Iconic US company continues to enjoy huge advantages over its rivals

It is likely domestic smartphone brands such as Huawei will one day be able to challenge the likes of Samsung and Apple in global sales. But before that can happen - and it is still probably at least five years off - Chinese smartphone makers will need to do a lot to become global brands.

Generally, Chinese smartphone makers have more complete supply chains than do their non-Chinese rivals, and manufacturing centers such as Shenzhen offer the local manufacturers strong support as they seek to grow.

Each of the Chinese smartphone companies has its particular advantages. For example, Huawei is good at sales, while Xiaomi is a relatively young company that is highly flexible and excels in e-commerce. Companies with operations overseas can obviously grow in that sphere more easily than those that have no overseas presence. For example, Huawei has good connections with local operators in Europe, and ZTE is similarly well placed in North America and South America.

However, Chinese smartphone makers still lack core technologies such as microchips and high-end screens. In addition, the domestic market is reaching the saturation point, which is putting more pressure on all manufacturers, whether they be Chinese or not.

The latest mobile phone tracker of the market research firm IDC shows that smartphone shipments in China shrank 4 percent to 98.8 million units in the first quarter of this year. This is the first time in six years that the China smartphone market has shrunk year on year. Quarter over quarter the market shrank 8 percent on the back of a large buildup of inventory at the end of last year.

Apple was the top smartphone vendor in China in the first quarter of this year, with consumers still strongly attracted to the iPhone 6 and the larger-screen iPhone 6 Plus. Xiaomi slipped to second spot as it faced stiff competition from other vendors in the low- to mid-range segment of the market, while Huawei maintained the third spot as a result of healthy growth in the mid-range segment.

Samsung and Lenovo both led the market at least once last year, but rankings have changed quickly, highlighting the volatility of consumers' brand preference in China.

With the market in the country slowing, Chinese vendors will focus on increasing their presence in countries such as India and in Southeast Asia. Some of the vendors plan to tap developed markets such as the United States and Europe.

Chinese smartphone makers enjoy some advantages in emerging markets, where the demand for low-cost phones is high. Yet in terms of branding, it is hard for Chinese brands to compete with foreign companies.

Branding is a long-term process. It involves many activities such as marketing and improving the customer experience. In the short term, it is hard for Chinese brands to challenge Apple, which has an enclosed system. Its hardware and software, its Apple store and IOS are closed to outsiders. This fosters high customer loyalty, and it is hard for customers to shift to other systems such as Android. Chinese smartphone companies are now gaining market share by using the Android system, through IOS continues to have a solid customer base.

What is more, Apple's IOS makes it easy to keep production costs down, and because it is an enclosed system, revenue can be ensured. No company can compete with Apple in this regard.

For any Chinese company trying to show off its success, going global is a highly important element. And in gaining a foothold globally, the most important factor for a smartphone company is innovation. China needs to be not only a manufacturing center for smartphones, but also to have some internationally famous brands of its own.

The author is a senior analyst at IDC China's mobile phone market research department.

(China Daily European Weekly 05/29/2015 page9)