Author | Lu Shiming

Editor | Dafeng

The mobile phone industry has been quite lively lately, with Apple and Huawei first engaging in a fierce competition, followed by Xiaomi's surprise move that heated up the competition. According to a report released by market research firm Counterpoint Research, Xiaomi surpassed Apple in mobile phone sales in August this year, becoming the world's second-largest smartphone brand, second only to Samsung. Meanwhile, renowned analyst Ming-Chi Kuo's latest report indicates that the pre-orders for the iPhone 16 series during its first weekend are expected to reach 37 million units, a decrease of approximately 12.7% compared to the same period for the iPhone 15 series the previous year. The underperformance of the iPhone 16 Pro series is a crucial factor in this sales decline. As the competition intensifies, the dynamics within the mobile phone industry are becoming increasingly clear. Apple, facing growing fatigue, must confront the immense pressure brought by domestic mobile phone brands. Subtle changes are also occurring in the global mobile phone market landscape.

01

Xiaomi Returns to Second Place, Global Strategy Starts to Gain Momentum

As early as the second quarter of 2021, Xiaomi surpassed Apple to become the second-largest mobile phone brand globally. At that time, Xiaomi achieved a market share of 17% in the second quarter of 2021, with a growth rate of up to 83%. In contrast, Apple ranked third with a market share of 14%. Three years later, Xiaomi has regained its position as the world's second-largest mobile phone brand. According to Counterpoint, there are two primary reasons for this. Firstly, Apple's iPhone typically experiences a seasonal sales slowdown before the September launch of its new models. Meanwhile, although Xiaomi's sales volume remained flat month-on-month in August, the Chinese brand was one of the fastest-growing in the first half of this year, with sales volume increasing by 22% year-on-year. Even if growth slows down in the second half of the year due to base effects, Counterpoint expects Xiaomi to still achieve a "strong double-digit percentage" growth rate for the full year.

Source: Counterpoint

Tarun Pathak, Director of Research in the Smartphone Sector at Counterpoint, stated that Xiaomi adopted a more streamlined product strategy this year, focusing on creating a flagship model in each price segment rather than launching multiple devices in the same market segment.

In other words, while other brands flood the market with multiple devices within the same price range, Xiaomi insists on launching only one flagship model in each market segment. This strategy has helped Xiaomi achieve remarkable results in both the entry-level and high-end markets. In addition to the impact of Xiaomi's product strategy, the current global economic pressures have also contributed to the strong momentum of Xiaomi's entry-level to mid-range devices. When the global economy is doing well, Apple's iPhones have no trouble selling, but currently, more consumers are thinking carefully before purchasing new devices, especially with increased price sensitivity. Xiaomi, once synonymous with "cost-effectiveness," has deep roots in the mid-to-low-end market. Models such as the Redmi 13C, Redmi Note 13, and Xiaomi 14 have seen significant sales in India, Latin America, Southeast Asia, the Middle East, and Africa, outperforming popular models like the Samsung Galaxy A05 and significantly boosting market share.

Redmi 13C Source: Xiaomi's Official Website

Apart from leveraging price advantages in the global market for entry-level and mid-range devices, Xiaomi has also made inroads into the high-end market in recent years with the launch of foldable and Ultra series phones, offering more choices for users and enhancing fan loyalty. The Xiaomi 14 series (excluding the Ultra model) has seen a 163% surge in sales in its tenth month on the market compared to the Xiaomi 13 series, with cumulative sales exceeding 6 million units. Some bloggers predict that the total lifetime sales of the Xiaomi 14 series could reach around 1.6 times that of the Xiaomi 13 series, or approximately 8 to 11 million units. Regardless of the reasons - seasonal factors, economic conditions, or strategic decisions - Xiaomi's return to the global second place is of immense significance, not only for Xiaomi itself but also for many domestic mobile phone brands.

02

The iPhone 16 Encounters a Cold Reception, and Apple's Market Value Plummets

In contrast to the continuous growth of domestic mobile phone brands like Xiaomi, Apple has had a tough year, with its former glory rapidly fading. As the world's second-largest economy, China has always been one of Apple's most important overseas markets. However, according to the latest report released by renowned market research firm Canalys on June 7, Apple's share of the high-end smartphone market in China experienced a significant decline in the first quarter of 2024, falling by 25% year-on-year.

By the second quarter of this year, Apple's sales in China had declined by 3.1% year-on-year, and its market share had fallen to sixth place. Recently, with the latest iPhone 16 series, Apple has again sparked heated debate about pre-order demand due to a decrease of approximately 12.7% in pre-orders during the first weekend compared to the same period for the iPhone 15 series the previous year. In an online survey conducted by Ifeng Tech asking, "What do you think of Apple's annual flagship phone?" over 24,000 netizens participated. The survey results showed that more than half (51%) of respondents believed that the iPhone 16 series did not meet expectations or even fell short; 39% found the new products to be average; and only 10% felt that they met expectations. Furthermore, regarding whether respondents would purchase the new models, over 83% indicated that they would not, with 10% considering a purchase and 7% waiting to experience the product before deciding.

Source: Ifeng Tech

It's worth noting that in previous years, new Apple devices could be resold to recyclers for around 800 yuan more than their retail price if obtained during the initial launch period. However, on the second day after pre-orders for the iPhone 16 series opened, scalpers reportedly offered only a premium of 50 to 400 yuan for the iPhone 16 Pro and Pro Max models, depending on memory configuration.

These various negative news items have spread to the secondary market, causing investor concerns and impacting Apple's market value. In just one week after the new device's launch, Apple's market value decreased by $69 billion, equivalent to nearly 500 billion yuan. If we look specifically at product-related reasons, Apple's significant drop in market value is not unwarranted. Compared to the iPhone 15 series, the iPhone 16 series introduces only minor changes, mainly in the form of a new camera control button, camera upgrades and rearrangements, and a slightly larger screen for the 16 Pro series. This has led to criticisms that Apple is merely "squeezing the toothpaste tube" with minor updates. Beyond hardware, the more substantial changes in the iPhone 16 come from software updates, notably an AI tool called "Apple Intelligence." Unfortunately, this "biggest selling point" is unavailable to users in China, further dampening consumer purchasing intentions. Beyond product factors, the acceleration of domestic mobile phone brands in recent years is the core reason for the pressure on Apple from a market perspective.

03

Domestic Mobile Phones Gather Momentum, Aiming for the Global Market

In recent years, competition in the global smartphone market has intensified. Chinese mobile phone manufacturers have continuously increased their R&D investments, focusing on technological innovation, product design, and user experience. Domestic brands such as Huawei, OPPO, vivo, and Xiaomi have narrowed the gap with Apple through technological innovation and differentiation strategies. Especially in the Chinese market, these brands have won a large market share by offering products and services that better understand local consumer needs. Apart from Xiaomi mentioned earlier, Huawei has been engaging in a "head-to-head" competition with Apple for several consecutive years.

From the hard confrontation between Huawei's Mate 20 and Apple's iPhone XR on October 26, 2018, to the Mate 50's preemptive strike against the iPhone 14, and the simultaneous launch of the Mate 60 and iPhone 16 series on September 10 this year, Huawei and Apple have consistently been locked in a fierce battle. On the same day that Apple unveiled the iPhone 16 series, Huawei introduced its first mass-produced tri-fold phone, the Mate XT Extraordinary Master series. This model not only redefines people's perceptions of mobile phone form factors but also sets a new price high for Huawei, starting at 19,999 yuan, making it the company's most expensive phone to date.

Source: Huawei's Official Website

Despite its high price, the Mate XT has garnered immense pre-order interest. Before its official launch, pre-orders for the Mate XT surpassed 4 million, underscoring its popularity. In some e-commerce platforms, the phone was even being scalped for as much as 100,000 yuan, earning it the nickname "electronic Moutai." The peak confrontation between the Huawei Mate XT and Apple iPhone 16 is not only temporally close but also involves all-around competition in terms of technological content and market strategies. With its groundbreaking tri-fold design, Huawei challenges Apple's traditional mobile phone form factor.

Looking back at the development of China's mobile phone market, it has long been dominated by foreign brands, from Motorola and Sony Ericsson to Nokia, and later Samsung and Apple. However, Chinese manufacturers have been catching up, from the early "Zhonghua Kulian" era to today's "Huawei, Xiaomi, OPPO, and vivo." Domestic mobile phones are rapidly rising. According to IDC data, in 2023, apart from Apple, the top four smartphone vendors in the Chinese market were all Chinese companies: Honor (17.1%), OPPO (16.7%), VIVO (16.5%), and Xiaomi (13.2%).

Source: IDC

Expanding our view to the global context, the market share and global competitiveness of domestic brands are also on the rise. Canalys data shows that in the second quarter of this year, the shipments of domestic mobile phones priced above $600 in the global market increased significantly, with Huawei and Xiaomi seeing growth rates of 80% and 71%, respectively, capturing 9% and 2% of the global market share.

The landscape of the global smartphone market is constantly evolving. From Nokia and Motorola to Apple's long dominance, it's time for a change. As "Huawei, Xiaomi, OPPO, and vivo" continue to grow their global market share with strong technological and supply chain capabilities, domestic mobile phones are poised to achieve even greater accomplishments.