Price war looms as smartphone market booms

Domestic mobile phone makers demonstrate the selfie functions of their products at a smartphone expo in Nanjing, capital of Jiangsu province. Major Chinese players are gearing up for a price war in the high-end smartphone sector. China Daily

China's big players are gearing up for a price war in the high-end smartphone sector, and the only big winner will be the consumer.

Xiaomi Corp, Huawei Technologies Co Ltd and ZTE Corp's Nubia have all rolled out new products in what has been dubbed the "Godzilla" handset business, as they battle to wrestle away more market share from South Korean-based giant Samsung.

"By introducing premium devices, the average price of high-end smartphones will be dragged down," Antonio Wang, an analyst with the United States-based market research company IDC in Beijing, said. "This will benefit consumers."

It will also create more problems for Samsung, which has already been badly mauled by the aggressive tactics of China's big three.

Earlier this month, the world's largest smartphone manufacturer reported that its second quarter operating profit would probably fall by 4 percent to 6.9 trillion won ($6 billion) because of poor sales of its new Galaxy S6, particularly in China.

As the brand loses its mass appeal here, consumers are switching to cutting-edge domestic products from Xiaomi, Huawei and Nubia.

"Chinese smartphone companies are now more willing to invest in innovation by putting state-of-the-art technology into their devices," Xiang Ligang, an independent analyst and founder of telecom website cctime.com, said.

"They know the 'low performance for low price' strategy does not work in today's market. Cheap devices will never make big profit margins," Xiang said.

The rise of China's smartphone companies from low-cost labels to upmarket brands has been meteoric.

Xiaomi shipped out 34.7 million smartphones in the first half of this year compared to 26 million during the same period in 2014 without revealing detailed financial figures.

Huawei announced shipments of 31 million units during the same period, a 40 percent increase compared to last year, without revealing detailed financial numbers. Nubia has yet to report its shipment figures in China.

For Samsung, the data are depressing. In the first quarter of this year, its shipments to the Chinese mainland were 9.6 million devices compared to 20 million during the same period in 2014, according to IDC. That left it in fourth spot behind Apple, Xiaomi, and Huawei in China's smartphone market, which is still the biggest in the world with estimated annual sales of about 400 million handsets.

"It (the fall in Samsung shipments) highlights the volatility of Chinese consumers' brand preferences," Wang, of IDC, said.