China's rapidly growing smartphone stars set sights on world domination

China's rapidly growing smartphone stars set sights on world domination
Journalists test the tablet Samsung Galaxy Book after its presentation on February 26, 2017 in Barcelona on the eve of the Worl Mobile Congress official opening.

Look around the Nou Camp, Barcelona's famous football ground, and you may see branding for Oppo on a green background. On the t-shirts of the Kolkata Knight Riders (KKR), one of India's biggest cricket teams, you'll see Gionee emblazoned on the front.

Oppo and Gionee might not be massive brands in the West, but the two Chinese smartphone makers along with other rivals are extending their reach out of their home market with explosive growth, and could soon be aiming for the US

Last year, China's Huawei cemented its position as the third biggest smartphone player in the world by market share, closing in on Apple and Samsung. Oppo grew its global shipments more than 111 per cent year-on-year in 2016, and is fourth, while Vivo saw 77.9 per cent growth and is fifth, according to Counterpoint Research.

Three of the top five smartphone makers in the world are Chinese and many more from the world's second-largest economy are hoping to see strong growth beyond China, where the market is fiercely competitive.

An Oppo mobile phone is displayed during the Mobile World Congress on the first day of the MWC in Barcelona, on February 27, 2017.Photo: AFP

At Mobile World Congress in Barcelona last week, one of the world's biggest industry events, Chinese firms were out in force. Huawei held a flashy press conference, while Gionee and Oppo both had large stands to show off their wares. Oppo unveiled a new camera technology, while Gionee unveiled the A1, a high-spec smartphone for a modest 349 euros ($369).

They used the event to show that they can play on a global stage, and challenge the likes of Apple and Samsung.

Oppo, Vivo and Gionee have found success in China by selling via offline channels, allowing them to expand their reach into smaller towns and cities. And all of the players have expanded into other areas of Asia including India, Indonesia and Thailand and are setting their sites on the Middle East and Africa.

Major advertising and sponsorship deals are part of the expansion. Gionee CEO William Lu said the company whose phones are now available in around 50 markets, is now focusing on increasing share in those countries.

Oppo mobile phones with a 5x zoom are displayed at the Mobile World Congress on the third day of the MWC in Barcelona, on March 1, 2017.Photo: AFP

"I think more important is not adding more countries for now, but going deep in each country," Lu told CNBC in an interview last week.

Gionee has 4,000 stores stocking its phones in India for example, a model it is trying to replicate in other territories to increase its physical footprint. India is a country where China's tech firms have made an impact, with four out of five of the top smartphone players being Chinese. But expanding beyond emerging markets could be a challenge.

Developed markets favour carrier-led selling models where users buy contracts through mobile operators and get the phone subsidized. Oppo said it has seen success in some of these markets though.

"Recently we have expanded into a number of carrier led markets, such as Taiwan, Singapore, Australia and most recently, New Zealand. The response to date has been extremely encouraging. In Singapore we're now number 3 in the market. Likewise in Australia we have signed agreements with major carriers including Vodafone, Virgin and Optus and are experiencing triple digit growth," Sky Li, managing director of the international mobile business at Oppo, told CNBC by email last week.

A visitor looks at the Oppo F1 Plus FC Barcelona special edition mobile phone during the Mobile World Congress on the third day of the MWC in Barcelona, on March 1, 2017. Photo: AFP

"Our experience in these markets will help us better understand consumer behaviour and prepare us for future expansions."

So could the US be next for China's rising stars? Not just yet, they say. Analysts warned that many Chinese players could find themselves up against intellectual property challenges in the US But it is not stopping Chinese firms expanding aggressively.

At the same time, the US environment has become more volatile for Chinese firms with President Donald Trump continuing with anti-China rhetoric. During his campaign he threatened to impose high import tariffs on goods from the country. But Chinese companies are not worried.

"I don't see that risk because I think the China-US relationship is the most important relationship in the world, we need each other," Yuanqing Yang, CEO of Lenovo, told CNBC in an interview last week.

For now though, the majority of Chinese firms are focusing on countries where they can win share without the chance of much trouble, but are not ruling out entrance to the US or other western markets.

"I think the Gionee brand is not ready to enter in US or Europe, but if we partner with local brands and offer products with them and work with them to understand this market, then we might be able to," Gionee's Lu said.

"For the developed markets, we have a plan to go step by step and not rush."

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