The recovery of the mobile phone industry is faster than expected.

As the second quarter of 2024 draws to a close, the competitive landscape of China's mobile phone market is undergoing a new reshuffle. Recently, three authoritative market research institutions (IDC, Canalys, Counterpoint) have successively released data on China's smartphone sales and market share in the second quarter of 2024.

One of the biggest surprises is that China's leading mobile phone brands surpassed Apple in shipments this quarter, taking the top five spots, while Apple fell to sixth place with a market share of just over 13%. Among them, Counterpoint's data shows that vivo leads the Chinese smartphone market with a market share of 18.5%, 3 percentage points higher than Apple in second place, and the sales share of the high-end X series has also made significant progress.

From a broader market perspective, although the overall growth rate still lags behind previous years, the current growth trajectory is exhibiting an upward trend characterized by "quality over quantity." In this cycle, the value of the smartphone market is being redefined—not just through increased sales but also through higher average prices, an increased share of the high-end market, and the innovative value brought about by generative AI.

The mobile phone industry has undergone rapid changes in recent years, and the competition for top market share in China's mobile phone market has become increasingly fierce and subtle. However, despite the constant shifting of competitors over the years, vivo has successfully navigated the cycles and remained a core player at the table. We can't help but wonder what the secret to its enduring success is.

On August 8, Counterpoint held a salon in Shenzhen with the theme of "Insights into the Rising Cycle of China's Mobile Phone Market." Cheng Gang, Vice President of vivo and President of vivo China, was invited to attend the event, deliver a keynote speech, and participate in a roundtable discussion.

Through Cheng Gang's speech at the meeting, we found the answer to the question. In short, it is vivo's two consistent commitments: maintaining its focus on users and pursuing technological innovation.

Especially in the current new rising cycle, pure sales growth is no longer the only goal. More importantly, under the guidance of an extreme user-centric mindset, we must strengthen competitiveness in the high-end market by improving product capabilities and leverage cutting-edge technologies such as generative AI to achieve qualitative leaps.

This qualitative transformation is the true driving force behind vivo's and the entire industry's sustainable development and innovation.

01. Old Industry, New Changes: vivo Still Leads the Way

At the end of last year, during a roundtable discussion at vivo's headquarters, Hu Baishan, Executive Vice President and Chief Operating Officer of vivo, shared a view: The mobile phone industry is the best in the tech sector, bar none.

As a product easily accessible and frequently used by ordinary people, mobile phones are an excellent vehicle for translating technological achievements into practical applications. According to Quest Mobile data, Chinese people used their phones an average of over 2,500 times per month last year, spending an average of around 170 hours or nearly six hours per day on them.

More importantly, as an intersection of various upstream and downstream industries such as AI technology, chips, cameras, and screens, it has developed a vast industrial chain closely related to the innovative progress of the entire tech industry. Whether it's car-phone integration or wearable and IoT devices, these trends built on the mobile phone industry all have an obvious driving force: only by relying on the sector with the largest user base and the most mature business model can incremental growth be achieved. These trends, in turn, reinforce the mobile ecosystem centered on mobile phones.

When a large user base, perpetual demand, a mature business model, and the potential for more industrial and commercial integration come together, they create an insatiable demand for mobile phones among consumers.

A good industry naturally possesses the ability to traverse cycles. We can see that after years of dormancy, the overall trend of the mobile phone market's recovery has accelerated significantly since the beginning of the year.

According to IDC data, smartphone shipments in China's market reached approximately 71.58 million units in Q2 2024, representing an 8.9% year-on-year increase and returning to 2022 levels. Canalys provided even more optimistic figures, with a long-awaited 10% growth rate, already close to the global average of 12%.

As the market recovers, there are both opportunities and new, intense competition. Notably, in Q2 of this year, Apple's shipments in China decreased by 6.7% year-on-year, ranking sixth. This marks the first time in history that all top five spots in China's mainland market have been taken by domestic manufacturers.

Counterpoint data shows that vivo leads the Chinese smartphone market with a 18.5% market share, 3 percentage points higher than Apple in second place. Canalys' report indicates an even more significant advantage for vivo, with shipments of 13.1 million units and a 19% market share in the first half of the year, significantly ahead of other brands. IDC's report provides a more detailed breakdown, with vivo topping shipments while also ranking first in various price segments, including 1000-2000 yuan, 3000-4000 yuan, and 4000-5000 yuan.

In the past, different market analysis agencies often had fluctuating rankings due to differences in data sources. In Q1 of this year, there were even three different agencies ranking three different leaders. However, this time, the three mainstream agencies provided a consistent answer, fully demonstrating vivo's genuine "hard power."

It's worth noting that a significant portion of vivo's achievements comes from its high-end models. According to official data, vivo's flagship X100 Ultra surpassed 500 million yuan in cumulative sales across all platforms within just one hour of its launch. The foldable X Fold3 series achieved over 580 million yuan in sales within the first minute of its official launch, representing an 800% increase in sales compared to the previous generation.

Explaining these achievements, Cheng Gang stated at the meeting that vivo has always measured the market based on user satisfaction rather than sales figures, using user satisfaction as the industry benchmark.

Indeed, only by adhering to a user-centric approach can technology and products avoid becoming self-indulgent. Guided by the overarching principle of extreme user orientation, vivo's dual-brand strategy precisely meets the needs of target demographics. In addition to the breakthroughs in high-end models mentioned above, the sub-brand iQOO alone accounts for 5.5% of the overall market share, making it the most successful sub-brand among manufacturers.

Of course, user orientation goes beyond simply identifying target demographics. The ability to use Design Thinking methodologies to gain insight into users' underlying, authentic needs is fundamental to forming a company's unique style and differentiating its product definitions.

vivo's answer to this is to make users Happy, which serves as both the starting point and the endpoint of all its endeavors.

02. Old Friends, New Experiences: User Happiness Builds a Solid Foundation

User word-of-mouth is the key to a company's success. In an era where traffic is king, genuine traffic comes from users spreading the word through their own networks.

For vivo, user word-of-mouth trumps all flashy numbers and short-term traffic dividends. Long-term human capital compounding is more valuable, derived from a user-centric strategy anchored in the long run. However, "user orientation" is a complex systematic project that is easier said than done, with making users Happy as one of its most basic aspects.

In a nutshell, making users Happy involves not only meeting their baseline needs but exceeding their expectations.

Take a simple example: telephoto lenses solve the pain point of capturing distant scenes, but as the lens zooms in, images tend to become blurry. vivo's X100 Ultra, equipped with a 200-megapixel telephoto lens, customizes a "Telephoto Stage" function specifically for concert scenes, turning even the back rows into VIP seats. For impromptu work arrangements, the X Fold3 can remotely control a Mac, enabling users to handle urgent matters on the go.

These high-frequency, star scenarios greatly exceed user expectations, delighting them and creating a ripple effect of positive word-of-mouth.

Of course, having a methodology alone is just scratching the surface of extreme user orientation. Technological innovation is the inexhaustible driving force behind making users Happy.

For a long time, vivo has adhered to a "dual-wheel drive" strategy combining design-driven and technology-driven approaches.

Design-driven essentially involves listening to users and understanding their underlying, authentic needs, investing effort in areas invisible to users but palpable in their experience, leading to technological accumulation and product iteration. The technology-driven approach is typified by "Blue Technology."

The future development of mobile phones necessitates continuous solutions to users' new needs. Last year, "Blue Technology" emerged, representing matrix-style technological innovation focused on user needs, rather than single-point breakthroughs like vivo's gimbal stabilization and pop-up cameras in the past.

Blue Technology encompasses various innovative technologies such as the Blue Crystal Chip Technology Stack, Blue Ocean Battery Life System, Blue Heart Large Model, Blue River Operating System, and Blue Print Imaging. Each technology addresses a specific scenario while also offering more development possibilities for hardware and software vendors.

At the hardware level, vivo's Blue Ocean Battery Life System systematically addresses battery endurance by improving battery materials. Previously, the large screens and slim bodies of foldable phones often implied shorter battery life, but vivo's latest Blue Ocean Battery Life System enables the X Fold 3 series to balance thinness with endurance.

In pursuit of a closed-loop experience, vivo has collaborated closely with MediaTek to introduce the Dimensity 9300 flagship chip, leveraging the Blue Crystal Chip Technology Stack and vivo's self-developed V3 imaging chip to significantly enhance performance and imaging capabilities through dual-chip synergy.

On the software front, vivo pioneered the launch of an end-side large model matrix in the era of large models. The Blue Heart Large Model encompasses five self-developed large models spanning billions, tens of billions, and hundreds of billions of parameters. Simultaneously, the Blue River Operating System (BlueOS) integrates AI large models into the system's underlying design.

Beyond AI, chips, and large models, vivo has also made early investments in technologies that fly under the radar. For instance, in the field of communications, vivo established a dedicated communications research institute as early as 2016 to delve into 5G technology. Even as 5G was still in its early commercial stages, vivo pioneered pre-research into 6G technology and accumulated substantial cutting-edge research achievements in multiple potential core 6G technologies.

With such technological depth and a world-class R&D team, vivo's "Blue Technology" serves as the foundational support for extreme user orientation, providing both the foundation for vivo's current success and the confidence to win in the future.

Reflecting on sales figures, vivo has not only consistently ranked first among domestic mobile phone brands over the past three years but has also delivered an impressive performance in the high-end market, which has long been dominated by Apple.

03. Focused on Causes, Remaining True to One's Original Aspirations, and Doing the Right Thing

On the subject of facing future competition, management guru Gary Hamel proposed the concept of "industry foresight."

In his view, what determines a company's long-term competitiveness is not improvements in current business operations and management but the formulation of future-oriented competitive strategies. This, in turn, requires companies to have insights into future industry trends, which Hamel calls "industry foresight."

In practice, there are two types of companies: Imitative enterprise , which advocate a "late-mover advantage," and innovative leaders. All great companies are forward-looking and have strategic perseverance in technological innovation.

vivo is a prime example of the latter.

In the past, when discussing vivo's success, corporate values such as "integrity" and "focusing on causes" have often been mentioned in the press. In reality, "long-termism" best encapsulates vivo's corporate culture. Causes determine outcomes, and focusing on causes requires patience, consistent effort, and a return to fundamental thinking at all times. Only then will the desired outcomes naturally follow.

In 2019, a special study on product and brand strategy served as a signal for strategic adjustments at vivo. A year later, vivo established an "Advanced Technology Group" internally, with one of its tasks being to internally communicate and unify brand strategies.

At that time, vivo aimed to form a comprehensive system rather than rely on individual selling points through long-term investment and development, identifying long-term, sustainably iterative solutions in design, imaging, systems, and performance—four sufficiently lengthy racetracks.

The late Qing Dynasty scholar Zeng Guofan once said, "It is always futile to shout and argue from the sidelines; one must personally enter the fray and take responsibility to have any hope of achieving success."

vivo's long-term investment in imaging is a concrete example of this approach in action:

Starting with the launch of the world's first vivo Xshot in 2014, which boasted both an F1.8 aperture and optical image stabilization; the X50 series then introduced vivo's self-developed "Gimbal Stabilization" technology for the first time; the X70 series featured vivo's first self-developed professional imaging chip, the V1; the X90 series came equipped with the V2 chip; and the X100 Ultra series boasted a 200-megapixel telephoto lens.

From 2014 to 2024, vivo's decade-long journey in imaging has been a testament to its commitment to the concept of "humanized professional imaging." Through the integration of industrial resources, vivo has achieved forward-looking layouts in the three future racetracks of imaging security, 3D imaging/XR, and visual health.

Moreover, vivo summarizes another connotation of its "integrity" value as "flying in formation like geese": the prosperity of the mobile phone industry is not just about one manufacturer or one industry but about the collective prosperity of millions of supply chain enterprises behind it.

The mobile phone industry chain not only concerns the livelihoods of millions of workers and practitioners but also continuously nourishes various industries and becomes an essential force for China to participate in global market competition. From chips, memory, cameras, and batteries to manufacturing processes like anodizing, CNC, and injection molding, almost all technologies related to mobile phones eventually trickle down and benefit other fields.

In vivo's core culture of "Four Happys", besides "Happy Users", there are also "Happy Employees", "Happy Partners", and "Happy Shareholders".

Steve Jobs once said that Apple stands at the intersection of humanities and technology, infusing the beauty and care of humanity into the cold technology. This is his sentiment towards Apple as a co-founder.

In fact, this sentiment shares some similarities with vivo's "Four Happys" theory.

However, Apple now wields both carrots and sticks, supporting technology and orders with one hand while preventing monopoly with the other. It takes the lion's share of profits from the entire industry while shifting inventory and cost pressures onto suppliers.

We do not deny that Apple once drove technological and process upgrades across the entire mobile phone industry, but today's incremental innovations and attempts to shift supply chains overseas are forcing domestic mobile phone brands to progress.

Whether it's vivo's deep involvement in defining the Dimensity 9300 chip or its collaboration with Zeiss to create ultimate imaging performance, vivo has both the capability and willingness to engage in a two-way partnership with its partners.

04. Conclusion

From the Kaiyu architecture, telephoto periscope technology, and Blue Ocean battery to OriginOS, and from foldable screen architecture, display, imaging, battery life to edge AI strategy...

vivo's innovations not only provide numerous new solutions and ideas to the smartphone industry, which has entered the stage of "micro-innovation", but also continuously help it compete better with companies like Apple and Samsung in the international market.

This undoubtedly proves a truth for us: actively seeking long-term goals, adhering firmly to long-termism, and user-oriented integrity are the keys to achieving sustained leadership.

To date, the simplest and most accurate summary of integrity comes from Shen Wei himself:

We must resolutely oppose pursuing individual happiness and strive for collective happiness instead. We must resolutely oppose short-sightedness and the pursuit of temporary wins and losses, opting instead for a long-term perspective that seeks sustainable and healthy longevity. We must resolutely oppose being driven by parameters, competition, and self-interest in product development, returning instead to consumer-driven and design-driven approaches.

Undoubtedly, if an enterprise wants to maintain its development, it must abandon blindly pursuing short-term interests and instead focus on its field, diligently cultivating its foundation. Regardless of how the business world changes or how the tides rise and fall, those who observe the rise and fall of the industry calmly and act prudently will ultimately be rewarded by time.

For such enterprises, survival is not about tumultuous storms but rather tranquil, deep waters. They are not obsessed with short-term prosperity nor afraid of long-term depression. Ultimately, enduring the long, arduous journey of branding amidst blizzards and surviving is what defines a world-class brand.

And vivo clearly understood this essence decades ago.

* Featured and in-text images sourced from the internet.