Chinese smartphone brands benefit from brand confusion and lower prices
By TIPG Director, Dean Arnold
Combining brand confusion and lower prices has been an excellent strategy for taking down incumbents and making significant gains in China's competitive smartphone market. First Xiaomi did it. Now Huawei is reaping the benefits. It's no secret that ascendant Chinese smartphone brands incorporate elements of iconic international brands into their design and advertising. And while it's not exactly counterfeiting, it is uncanny the degree to which Chinese smartphones can resemble Apple's iPhone.
Xiaomi handsets were the first to be called out for their resemblance to iPhones some years ago, and we know that this has been a deliberate move by the company to raise its profile, even if it has resulted in some negative publicity. In 2014, Xiaomi CEO Lei Jun, clad in a black shirt and blue jeans, did his best Steve Jobs impression as he unveiled the Mi 4. Lei mentioned Apple's products throughout his introduction of the phone and even told the audience that Xiaomi went to the same contract manufacturers that make the iPhone, to ask what they could produce for Xiaomi.
Overall, Xiaomi's strategy has been a success. The company is the No. 5 smartphone vendor in China by shipments and remains one of the world's most valuable startups. It is not a big player globally, with the exception of India where it is the No. 2 handset vendor by shipments.
Of course, Xiaomi, despite its sky-high valuation, is barely six years old. We can cut this "startup" some slack for its lack of originality. But what about Huawei, China's top smartphone vendor by shipments and a long-established telecommunications giant? Huawei's newer Honor smartphones closely resemble iPhone 6 and 7 models and also use similar colors. The only notable difference is the circular home button missing from the Honor.
Critics could rightfully point out that there are just not that many ways to design a smartphone. However, when Huawei's advertising and billboards also cut a strikingly similar image to that of Apple's, it doesn't leave much doubt that Huawei's intention is brand confusion. Those who regularly travel through China's domestic airports might know what I'm talking about here; The billboards look and feel like Apple. All in all, it's a means of stealing away demand for the iPhone and also filling that demand for consumers who want the real thing but can't afford it. And in that way, the Honor is akin to a luxury knockoff.
With regard to prices - Huawei and other Android phone-of-the-moment brands Oppo and Vivo offer consumers better value than Apple to be sure. They have near-complete supply chains in China capable of churning out excellent hardware efficiently. They aren't necessarily cheap, but a bargain compared to an iPhone, which starts at 5388 yuan in China. An entry-level Huawei Honor 8 costs less than half of that amount. An Oppo R7 is about 40% cheaper.
Some analysts insist Chinese consumers want to support domestic brands, but ultimately, discerning buyers who can afford it prefer iPhones to Honors.