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Home » How Are Chinese Android Phones So Cheap?

How Are Chinese Android Phones So Cheap?

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When you think of buying a new smartphone, the first two names that come to mind are Samsung and Apple. The two tech giants are age-old business rivals renowned for driving tech innovation with their bleeding-edge products and services.


But as new Chinese brands enter the tech arena, the competition is skyrocketing like never before—as new challenges, opportunities, and concerns emerge. Here’s the truth behind the sudden explosion of Chinese brands and why you should care.


The BBK Electronics Empire

There’s a good chance you have heard of at least one brand among OnePlus, Oppo, Vivo, and Realme—undoubtedly so if you live in Asia. All of these emerging brands are subsidiaries of the Dongguan-based Chinese umbrella company BBK Electronics, founded by Duan Yongping.

Depending on where you live, you have either never heard of BBK or it is a household name you are all too familiar with. This multinational conglomerate became the world’s largest smartphone manufacturer in Q1 2021 outperforming even the most well-known tech giants.

BBK may not be a globally-known name, but its subsidiary brands are marking their territory in the tech world, and fast. So fast in fact that the sub-brands of these subsidiary companies are now becoming separate full-fledged independent companies.

For instance, Realme is a former sub-brand of Oppo. And iQOO, a sub-brand of Vivo, is on the same path to becoming independent. On paper, these subsidiary companies may indeed seem distant, but they communicate and collaborate with each other rigorously—sharing ideas, expertise, and strategy.

The Genius of Chinese Phone Makers

When you zoom out and look at the big picture, you realize the genius behind these Chinese phone makers. You see, the more subsidiary brands in the market communicating and sharing resources and expertise with one another, the easier it is to avoid losses. This is because a hit taken by one brand can be absorbed by the others—dispersing the effect.

This is perhaps one of the biggest reasons for BBK’s massive success. To understand how the giant is changing the tech industry, it’s more convenient to see its subsidiary brands as a unified effort instead of treating them as separate entities. To do so, let’s take a closer look at the Q1 2021 Global Smartphone Market Share statistics.

The collective market share of three of BBK’s subsidiaries (Oppo, Vivo, and Realme) totaled an impressive 25%—beating giants like Samsung at 22%, Apple at 17%, and its close rival Xiaomi (also a Chinese brand) at 14%. Also, let’s not forget that we haven’t added the market share of OnePlus to the equation, and BBK is still the biggest smartphone maker in the world.

If you’ve noticed, Xiaomi and BBK follow the exact same strategy when it comes to market penetration: divide and conquer. The same is evident with Xiaomi’s brands like Mi, POCO, Redmi, and its partly-owned brand Black Shark, all of which are geared towards serving a specific audience and a specific purpose.

In the case of BBK’s brands, Oppo and Vivo are positioned as innovative brands i.e. the ones that invest in R&D and come up with new technologies. OnePlus is positioned to offer a premium smartphone experience at competitive prices. And Realme is positioned as a budget-friendly brand for price-conscious buyers.

How Chinese Brands Rival With Tech Giants

If you have been keeping track, you must have noticed how almost all Chinese brands seem to be targeting a very specific goal: selling large volumes of value-for-money products to price-conscious buyers to establish authority. There are three key elements to note in this goal: audience, strategy, and message.

Audience

We know that the buyer of today is educated, and have the tools and knowledge needed to get the most out of their money. This is especially true in the highly competitive Asian market with its hyper-elastic demand where Chinese brands offer great value to build repute.

A hyper-elastic demand simply means that a minimal change in the price of a product has a massive effect on the number of units demanded of that product. Chinese brands take advantage of this phenomenon by slashing their prices to suffocate the local competition as soon as they enter a new market.

Strategy

Since Asia has such a massive population, primarily from China and India, brands have the advantage of playing by the numbers. They can afford to sell their devices for a smaller profit margin if it means the devices will sell in large quantities.

For budget-oriented brands like Redmi and Realme, profiting on hardware is not the goal. They profit instead on their in-built ads and pre-installed bloatware apps.

So, the logical way to achieve that goal is to get their phones in as many hands as possible, using a ton of celebrity endorsements and event sponsorships. In addition, they opt for the 2nd-mover advantage to avoid the risk of investing in R&D on innovations that might fail.

Message

One of the biggest advantages of having multiple subsidiary brands is that each one can be used to create, market, and exploit a unique brand image. Let’s take OnePlus, for example. When it first started out, it positioned itself as an enthusiast brand with catchy taglines like “Never Settle” and “Flagship Killer”.

The company listened to feedback and offered a premium smartphone experience at great prices. Now, years later, OnePlus has evolved into a mainstream brand. The point here is that Chinese brands tend to be more community-focused and customer-centric which is a brilliant strategy for the fast-paced Asian market.

How Chinese Brands Save Costs

We saw how Chinese manufacturers benefit from keeping a low profit margin on their phones, but that’s only half the story. They also save costs by taking advantage of low labor costs in China to cut down their cost of production.

In addition, they enjoy lower shipping charges since their primary target market is nearby Asian countries such as India, Nepal, Bhutan, Indonesia, and more. This also makes it easier to set up overseas manufacturing facilities to avoid heavy import duties.

All of these savings are then passed on to the consumer by making the product cheaper. In comparison, targeting faraway markets like the US and Canada would require a much higher cost of customer acquisition.

Would You Buy From a Chinese Brand?

Chinese brands may not be everyone’s first pick, especially if you live in the US. But in a fast-growing market like India, they are marking their territory rather quickly. So much so that they’re driving away international brands and have completely wiped out local competition.

But these great value-for-money smartphones come at a cost. If you own a Chinese smartphone, especially a budget one, it’s hard to get rid of the built-in ads and bloatware—some of which you can’t disable—that eat memory and result in a poor OS experience.

On top of that, there’s a growing concern in the tech industry about Chinese brands spying on their users, as is suggested by the US-China clash and the 2019 Huawei ban. As great of a value that Chinese brands are providing, this is something worth considering if you’re thinking of buying from one.



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