Brown’s Bytes – The Rise of the Chinese Smartphone

Welcome to Brown’s Bytes! Your weekly insight from Mobliciti’s CTO Andy Brown. Follow #brownsbytes

3rd August 2018

There has been a lot going on in the Smartphone space this week. It seemed prudent to summarise and take stock of where we are up to…

Apple is Quite Big

Unless you’ve been living under a rock you will no doubt have heard that Apple is the first Trillion Dollar organisation. A large part of this is down to the iPhone and more importantly how much Apple is able to charge for one. The genius of Apple is to create desirable products, charge a premium price for them and (most importantly) make their users feel exclusive despite the fact that everyone has one!

It’s a neat trick, but it was starting to look like they were running out of road a bit (the iPhone 7 being case in point). Indeed Apple was starting to ship less iPhones than in previous years as their markets started to saturate… the answer was genius… charge more for the phones!! The launch (and success) of the iPhone X means that the average price (and profit) of the phones has leapt up for Apple. It’s a neat trick and worthy of the market valuation they now have.

Is Samsung Struggling?The Samsung S9 is a perfectly good high-end phone. However, a bit like the iPhone 7 was for Apple, it hasn’t really brought anything new to the party. Consequently, it doesn’t really have much draw to consumers – in particular an S8 user isn’t clamouring to upgrade to get one (I count myself in this camp).

It’s been reported that low shipments of the S9 are behind a slowdown in growth at Samsung. As a result, they’re racing to get the latest Note 9 device out to try and get things back on track. It’s amazing what a difference a single handset launch can make these days.

My personal theory is that Samsung is increasingly caught between a rock and a hard place. Apple increasingly own the high end, high margin handset area now. Samsung has traditionally been the high-end Android device that competes with them, but the S9 clearly isn’t playing ball. In fact, it could be argued that Samsung has been on the back foot ever since Apple caved in and made phones with bigger screens (the iPhone 6) as this was really the only USP that Samsung had over Apple until then.

Right now, Samsung seem to lack any unique features in their range. Remember Apple has iOS – it is unique to them and always will be. Samsung has… err… some things they’ve bolted on to Android that arguably make it worse (Bixby anyone). The S9 was touted for it’s amazing camera, but that’s clearly not really resonated with consumers. Most people take snaps with their phones and the camera they have in any recent phone is good enough.

This is bad for them, but it’s actually doubly dangerous because of…

The Rise of Huawei

Underneath all the noise about Apple’s profitability there was a much more interesting stat – Huawei overtook them to be the number 2 handset manufacturer. Samsung remain number 1 but remember that this is total handsets (including all the much cheaper stuff that they sell).

Huawei is fuelled by their share of the Chinese market. However, they’re now aggressively going out into the rest of the World and they bring a perfect storm for Samsung.

The danger they pose is that they make the Android market increasingly a price choice. It’s simple logic that if everyone makes phones that run Android and the features are similar, then the consumer will choose the phone that’s the lowest price.

And this is happening. Huawei has everything from the low end up to the P20 Pro (which is a really good phone and getting rave reviews). Crucially they’re cheaper than Samsung equivalents.

About 5 years ago I presented my plan to deploy Samsung handsets to a senior IT manager at my former employer. His response was lukewarm at best and further he challenged my choice by predicting what is now arguably coming to pass… His key point was that Android must ultimately be a race to the bottom on price and that Chinese manufacturers will ultimately win because they can make phones cheaper than anyone else. He just didn’t see how Samsung could compete long term as their cost base was higher. He is potentially now being proven right and I doff my cap 5 years later.

Let me repeat – Huawei is 2nd already.

And, this is with Huawei not even being formally available in the significant US market.

Oh, and Huawei has a large range of phones that are part of the Android Enterprise Recommended programme. This means if you want to deploy these phones in the enterprise you’ll have Google backing for the best management and control of them.

And finally, don’t forget that it’s not just Huawei. TCL is making inroads with their BlackBerry branded handsets (also Android Enterprise Recommended) and there are more brands waiting in the wings (Honor, OnePlus etc). It’s getting very busy out there.

In Summary

Interesting times ahead. Apple is getting more expensive and Android is getting less expensive. Could it be that we finally see a rise of Android in the Enterprise?

Don’t forget that where consumers lead, enterprise generally has no choice but to follow in the Smartphone space.

Let’s see…