Are Chinese Manufacturers Able to Earn Money in U.S. Handset Market?

The global smartphone market was saturated in 2017. China’s handset market plunged more than 10 percent and many Chinese mobile phone manufacturers, including Huawei and Xiaomi, are preparing to excavate the gold from the US market. But the mobile phone market in the U.S. also saturates, with sales up only 1.6 percent last year.

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The US is a developed market of smart phones, with strong consumption capacity and high profit margins. Chinese manufacturers hope to get a sense of existence in the US high-end market after occupying low and medium ends.

Washington Post reports that IDC data shows the smartphone sales grew 1.6 percent last year, which is the lowest growth rate ever, and the total shipments was 178 million.

Analyst Brian Blau from Gartner said, the smartphone now can fully meet the consumers’ daily needs, naturally prolonging the period of replacement.

In the past few years, the U.S. carriers abandoned the traditional subsidy system. Consumers need to buy Apple and Samsung flagship handsets at the full price. The costs increased from $199 into $650 and even $999 for iPhone X. As the price rose sharply, Americans think twice before replacing mobile phones.

In addition, smartphones handsets are becoming more and more similar, brands like Android and Apple are learning from each other. It also hit consumers’ interest in buying new phones.

Apple hoped to achieve differentiation from other brands by launching iPhone X last year. Apple introduced face recognition, 3D recognition, augmented reality and other functions. But these new functions have yet got the expected response. In particular, the AI did not have a similar impact on mobile phones like the Nintendo Pokemon GO game.

Market Share

In addition to slow growth of the US mobile market, the market pattern has gradually solidified. Kantar report shows that Apple and Samsung have dominated 70 percent of the entire mobile phone market in the US.

South Korea’s LG and China ZTE have each obtained more than 10 percent of the market share. The rest of brands, such as Motorola, have also gained the market share at a single digit percentage.

Huawei, the world’s third largest mobile phone maker, has so far had a share of only 0.4 percent in the United States. Last year, Huawei hoped to sell a flagship phone through the two major operators of AT&T and Verizon, but these two operators gave up cooperation because of political pressure.

After years of work, ZTE has established the partnership with the operators and has obtained the trust of some consumers.

China’s mobile phone manufacturers, such as Xiaomi and Coolpad, have expressed the will of building up or expanding its share in the United States. But the saturation of the mobile phone market in the U.S. will make Chinese companies face great difficulties.

The US mobile phone market is dominated by operators. Chinese mobile phone manufacturers first need to be patient to build operating partnerships, but cooperation can not be achieved overnight.

In 2018, Xiaomi is going to be listed in Hongkong. If it can cooperate with the US carriers and enter the US market, it will be a great benefit to the valuation and share price. It is worth paying attention to whether or not Xiaomi can enter the “virgin land” of the United States mobike market.