Chinese smartphone pioneers like Huawei, Oppo, Vivo, and Lenovo have made deep inroads into India, Russia, and even Africa, but making a foothold in the American market still appears to be a distant dream.
Analysts have been predicting for well over 10 years that new Chinese entrants will be taking the US market by storm, Counterpoint Research said in a blog post this week.
“Yet, there has been limited change on this front. Globally, Chinese handset original equipment manufacturers (OEMs) own more than 43 percent of smartphone market share. Yet, in the US it is 18 percent,” said Jeff Fieldhack, Research Director at Counterpoint.
Chinese ZTE and French Alcatel have cracked the top five, breaking through with solid volumes within prepaid channels. Motorola (Lenovo) remains a niche but well-known vendor within Verizon.
While rest of the contenders have been relegated to the US open channel with very limited growth prospects. Why is it so difficult for Oppo, Vivo, Huawei, and other Chinese manufacturers to stage a ground in the US?
“There are many barriers for new players in carrier-controlled markets. Carriers continue to hold the power in the US controlling over 70 percent of sales. US carriers are not interested in building handset OEM brands,” Fieldhack said.
Currently, Verizon Wireless dominates the US smartphone market with 147.2 million subscribers (Q2 2017). AT&T Mobility enjoys 138.8 million subscribers (Q3 2017), and T-Mobile US have 70.7 million subscribers (Q3 2017).
“Carriers expect brands to either bring in users on their own recognizance or for brands to spend big money to do so. Further, it is expensive to carry many brands, many stock keeping units (SKUs) – especially when many do not sell well,” Counterpoint informed.
Its a costly process of testing, training, marketing and handle returns of low volume brands. New brands must present something unique or compelling cases to carriers.
“Carriers are interested in known brands bringing full portfolios. For example, it is easier for carriers to sell a full suite of Samsung Galaxies at multiple price points than smaller brands who only address certain price points,” explained Fieldhack.
The US market has turned into an all-or-nothing market. Spend big on marketing campaigns or a be ready to rule out by the major launches.
“Carriers are looking for large, flashy ad campaigns to bring subscribers into stores. And, often carriers will throw in money to these large campaigns. Big spending has become a normal mode of business for the major carriers,” the blog post said.
The US market is a mature smartphone market and over 50 percent of subscribers have purchased multiple Apple and Samsung smartphones.
“So, to become a top 5 OEM in the US market will take the hardware, heavy marketing, and a strong value offering to switch a subscriber from another OS and/or another OEM ecosystem,” Fieldhack said.
To crack the US market will take a multi-year plan and will take a considerable amount of patience, he added.