in Europe and even in Samsung’s and Apple’s home markets, South Korea and the United States.

Chinese phone makers made their global ambitions known at this week’s Mobile World Congress wireless show in Barcelona, Spain. Huawei and TCL vied to steal the spotlight from Samsung and LG, both of which announced new high-end phones at the show. Xiaomi, which typically launches phones in China, will preview the Mi 5 phone in Barcelona on Wednesday.

“The Chinese smartphone vendors have a very unique feature — it is the price,” said Shu On Kwok, editor of AndroidPIT, a website that tracks Android developments. “You get the same features as an LG or a Samsung smartphone has hardware-wise, but for a lower price.”

Samsung saw its market share decline in 2015, while Apple forecast its first revenue decline in over 13 years. Both will have to do more to prove the value of the extra dollars their customers pay.

Along with premium hardware, Apple has tried to position its products as unique by offering software, services and apps that work only on Apple devices — although in many cases comparable services are available for Android devices.

At Samsung’s product event Sunday, mobile chief D.J. Koh said “we have other ideas” beyond core smartphone features. Samsung, for instance, is promoting its Galaxy phones’ compatibility with a Samsung virtual-reality headset and an upcoming 360-degree camera. But VR is still in its early days, of interest largely to gamers and tech pioneers.

The Chinese brands have already taken their toll on Samsung. Although it’s still the largest smartphone maker in the world, Samsung is no longer among the top five phone makers in China, according to market research firms IDC and Counterpoint Technology. Profits from the mobile business have plunged to less than half of what it was in its heyday. Apple’s sales in China rose in the fourth quarter, but its growth was outshined by Huawei.

But bad news for manufacturers is good news for consumers.

Many of these Chinese companies sell decent phones for less than $200, compared with about $650 for an iPhone or high-end Samsung Galaxy phone. In other words, for the same price, customers can buy three or four smartphones with decent cameras and screens.

Chinese makers can keep prices low by reducing the profit margin and turning to cheaper components that are a year or two old. That means high-end phones still take better pictures and have sleeker, thinner designs. But phone innovation has slowed, and the advances appear marginal to many consumers. A Huawei photo taken in good light often looks just as good as an iPhone or Samsung shot when displayed on a small phone screen.

Melissa Chau, senior research manager at IDC, said Chinese companies are catching up on phone design and quality even more quickly than Samsung did a few years ago.

“Samsung was a fast follower in terms of innovation,” Chau said. “These Chinese players, they are even faster.”

And while these phone companies are pushing cheap phones, they are starting to succeed in getting customers to pay more — though still not as much as an iPhone or a high-end Galaxy. For instance, the average price for Huawei smartphones in China was $213 last year, up 21 percent from 2014, according to IDC.

Having succeeded in China, these phone makers are looking elsewhere to grow. OPPO, China’s fourth-largest smartphone maker according to IDC, is marketing aggressively in southeast Asia. Xiaomi already sells phones in Indonesia, Singapore and Malaysia.

At the Barcelona show, Huawei executive Adam Joshua said that while the company’s focus has been on emerging markets, it also has eyes on “the European market, Australia, and obviously the last big one, the U.S.”

Analysts said Huawei and Xiaomi will likely steal customers from Apple and Samsung in their strongholds as some budget-conscious consumers seek to upgrade their phones without financial pressure.

When South Koreans were just starting to buy smartphones, many upgraded frequently to get longer-lasting batteries, sharper cameras and larger screens.

Now fewer consumers care whether they have the latest technologies, said Oh Bong Yeon, a 38-year-old South Korean. They may even wait several months until the price drops. Although Oh has the iPhone 6, he said he would buy Huawei’s flagship smartphone if the company starts selling it in South Korea.

Raphael Rashid, 28, a British citizen living in Seoul, loves his Xiaomi Redmi Note 2, which his friend bought for him in China for about $120. Before Xiaomi, Rashid used a $150 Huawei smartphone for about a year.

“For a thousand dollars, I can get five new phones in the space of two years,” he said. “I’ll always have the latest phone.”

Much of the growth comes from consumers who feel comfortable buying phones directly from manufacturers online, rather than from the wireless carrier. In the U.S., consumers are just starting to warm up to direct online sales, especially as carriers stop offering discounts in exchange for two-year contracts.

Huawei is now the third-largest smartphone maker in the world. Its market share exceeded 7 percent last year, compared with less than 6 percent in 2014, according to IDC. That’s still far behind Samsung’s 23 percent and Apple’s 16 percent, but success doesn’t necessarily mean being No. 1 everywhere.

In fact, ZTE mobile chief Adam Zeng said the Chinese phone maker wants to be in the top three in selected markets — read that as No. 3 — and not necessarily worldwide.

And Xiaomi might have trouble expanding to established markets — particularly the U.S. — because of accusations it has copied or closely imitated designs from Apple and other companies. Phone manufacturers routinely sue each other in these markets, and Xiaomi will need to build up a portfolio of its own patents to defend itself.

Even if gaps remain in market share, IDC’s Chau said Chinese companies can at least close the gap in brand reputation in about three years. That’s partly because Apple and Samsung are struggling to stay cool.

She said that while Apple is still the premium brand in China, “it’s been around for a while and people are familiar with it. It lost the extra shine of being the new.”

AP video journalist Jona Kallgren in Berlin, AP Technology Writer Brandon Bailey in San Francisco and AP writer Joe Wilson in Barcelona, Spain, contributed to this story.

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      • Bought/installed Made in China car parts that wasn’t up to specs and failed within a years time. How’s your Harbor Freight tools holding up? lol

        Cheap skates

        • You can blame Mitt Romney’s vulture capital company, Bain Capital, for that. They took over the major auto parts supply company in US, Delphi Automotive, announced to the workers of the 29 factories they were shutting down all but four, laid off the workers of those factories, and to maximize their profit, terminated ALL retirements, and then they set up factories in China to supply the vital auto parts and components. Remember when Romney refused to give his income for certain years, Yeah, those were the years. Estimate is he may have made as much as $15.3 million as his share of the vulture takeover, Bain, several billion $$$$. Yeah, and he blamed Obama for making it possible.

          If they’re going to bring over the Huawei phones (They already have the small appliance, refrigerator market.), I’d like to see them begin to export the BAIC automobile. One of the sleekest designs I’ve ever seen was their luxury design model. Currently, BAIC’s are sold in South East Asia and the Philippines. Saw one with its distinctive logo cruising on the street in one mainland China city. It just catches your eye with its distinctive styling. And, yeah, Mercedes Benz, Volvo, and Hyundai have licensed BAIC to produce its cars in China. BAIC is even in talks to take over Volvo.

      • SO I GUESS QUALITY AND VALUE MEAN NOTHING? I’LL BE THE FIRST TO SAY BUYING “AMERICAN” MEANS NOTHING TO ME. IT’S ALL ABOUT VALUE. IF A CHINESE PRODUCT GIVES ME THE BEST VALUE YOU CAN BET YOUR BOTTOM DOLLAR THAT’S WHAT I’LL BUY. THE ARE ACTUALLY MANY HIGH QUALITY CHINESE MADE PRODUCTS OUT THERE. JUST TAKE A LOOK AROUND YOUR HOUSE. I’D BET THE MAJORITY OF YOUR ELECTRONICS ARE “MADE IN CHINA”.

    • Like the Lenovo computer that was in the news a few years ago. The Chinese implanted a program that was transmitting information of the user to a central processing back in China…remember folks China does not have any regards to intellectual property rights. China got rich by selling knock offs with name brank merchandise.

      • I believe Hewlett Packard, Apple, and Microsoft do the same. It’s called customer service. Hmmm, I guess Uncle Sam must be doing the same. What was that whistle blower’s name? Should ask him if our IT and high tech companies are doing same for the CIA, FBI and Homeland Security.

    • Good thing Walmart is tanking because of China made products. Use a cheap chinese screw and watch it shred. Use an American screw and watch it shred a Chinese Phillip screwdriver. Hell just screw the Chinese.

    • Long ago in growing up in the 60’s it used to be a joke, “Made in Japan” and now at least in my view things produced there are quality products. I could never view China as being a country that produces “Quality” goods.

      Cheap and junk products coming out of there, from electronics to car parts I’ve experience less than desirable goods as to longevity and quality. You get what you pay fer!

      • Actually, most of their parts are made in foreign countries and final assembly is done in China. As the article stated, they maintain low prices via using older parts and simply not charging the outrageous markups that both Samsung and Apple charge. You should visit iFixit to see what parts are actually in phones. Parts are sourced globally. Including from the US.

        • Too bad them dead Dogs that ate Chinese manufactured dog food ain’t living today to tell you what they tink. lol

        • To Pocho and mineeyes, they eat dogs in Taiwan, Korea, Vietnam and the Philippines, and horses in France. They also put horse meat into dog food in the US, so why not insult those countries while you’re at it.

      • Funny, I’ve been pleased with most of the products that I bought that were “made in China”. Then again I know which products to buy and what to avoid. It’s all about value. Assuming quality is similar, if a $500 TV made in the US lasts 10 years and a $200 TV made in China lasts 8 years, guess which is the better deal?

        • Mori. Why build something like a TV to last more than a few years when a new technology with supersede the old model in a few months?

        • To mike,our vaunted Apple iPads and iPhones are made by Chinese making $2 an hour. Yeah, that kind of trash.

  • Put your money where your mouth is! Let’s actually report on the actual components within these cheap knock-offs. There will always be a market for junk but the big boys have nothing to worry about. I don’t buy garbage.

      • from back in the late sixties, i did not favor melamine products…i still don’t – especially when heat is applied! the composition of melamine is quite suspect in that some of its composite elements have to ability to leach into the food being served when heat is applied.

      • The father and son, who owned the company responsible were summarily executed, with bullets to the brain, the charge for the bullets billed to the family, and all properties of the family confiscated. That would never happen in the US. They would get to spend time in prison in luxury like that guy who bilked his friends of billions in a Ponzi scheme.

        • This was the case of the deliberate introduction of melamine into infant formula to fool the nutrition analysis machines. The greedy father-and-son duo paid for their crime with their lives, and the families lost all their wealth because they participated in leeching off the people and babies who used their products. Should happen here.

  • a chinese made phone is surely a piece of junk. but people will be sucked into buying them cause they are cheap. I try to avoid anything made in Chins if I can. Glad to see more US companies are moving their plants out of China.

        • lol, my SamSung made in Korea. Do you have a Samsung Note5 replica that was Made in China. Did you not check the spelling printed on your replica phone? hahahahaha. Maybe you got a SanSumg?

        • To Pocho, read this: “… Samsung Electronics, headquartered out of South Korea, is a world leader in electronics manufacturing and sales. In 2011, Samsung enjoyed profits of over $12 billion and was ranked as the 22nd largest corporation in the world by CNN. Naturally, the treatment of this corporation’s manufacturing workers serves as a model for other businesses in the industry.

          However, new investigations by CLW have revealed that the treatment of Samsung’s Chinese factory workers is far from model. Indeed, the list of illegal and inhumane violations is long, including but not limited to well over 100 hours of forced overtime work per month, unpaid work, standing for 11 to 12 hours while working, underage workers, severe age and gender discrimination, abuse of student and labor dispatch workers, a lack of worker safety, and verbal and physical abuse. Moreover, workers lack of any effective internal grievance channel by which to rectify these transgressions.

          Samsung has a network of 12 factories that it directly owns and operates in China. In addition, it has countless contracted factories which it does not operate but which are part of Samsung’s supply chain, including the HEG Electronics factory, which was exposed by CLW on August 12 for child labor abuse. From May to August 2012, CLW conducted an investigation of 8 factories, including 6 directly-operated by Samsung and 2 Samsung supplier factories. …”

          http://www.chinalaborwatch.org/report/64

    • Yeah, they’re moving their factories to Vietnam and India where labor is even cheaper. Quality? Have you ever gotten IT assistance from a help line linked to an office in India? And the guy has a fictitious name of Joseph Smith?

  • But American, ha, ha. Made in Asia, with near slave wages and profits kept overseas so as to avoid US taxes. For an over-priced, bloated product. I don’t think so. Apple had the biggest profit margins around, playing off the “my appendage” is cooler than yours.

  • The headline on this article is a hoot. Last time I looked, a $29.95 Chinese phone was nowhere near “pushing aside” Apple. If you want a good laugh about this kind of clickbait tech “journalism” read the Macalope’s columns. (just Google macalope)

  • I is very cheap in China. I heard that the manufacturer planted a backdoor software in the phone; the government can access one’s messages, chats and email through it. It is their way to monitor their peoples.

  • Frankly, my two Samsungs experience hasn’t been very good. Many bugs that required shutdown and reboot, short battery life, heated after use for a while, got slower after a few months even with cleanup, etc. Am thinking about iPhone now. But if the Chinese is $200 versus $800 iPhone, the choice is clear. I’ve had some quality issues with Chinese products, but lately some bigger ones with my Japanese car too. So there is always the risk.

    • (I’m not an employee of Apple though I own a few shares of APPL that I’ve purchased since 1999 and I do have a Masters in a technology related field) I have had essentially no problems with the iPhones I’ve owned. They have performed as advertised, they integrate with my workflows, they don’t crash, (perhaps 3 times since the iPhone one) I’m very happy with the way that they allow me to extend what I’m doing. (your experience may be different because there are so many variables) For me, the key is keeping desktops, laptops, tablets, and phones up to date as far the OS goes. (another caveat: I’m an IOS and OS X developer and have beta software installed an most of my devices. Sometimes it’s problematic but mostly, it works as it’s supposed to. In fact , my only real problem and gripe is with Photo.)

    • Samsung probably has factories in China. Don’t you watch Korean drama where all those chaebol have their factories in China? It’s the big thing to do. In fact, the Korean population in China is so huge, that it is considered one of the country’s ethnic minorities.

  • I went to China and bought a name brand knock off golf driver for $10. Piece of junk, so I sold it on ebay as a knock off for $35. Maybe I can do that with these phones. Ha!

    • So, you passed your purchase of a product ripoff to another idiot, at a profit, making 2505 profit off of it. Now, that’s American chutzpah, greed, deceit, and avarice at its best. That’s what Apple is doing. Jawohl.

    • So, you passed your purchase of a product ripoff to another prestige name label lover, at a profit, making 250% profit off of it. Now, that’s American chutzpah, greed, deceit, and avarice at its best. That’s what Apple is doing everyday. Jawohl.

    • Yeah, and according to our much maligned local whistleblower, Edward Snowden, the US is doing same. Even tapping into German President Angela Merkel’s cell phone. But then again they probably need to, because she is a vacillating woman, and as such, can’t be trusted. That’s American, male chauvinism at its best.

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