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Two of China’s biggest smartphone vendors, Huawei and Xiaomi, are reportedly in talks with Verizon and AT&T about selling their flagship smartphones to US consumers in 2018, according to Bloomberg.
While Huawei and Xiaomi have been able to rank in the top five smartphone vendors globally without breaking into the US market, the newfound ability to tap into the world’s third-largest smartphone market will help the Chinese vendors expand their global shares further.
There are two reasons Huawei and Xiaomi stand a chance in the US smartphone market:
- Working directly with US carriers helps guarantee success. Huawei already sells its budget devices, and Xiaomi sells its non-smartphone connected devices, in the US via Amazon, Walmart, and other retailers. But selling devices via telecoms, which are the dominant smartphone distribution channels in the nation, could strengthen the pair’s presence in the US.
- Chinese vendors have previously found success in the US smartphone market.Chinese smartphone vendor ZTE carved out a position in the US market after debuting its dual-screen Axon model in partnership with AT&T last year. The company, which ranks fourth in the US by smartphone shipments, captured an 11.6% share in Q3 2017, up from 9% in the year-ago quarter.
But the entrance of Huawei’s and Xiaomi’s premium devices to the US market could be bad news for Apple.
- Apple is the market leader in the US. As of Q3 2017, Apple achieved a 30% share of smartphone shipments in the US. That’s well above its closest competitors, Samsung and LG, which had shares of 25% and 15% during the quarter, respectively.
- Huawei and Xiaomi appeal to consumers’ high demand for premium smartphones at a fraction of the cost. Huawei and Xiaomi offer smartphones with the same or similar specs to Apple iPhones at significantly lower price points. Since the average selling price (ASP) of iPhone devices are increasing — ASP of iPhones hit $700 in Q3 for the first time — Chinese vendors’ smartphones could be viable alternatives.
In terms of overall impact, Xiaomi and Huawei will have to overcome Apple’s walled garden effect to make an impact in the US. The US smartphone market is mature and nearing saturation, which suggests that a new entrant will likely not cause any major shifts in the market in the near term. Because of high levels of smartphone saturation, most shipment growth in the US comes from users upgrading their handsets, rather than from new purchases of smartphones.
Apple’s iOS gives the company staying power among its smartphone users, and the Android OS versions offered by Xiaomi and Huawei might not be appealing enough to pull iOS users away. Xiaomi, however, might be in a better position to sway iOS users since its ecosystem of connected devices already has a presence in the US market.
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The Next Smartphone by the BI Intelligence Research Team.
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