Upstart smartphone maker challenged as latecomer to continent’s market

By Xie Jun Source:Global Times Published: 2015-11-9 18:53:01

On November 2, domestic smartphone maker Xiaomi Inc announced it would begin selling two of its hottest devices in Africa. It's a bold move to drive the company's international expansion as China's smartphone market approaches saturation. However, Xiaomi won't be the first major smartphone maker to set its sights on the continent. It already faces competition from industry heavyweight Samsung and Chinese competitors such as Huawei. More importantly, it may not be able to rely on the strategies and strengths that catapulted it into prominence in China.

Photo: CFP

In recent years, Africa has become a magnet for Chinese smartphone makers looking to get a leg up on their competitors as they expand around the globe.

The latest warrior to enter the fray is Xiaomi Inc, the trendy Beijing-based manufacturer known for its affordable phones and novel marketing strategy.

On November 2, the company announced that it would begin selling two of its models, Redmi 2 and Mi 4, in South Africa, Nigeria and Kenya later this month through a distribution deal with Mobile In Africa Group.

Xiaomi is a latecomer to Africa. Other Chinese smartphone makers such as Huawei Technologies Co and Guangdong Oppo Mobile Telecommunications Corp have already entered the market, drawn by the rising demand for smartphones on the rapidly developing continent.

Smartphone shipments to Africa and the Middle East will total more than 150 million units by the end of 2015, after increasing by 66 percent year-on-year during the first quarter of this year, according to a report by global technology consulting firm International Data Corp (IDC) on July 12.

At the same time, demand for smartphones has begun to fall in China's nearly saturated market. Smartphone shipments in China fell 4.3 percent year-on-year in the first quarter of 2015, according to an IDC report released on May 11.

Even hot brands like Xiaomi, which reported rising sales in the third quarter, can't help but notice that China's market may be running out of room to grow.

"Xiaomi has developed well over the past five years. In 2015, even though it continues to dominate the domestic market, the company is evidently facing a bottleneck," Wang Yanhui, head of the Shanghai-based Mobile China Alliance, told the Global Times on Thursday. "If Xiaomi wants to maintain its rapid growth, it is crucial that it turns to overseas markets."

Africa seems as if it could be the answer. But that doesn't mean that the continent's smartphone market will be easy for Xiaomi to crack.

Turning to Africa

Over the last few years, Chinese smartphone makers have been gaining experience selling their products in less saturated markets overseas. For example, almost all of China's major smartphone brands, including Huawei, Oppo and OnePlus, have started selling smartphones in India.

Particularly for Xiaomi, sales in India are an encouraging sign for its further expansion. The company is one of the two most popular Chinese smartphone brands in India, said Tian Kai, an India-based PR representative of Vivo Communication Technology Co. The other is OnePlus.

"Xiaomi's distinctive strategy of 'hunger marketing' on the Internet is quite sought after here," Tian told the Global Times on Thursday.

Although India has been a good market for Chinese smartphone makers, it is becoming more and more saturated, leaving them to ponder their next move, Wang noted.

"Where after India?" he said. "Africa is a good choice."

In recent years, Africa's mobile users have shifted from using simple feature phones to more advanced smartphones, which provide users with more advanced features and more ways to take advantage of the Internet.

Pan, a Chinese citizen who asked to be identified only by his surname, has witnessed the shift to smartphones in Kenya where he now works.

"Almost all of Kenya is now covered by a 3G network," he told the Global Times on Thursday.

A continent of competitors

Although the competition among smartphone makers is not as fierce in Africa as it is in India, the continent is far from a virgin land. It will be difficult for any one company to dominate the continent's rapidly developing market.

Xiaomi's biggest competitor in Africa is Tecno, a smartphone brand by a Shenzhen-based vendor.

"Tecno is not well known in China, but is one of the most popular smartphone brands in Africa," Wang said. "Each year, the company ships about 60 million smartphones to, and only to, Africa."

Pan noted that Tecno smartphones are extremely cheap. They only cost about 200 yuan ($31.44).

"Many employees in my company, such as the security guards and janitors, use Tecno smartphones," he said.

According to Pan, Tecno dominates the low-end smartphone market in Africa, while wealthier people prefer brands like Japan's Sony and South Korea's Samsung.

Apart from Tecno, Chinese smartphone giant Huawei also has strong presence in Africa.

According to a China Business News report on April 2, Huawei's shipments to Africa were second only to Samsung's in 2014.

Huawei did not reply to a request for an interview as of press time.

Facing such entrenched competition, it will be difficult for Xiaomi to stand out in the African market.

"Xiaomi's core marketing strategy is selling phones online, but it is doubtful that it will be able to take full advantage of this in Africa," Wang said.

The problem is that most Africans still buy their smartphones from bricks-and-mortar stores, said Mouhamadou Moustapha Dieng, managing director of Guangzhou-based Teranga Trading Co, who is from Senegal.

"People here still go to shores to buy smartphones most of the time because e-commerce is not very well developed in Africa," he told the Global Times on Thursday.

Xiaomi has recently started to develop its off-line business, but it will take time to master it. In India, for example, Xiaomi's off-line business has developed at a rather "slow" pace, Tian said.

Xiaomi also faces a disadvantage in pricing. Its devices are priced a bit higher than what the average African consumer pays for a smartphone.

"On average, a Xiaomi smartphone costs about 1,000 yuan in China. This is higher than the price that most African customers pay for a smartphone, which is less than $50," Wang said.

Li Lei, Xiaomi's PR representative, declined to reveal the prices of the two Xiaomi phones to be sold in Africa.

Despite these challenges, it is still wise for Xiaomi to break into the African market, according to Wang Jun, an analyst at Beijing-based market research firm Analysys International.
Newspaper headline: Xiaomi seeks foothold in Africa

Posted in: Insight

blog comments powered by Disqus