The U.S. Market for Chinese Smartphone Makers after the ZTE & Huawei Incidents

7 min read 

The flames of the trade war between China and the United States have long spread to the field of science and technology. Following the U.S. ban on ZTE, it is rumored that Huawei will withdraw from the U.S. market and is under investigation by the United States Department of Justice. After that, Australia has also jumped on the bandwagon to ban Chinese mobile phones. An overseas crisis for Chinese phone makers seems to be just around the corner.

How will the trade frictions between China and the U.S. affect Chinese mobile phone brands? Apart from the U.S. market, what other overseas markets can China resort to? Here is the analysis from a mobile data analysis platform, Cheetah Data.

Note:

  1. All data in this report are from Android phones and therefore do not include data of iPhones in the global markets.
  2. All data concerning market shares in this report are based on the number of active phones, and is not directly related to number of shipments.

The overseas market share of Chinese mobile phone brands is close to 40%

On a global scale, Samsung still firmly holds the first place among Android phones in global market shares (Chinese market excluded). But if we look at the all the brands with high market shares, Chinese phones are clearly at an advantage. The combined market share of Chinese mobile phone brands has reached 39.12 % if you include Motorola which has been acquired by Lenovo.

The overseas market share of phone brands
The overseas market share of phone brands

Among them, Lenovo, Huawei and Xiaomi are the top three Chinese brands in the overseas market. In addition, Motorola, Xiaomi, Meizu, OPPO, Vivo and other Chinese phone makers have also grown significantly in overseas market share.

The market share of Chinese phones in the U.S. is lower than their average overseas market share

Cheetah Data shows that the market share of the two major manufacturers Samsung and LG now accounts for 75.40% of the the U.S. market, while the combined share of all Chinese phone manufacturers is only 21.06%, which is lower than their average overseas market share overseas of 39.12%.

The U.S. market share of phone brands
The U.S. market share of phone brands

In addition, the top Chinese brands in the U.S. market also differ from that in the overall overseas market. According to Cheetah Data, Huawei is the most popular brands in the United States, with a market share of 9.27%, while Motorola (under Lenovo) ranks second with a market share of 5.83%. Apart from the above-mentioned, the market shares of Chinese mobile phone brands in the United States are all relatively low. The combined share of Huawei and Honor is only 0.41%, and Xiaomi has not even entered the US market yet.

The market share of Chinese phones in the U.S.
The market share of Chinese phones in the U.S.

The strategies of Chinese Phone Brands in the U.S.

The main products that these Chinese companies sell in the U.S. market still belong to the low-end category. Taking ZTE, Motorola (Lenovo) and TCL for example, the top three Chinese brands in America, the American cities where they have the highest penetration rates are mostly not first-tier cities.

Additionally, Android phones with smaller screens are mostly low and middle-end phones. To some extent, the size of the screen can reflect the low to middle-end strategies of Chinese mobile phones in the United States. Among all ZTE’s phones in America, 6 to 7 inch screens and smaller than 6 inch screens account for 50% each. Motorola phones in America are mainly 5 to 6 inches, accounting for 64.26% of their total. TCL mainly sells small-screen mobile phones of less than 5 inches, accounting for 48.76% of their total.

The U.S. market is not conducive to the development of Chinese phone makers in the short run.

While brands such as ZTE and Motorola have increased their presence in America, the overall market share of Chinese mobile phones in America is still low. Judging from the current situation, the market environment in America will continue to worsen, which will hinder the low and middle-end sales strategies. The companies that have entered the U.S. market need to prepare for an uphill battle.

1. Subsidies for operators have been cancelled

First of all, the driving force in the U.S. mobile phone market is operator subsidies. The subsidies enable consumers to buy top-notch mobile phones at low prices, therefore diminishing their incentives to try new brands. Recently, the United States has banned mobile operators from buying any telecommunication equipment produced by Chinese companies with federal subsidies. Since Chinese brands mainly target the low-end market in the United States, their customers are highly price-sensitive, which undoubtedly aggravates the market situations for Chinese mobile phones.

2. Patent and Privacy

Patent and privacy issues have always been the associated risks of Chinese phone manufacturer’s entry into the U.S. market. HTC’s decline in the United States started from the patent war with Apple, while Huawei, ZTE and OnePlus have all tumbled in privacy issues. Huawei’s mobile phones are suspected by the U.S. government of stealing government information and private communication, posing a threat to national security. This largely explains Huawei’s unfavourable situation and treatment in the United States.

3. the U.S. market has shown signs of saturation

Sales of smartphones in the U.S. market
Sales of smartphones in the U.S. market

Last but not least, the U.S. market has shown signs of saturation in recent years. According to International Data Corporation, a market intelligence company, sales of smartphones grew 1.6% year-on-year in America last year, marking the lowest growth rate ever, while the total number of shiptments is only 178 million.

Will the dilemma of the U.S. market affect Chinese mobile phones?

For the Chinese cellphone makers that have entered the U.S. market, the importance of the U.S. market for them also varies. Looking at the weight of U.S. sales as a percentage of total overseas sales, most companies, other than ZTE, Coolpad and TCL, do not depend the U.S. market, which means they are also less impacted.

 The weight of U.S. sales as a percentage of total overseas sales
The weight of U.S. sales as a percentage of total overseas sales

Looking again at ZTE and Huawei, the two also faces different situations. For ZTE, the ban on the sales of U.S. components is undoubtedly a fatal blow, and with the continuous deteriorating of the U.S. market upon which it is highly dependent, ZTE has now entered a critical moment. In terms of ZTE’s global sales, apart from America, its sales in their second and third largest markets, Russia and China, are also not very promising. In Russia, two fierce competitors Samsung and Meizu undermines ZTE’s market share. In China, ZTE has long been a three-tier brand, with a market share of only 0.43%.

Smartphones market share in Russia
Smartphones market share in Russia

As for Huawei’s mobile-phone business, the loss of withdrawing from the U.S. market is very limited. Cheetah Data shows that the market share of Huawei and Honor in the U.S. market only accounts for 1.36% of their total overseas market, and Huawei’s market share in China is rather stable. In the overseas markets, Huawei and Honor also have a sizeable share in Iran and Italy, at 17.39% and 23.14% respectively, second only to Samsung.

Finally, Coolpad and TCL also need to guard against possible volatility in the U.S. market. In recent years, the global market shares of these two companies have not been very promising, showing a downward trend. The massive retreats like the ones by ZTE and Huawei could also pose a fatal blow to fellow Chinese brands like Coolpad and TCL.

Conclusion

or Chinese cellphone manufacturers, the U.S. market has always been a hard nut to crack, and now is definitely not a good time to try. However, a vast majority of Chinese phones are not made with the U.S. market in mind. As a whole, the impact of the trade war on the Chinese mobile industry may be more on the technology side, but the future of ZTE, Coolpad and TCL is still quite worrisome.

This article originally appeared in Cheetah Data and was translated by Pandaily.
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