China’s smartphone makers seek big push overseas

China’s next-generation Android smartphone makers, led by Honor and Realme, are looking to boost sales in international markets, as demand on the mainland contracts because of slowing economic activity under the government’s zero-Covid-19 policy.

Honor, formerly the budget smartphone business of Huawei Technologies Co, and Realme, which was previously a sub-brand of Oppo, are sharpening their efforts in overseas markets to spur new growth, according to separate statements recently made by the two firms’ senior management.

Their initiatives reflect an industrywide concern after first-quarter shipments in mainland China, the world’s biggest smartphone market, decreased 14 per cent year on year to 74.2 million units amid weak consumer spending and Covid-19-related disruptions.

“The macro-environment will impact all smartphone makers,” Honor chief executive Zhao Ming said on Monday during the company’s launch of its 70-series 5G handsets. “Honor is prepared to look for new growth beyond smartphones and invest in overseas markets.”

Honor, which is majority owned by state-owned enterprises controlled by the municipal government of Shenzhen, has already entered 16 new overseas markets this year.

Zhao said Honor’s overseas push will entail increased focus on the high-end smartphone segment, according to a report published this week by state-backed media outlet The Time Weekly. Honor confirmed Zhao’s remarks.

“All brands face risks when venturing abroad during this pandemic, and it will be harder for Honor because we are only at the starting stage of exploring the global market,” Zhao said on Monday.

He also said that he agreed with industry estimates that domestic smartphone shipments could fall under 300 million units this year. On his company’s performance, Zhao said: “I can predict that Honor can maintain healthy growth in the next three months, but it’s hard for me to predict total sales in 2022.”

While Shenzhen-based budget smartphone maker Realme expected overseas markets to help drive the company’s business, it predicted global industry shipments this year to decline between 10 and 20 per cent.

“China is facing bigger market pressure, but we are optimistic about overseas markets in which we observe notable growth momentum,” Realme vice-president Xu Qi said in a media briefing on Sunday. He said the local smartphone industry’s goal this year is to match the overall domestic market volume of 10 million units in 2021.

Realme recorded 177 per cent growth in its European market operations in the first quarter, and an 86 per cent increase in South America in the same period, according to the company.

China saw smartphone sales fall 21.6 per cent in April, the second-worst month for the domestic industry since the Covid-19 pandemic started in 2020, according to the latest data from consulting firm CINNO Research. It forecast total domestic sales this year to decline from 7 to 8 per cent.

April’s weak performance was directly affected by stringent lockdown measures implemented in major Chinese cities, which disrupted both manufacturing operations and logistics, according to Charley Zhou, an analyst at CINNO Research.

“The domestic smartphone market has been on a downward trajectory since February this year,” Zhou wrote in a report last week. “In addition, consumers are not keen for upgrades because of the lack of significant advancements or innovations in terms of chips and functionalities.”

Chinese Android smartphone vendors, meanwhile, have stepped up their product launches. In May, Honor launched its Magic4 Pro smartphone in the UK. Vivo – the world’s No 5 smartphone vendor in the first quarter, according to Counterpoint – also rolled out in the same month its latest X80-series handset in collaboration with German optical systems maker Carl Zeiss across the Asia-Pacific, Middle East, South America and Europe. South China Morning Post