IDC Q1 2016 : OPPO and Vivo push Lenovo and Xiaomi out of top 5

This is a shocker for sure.While we all were thinking that Lenovo and Xiaomi were making great inroads in smarphone industry, OPPO and Vivo shocked everyone by taking the #4 and #5 positions in global smartphone shipments for Q1 2016. According to IDC, Samsung Apple and Huawei managed to stay in top 3 but, with year-over-year change of 153.2% and 123.8%, OPPO and Vivo took the final two slots in the table. Whats interesting is that Samsung and Apple registered negative growth while the three Chinese makers made massive gains. The growth for smartphone industry on the whole became stagnant, with only 0.2% YoY increase in shipments.

The biggest change to the market, however, was the addition of lesser-known Chinese brands OPPO and Vivo, which pushed out previous fourth and fifth place players Lenovo and Xiaomi, respectively. As the China market matures, the appetite for smartphones has slowed dramatically as the explosion of uptake has passed its peak. In 2013, China’s year-over-year shipment growth was 62.5%; by 2015, it had dropped to 2.5%. Conversely, the average selling price (ASP) for a smartphone in China rose from US$207 in 2013 to US$257 in 2015.

“Along China’s maturing smartphone adoption curve, the companies most aligned with growth are those with products serving increasingly sophisticated consumers. Lenovo benefited with ASPs below US$150 in 2013, and Xiaomi picked up the mantle with ASPs below US$200 in 2014 and 2015. Now Huawei, OPPO, and vivo, which play mainly in the sub-US$250 range, are positioned for a strong 2016,” said Melissa Chau, senior research manager with IDC’s Worldwide Quarterly Mobile Phone Tracker. “These new vendors would be well-advised not to rest on their laurels though, as this dynamic smartphone landscape has shown to even cult brands like Xiaomi that customer loyalty is difficult to consistently maintain.”

“Outside of China, many of these brands are virtually unknown and the ability of these rapidly growing Chinese vendors to gain entry into mature markets such as the United States and Western Europe will be essential if they have aspirations of catching Apple or Samsung at the top,” said Anthony Scarsella, research manager with IDC’s Mobile Phone team. “Huawei has proven that it can sell increasingly premium devices. In China, Huawei is already recognized as a premium brand, but it is now going toe-to-toe on build quality with premium devices like the Nexus 6P that are available worldwide. While Huawei is furthest along in terms of international recognition, selling equally impressive volumes outside of China remains a challenge for many of these brands, whether it is Xiaomi, Lenovo, OPPO, or vivo. Their ability to drive local growth no longer applies when it comes to international expansion, where premium branding quickly turns to price competition.”

Lenovo has been focusing too much on online sales in India and we think it is time that they remove exclusivity (at least for the Motorola branded phones) and start making these phones available in offline market. The online only flash sales did work in 2015 but it is clearly visible now that this strategy will not help the company grow.

Xiaomi, on the other hand, should start thinking on global expansion and sales strategy. Xiaomi has a cash cow in Mi5 but atleast in India, the company wanted to create fake demand by seriously limiting the number of units that can be sold. Funny thing is that there was massive demand for the Mi5 and due to the flash sales circus, many gave up on buying the Mi5 and went ahead with purchasing other phones. The effec of this is now visible as Xiaomi is pushed out of the top 5. Had Xiaomi made enough units of Mi5 and Redmi 3 available in countries where there is demand, the story would have been different. Given that Lenovo is coming up with the Motorola Moto X 2016, the 2016 Moto G, OnePlus is getting the successor to OnePlus 2 ready, it is time that Xiaomi ditches the fake demand strategy and start pushing for ‘proper and ethical’ sales.

Thanks to the strong sales of Samsung Galaxy S7 and the S7 Edge phone, Samsung has managed to stay at the top and still, one in four smart phones sold across the globe come with Samsung logo. Apple posted massive decline in shipments as the iPhone 6s and 6s Plus were not well received and Apple is struggling to keep the production up for the iPhone SE. The iPhone SE could not generate interest amount buyers in developing nations due to the high price and the mental block due to the fact that the SE looks a lot like the iPhone 5S and has a small display. Apple says that the low sales for the iPhone SE is because of slow production that is not able to keep up with demand. It will be interesting to see how the SE fares in current quarter.

Huawei’s aggressive porfolio of smartphones has cemented its position as second runner up in global smartphone sales. Unlike Xiaomi, Huawei is able to release phones in Europe and USA (as Huawei does not have to think too much about patent and copyright violations) and this has given them a massive edge over Chinese rivals. The gap to Apple has also come down and if Huawei manages to release some super hit models in coming months, they may get closer to Apple as the next iPhone will not be out till end of this year.

OPPO and Vivo were aggressive in push for sales in the sub continent, south east Asia, middle east and in Africa and this has resulted in massive increase in sales. Given that the Chinese smartphone market has stagnated due to weak economy, the global expansion was done at the right time. Do note that OPPO and Vivo have very good models and like Huawei, they do not have to worry about patents to launch the phones in Europe and USA. OPPO allso managed to expand well in offline markets in China and India. Given how volatile these comapnies stand is, it will be interesting to see if OPPO and Vivo can consolidate their position in the table.