In China, the Coolpad Is Hotter Than Apple's iPhone
(updated by Endah)
Jan. 28, 2014 11:46 a.m. ET
HONG KONG—
Apple Inc.
AAPL -7.99%
and
Samsung Electronics Co.
005930.SE -0.31%
are the dominant smartphone brands in the U.S. and in many other
parts of the world. But in China, the world's biggest smartphone market,
there isn't a clear winner yet.
Virtually
unheard of outside China, several homegrown brands are gaining ground
and seeking to challenge the technology giants' duopoly. Working in
their favor: advanced hardware at lower prices, strong relationship with
Chinese carriers, as well as creative ways to build a fan base through
social media and online forums.
Hundreds
of millions of Chinese mobile users still haven't replaced their basic
phones, making the country a critical battleground for global smartphone
brands at a time when growth is slowing in the U.S. and other mature
markets.
Research firm Canalys
estimates that smartphone shipments in China totaled 354 million units
last year—compared with 139 million units in the U.S. Canalys expects
Chinese shipments to increase to 422 million units this year.
Zhou Cheng,
a 25-year-old shop manager in the southern province of Hunan, recently purchased his first smartphone to replace his old
Nokia
NOK1V.HE +0.59%
handset. He spent nearly $500 for the Oppo Find 5 from Oppo
Mobile Telecommunications Corp., based in Dongguan. The device runs on
Google Inc.
GOOG +1.98%
's Android operating system, and comes with a 13-megapixel camera
and a 5-inch high-resolution screen that has more pixels per inch than
Apple's new iPhone 5S.
"It looks good and works well," Mr. Zhou says, describing Oppo as cooler than other Chinese smartphone brands such as
Lenovo Group Ltd.
0992.HK +4.20%
and Huawei Technologies Co. "Oppo is for young people and its
phones are more stylish." The Find 5, which is about 30% cheaper than
Apple's entry-level iPhone 5C in China, also fit his budget.
Mr.
Zhou is one of many Chinese consumers that companies like Oppo, Coolpad
and Xiaomi Inc. are targeting. Their growing presence is creating a
more challenging environment for foreign brands such as Apple and
Samsung.
China's mobile market is so
big that some local handset vendors, despite focusing mainly on the
domestic market, already sell more smartphones overall than global
competitors. In the third quarter of last year, Coolpad, the smartphone
brand of China's Yulong Computer Telecommunication Scientific (Shenzhen)
Co., was the sixth-biggest smartphone vendor by units sold world-wide,
ahead of Nokia Corp. and
Sony Corp.
6758.TO +1.38%
, according to Canalys.
In China itself, Coolpad ranked third
with a market share of 11%, behind Samsung's 21% and Lenovo's 13%.
Apple came in fifth with 6%.
Apple will likely get a boost in China this year after
China Mobile Ltd.
0941.HK +0.07%
, the country's largest carrier with more than 760 million
subscribers, started selling iPhones for the first time on Jan. 17.
Earlier this month, China Mobile Chairman
Xi Guohua
said the carrier had received preorders for more than a million
iPhones since it started accepting them in late December.
Apple
on Monday reported a 29% increase in its revenue in China, Hong Kong
and Taiwan combined for the quarter ended Dec. 28. The company didn't
disclose its iPhone sales in China, but Chief Executive
Tim Cook
said, "We've been selling with China Mobile now for about a week.
And last week was the best week for activations we've ever had in
China."
Still, analysts said the higher
upfront costs of China Mobile's iPhone contracts—compared with those at
other Chinese carriers—could deter many price-conscious consumers.
Despite competition, Apple is one of the most desirable brands in China.
Agence France-Presse/Getty Images
Coolpad, which started out in 1993 as
a maker of pagers and telecom equipment, is now one of the more
established players in China's mobile industry. Its strength lies in its
close business ties with all major Chinese telecom carriers, which help
distribute its phones outside major urban centers such as Sichuan and
Hunan.
One of Coolpad's most popular
phones, the Coolpad 9080W, comes with a 5.7-inch screen, an 8-megapixel
camera and a quad-core processor, even though it sells for about $260.
Coolpad
says it is trying to attract millions of first-time smartphone users in
China. Its parent company reported that its first-half profit in 2013
rose 40% to 212.8 million Hong Kong dollars (US$27.4 million) from
HK$152.5 million in 2012.
"When
first-time smartphone users have a good experience with our phones, they
may buy more expensive Coolpad models later when their purchasing power
increases," said Coolpad Vice President
Zhang Guang-qiang
in an interview.
Some analysts are skeptical about
Coolpad's strategy, noting it will be a big challenge to raise its brand
and convince consumers to pay more for its handsets.
Apple
remains one of the most desirable brands in China, as local consumers'
recent frenzy over the gold-colored iPhone 5S indicated. Samsung, a
household name in China because of its TV sets, sells smartphones that
cost less than $200 to compete against local handset vendors.
Apple and Samsung declined to comment about competition in China.
Executives
from Chinese smartphone makers say their companies are well positioned
to understand the local market and cater to the needs of specific types
of Chinese consumers.
Oppo, which has previously used actor
Leonardo DiCaprio
in its ads and promoted its phones through tie-ins with local TV
shows, has been particularly successful in attracting young female
customers.
The private company doesn't disclose earnings, though it said it makes a profit from smartphones.
Beijing-based
Xiaomi is another Chinese smartphone vendor known for its marketing
savvy. The company, founded in 2010, has since created a cultlike fan
base among techie types who are often early adopters of new gadgets.
Xiaomi,
which doesn't disclose whether it is profitable, sells its phones
mainly through its own website, and offers an array of accessories
including multicolored batteries and dolls. It builds brand loyalty in
part by constantly tweaking its version of the Android operating system
with suggestions from users and by offering weekly updates.
"If
you give us a suggestion, and we quickly change it, you will have a
long-lasting sense of achievement," said Xiaomi founder Lei Jun in an
interview. In the third quarter, Xiaomi was the No. 6 smartphone vendor
in China, slightly behind Apple, according to Canalys.
Social media has played a role in Xiaomi's popularity. Mr. Lei, who has been often compared with Apple's late founder
Steve Jobs
for his presentation style at product releases, has close to eight million followers on Sina Weibo.
Looking
to expand its business overseas, Xiaomi last year hired
Hugo Barra,
who was an executive at Google's Android business. Mr. Barra said
earlier this month that Xiaomi would expand into Singapore.
The success of Xiaomi and Oppo made other Chinese companies see the importance of marketing and social media.
Coolpad's
Mr. Zhang said that the company's executives have become more active on
social-media platforms like Sina Weibo and on the Chinese smartphone
messaging service WeChat.
"Being a
software engineer, I didn't talk to users and media several years ago,"
said Mr. Zhang. "But the market has changed a lot. Now I always interact
with users on my Weibo," said Mr. Zhang, who has more than 275,000
followers on the microblog.
Coolpad has won fans including
Yang Guang,
an 18-year-old student in Guangzhou who bought the Coolpad 9070 smartphone several months ago.
"Only a minority of students from wealthy families can afford to buy expensive foreign-brand smartphones," said Mr. Yang.
Write to Lorraine Luk at lorraine.luk@wsj.com and Juro Osawa at juro.osawa@wsj.com
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