Thriving Chinese smartphone manufacturers have developed aggressive strategies to expand into the rest of the world, and South Africa is high on their priority list. Browsing through catalogues of cellphone network operators and retailers shows a growing number of previously unheard-of brands that are beginning to compete with Apple and Samsung in the high-end market, even among SA's brand-conscious consumers. The more familiar brands are Huawei, ZTE, Lenovo, Xiaomi, Hisense and TCL Mobile, which is behind the revival of Alcatel. TCL also has its own branded handsets. The latest entrant – a new brand for SA – is Meizu, which introduced its smartphones to SA last year.
Chinese-made devices have highly attractive features and most offer value for money. Their main target is medium- to low-end buyers and entry-level handsets are priced around R2 000. Low prices have accelerated smartphone adoption in South Africa. Cellphone network operators have recorded a double-digit increase in smartphone usage, resulting in growth in data revenue. According to the International Data Corp (IDC), low-priced smartphones (costing less than USD100) account for more than two-thirds of SA's Android phone sales.
“This space has evolved after top-end sales became well-established in the market courtesy of the country's substantial post-paid segment, a rare feature of the operator environment in Africa,” said IDC in a report released in September 2016. World Wide Worx managing director Arthur Goldstuck says the main factor driving the uptake of Chinese handset brands is value for money, rather than low cost in itself. The high-end features available on mid-range phones make them viable alternatives to the big brands, for which the cost is often two to three times that of the economy brands.
MTN SA's general managing director for pricing, research and intelligence, Jay Chetty, says the popularity of these devices is growing – largely because of their costs – as they enable more South Africans to get into the smartphone environment. “The Huawei brand is gaining credibility,”? says Chetty. “It is starting to tap into the high and medium value segment.” Between 11% and 15% of smartphones running on MTN's network are from Chinese brands. Goldstuck believes South Africans are very brand conscious, mainly when they are paying a premium, but when they simply want an affordable option the brand becomes less important than what you get for your money. He says Huawei is the big challenger to Samsung's market dominance. It displays many of the same characteristics, strategies and attitudes Samsung did when it was still an up-and-coming smartphone player. Alcatel has the potential to dominate the low end, where it has been successful, but has not yet broken into the high end.
However, not all Chinese brands are succeeding here. Goldstuck says Xiaomi has made a huge impact in some markets, but its online marketing model has required substantial adaptation for the African market. He says it may not be able to achieve the same scale as Huawei. “ZTE seems to have little interest in deepening its role in the local handset market. Other Chinese players like Meizu and Oppo remain unproven in this market.” The IDC says the share of Chinese brands in the smartphone market has exceeded 20% of total units by the end of 2016. Besides the product mix, currency challenges and macroeconomics factors in South Africa are favouring economically priced phones from China. These brands are no longer seen as cheap and low quality? but rather as better and preferable to the overpriced ones, concludes Goldstuck.
