Chinese smartphone makers adjust prices as costs go up

Chinese smartphone manufacturers are restructuring their product line-ups as rising memory chip prices and increasing supply chain costs squeeze margins, particularly in the low-end segment.

An analyst at technology research firm Omdia highlights that price increases in storage components over the past year have hit phones priced below $100 the hardest. The pressure is expected to continue this year, affecting pricing strategies and shipment plans across the industry.

The global number of smartphone shipments stood at approximately 900 million units during the initial nine months of the previous year, with more than 60% of sales contributed by Chinese makers, as per data shared by Omdia. 

However, entry-level models have been the top choice for global purchases among Chinese makers, profitability has been impacted due to increased prices of key components like memory chips.

Analysts pointed out that Chinese mobile phone manufacturers had been using affordable models to expand scale but now are readjusting product lines and positioning them in higher price tiers. Even though these brands remain to be introduced in other countries, competitive strategies are evolving.

Honour appeared to be the most rapidly growing Chinese brand in foreign markets in terms of sales performance in the first nine months of last year, with a 55% year-on-year growth.

Most of its growth came from the sales in the Middle East, Africa, and Southeast Asia. Unlike most competing brands, Honour targeted the mid-range class from $300 to $500, which contributed 23% to its foreign sales.

Sales of the Honour X9 increased more than twice compared with its previous X9b generation, while the shipment volume of the Honour 400 series increased around 86% compared to the Honour 200 series.

Moreover, other players in the market are undergoing repositioning of their product portfolios. Oppo has moved away from the previously adopted strategy of launching models in the $200 price range with the introduction of the 4G models in the mid- to higher-end category in the developing world.

Xiaomi has focused on improving their brand image and the proportion of their sales in the mid- to higher-end models in Southeast Asia and Western Europe, while Vivo has increased focus in Southeast Asia along with investment in North Africa and Latin America, especially Brazil.

Meanwhile, Transsion Holdings, which has been heavily affected by rising storage costs, is using financial tools such as instalment payment options to lower barriers for consumers and sustain shipments in emerging markets.