Is the smartphone market a monopolistic competition?
Oligopoly. A few suppliers. Since the phones are differentiated this is a differentiated oligopoly (the phones have different features). Monopolistic competition is where there are a very large number of suppliers. If there were over a thousand companies making smart phones, you would have monopolistic competition.
How did Huawei smartphones become competitive with Apple and Samsung? What is the key of Huawei's success?
Not really so competitive currently. And if there is any success, should be owed to the rivals, Samsung for instance, as much as to the company itself.Not gonna talk too much, but here are some facts :the profit rate is miserable. No idea where exactly they spend the money(said much spent on advertisement), but to be honest, I am getting paid indirectly by them, i.e., they have to sign salary checks for numerous employees working at other departments who, for example , make chips for them. Well, they could have bought cheaper (since in this case they don’t have to pay the salaries nor afford the expenses in research) and maybe better chips, but for some reasons which you can figure out yourself, they have been forced to do so. It’s deemed to be a long term investment, and let’s hope so.whether or not could the company survive the next decade is unknown . You see, Huawei is actually a CT company, dealing most of its business by selling equipment to, say, China Mobile, Vodafone, and even AT&T if possible. Sure the company now announce itself to be an ICT company, which means it would now dive into the Information Technology. But wait, Amazon, Google and Microsoft are already giants there. Even in the mainland of China, there is an company named Alibaba strong enough to knock Huawei down. Consumer Department, which launch smartphones and all the other products for consumers, even though now an independent company, can hardly avoid its crisis if the company falls. And this let’s hope not.Oh, I have quite deviated from the topic. As to why it succeeds,you can find an ocean of articles trying to explain its culture, its human resource management, or whatever. But few of them dare to mention the most important clue, which is, Ren Zhengfei, the founder and the owner, now only holds approximately 5% shares of the company. The rest has gone to the extraordinary staff and will still go. Note that Huawei is a private limited company, and all the shares belong to the staff. And emphasis once more, Ren has taken out nearly all the shares from his own pocket by himself.Ask your boss to share the company with you, imagine he could have owned 10 billion USD but instead, he only keeps 0.05 billion and says,‘hi guys, if you work well, you can have your deserved part of the 9.95 billion’. Then maybe your company become much more successful than Huawei.
How competitive is the Chinese brand Xiaomi in the smartphone market of middle-income countries (due to its more affordable price)?
We'll see. The problem with Chinese android phones is that they've had the reputation of being cheap and low quality. The manufacturers have tried and failed several times to create a brand, but maybe Xiaomi will get it right this time.One thing that makes Xiaomi unique is that it's one of the first Chinese phones that's gotten a decent reputation in China. Chinese smart phone buyers tend to go for Apple and Samsung, and Xiaomi is one of first phones that has gotten good sales in their home turf. Also, there is a another brand called Infinix that has been getting traction in Nigeria. It is a French brand that is made in China, and I've been trying to get some of those phones to sell in Nigeria, but no one here in Hong Kong has ever heard of them. They seem to be capturing the Nigerian market, and whoever is in charge of their marketing is something of a genius.
Are Chinese smartphone makers using low quality chip sets? Is that why their prices are cheaper?
No, low quality chipset is not the reason why Chinese smartphones are so cheap.Below are the 2016 top chipset suppliers & their market share for Android devices. They are all quality suppliers.Qualcomm (USA ) 57% - high tier, high priceMediaTek (Taiwan) 20% - mid-low tier, aggressive priceSamsung (S. Korea) 12% - high tier; mostly for internal consumptionHiSilicon, a Huawei subsidiary (China) 6% - high/mid; mostly for internal consumptionOther 4%MediaTek dominates in the chipset for mid-low tier smartphones; and they didn’t garner 20% of the market by producing junk. And while they have aggressive pricing, this is not the primary reason why smartphones nowadays are so cheap. Instead, here are the factors why Chinese smartphones are so cheap to produce.Highly integrated chipsets - Even low-tier chips have a high level of integration (video/graphics, audio, power mgmt, RF, etc.) Unlike in the old days, phone manufactures don’t have to do all these design/engineering integrations. That’s a lot of NRE avoided.Cheap components - The Chinese electronics component industry is very competitive.Cheap technical talent - The average annual salary for a Chinese college grad is US$6,000. So, cost for engineers (electrical, mechanical, tooling, production, quality control, etc) are a fraction of what it would cost in other countries; and they are in ample supply. For comparison, an experienced tooling engineer in the US will run about $100K.Less marketing - Most Chinese companies still haven’t invested big dollars on marketing and in building their brand.Competition - Due to the high level of chipset integration, the entry barrier to building an Android phone is not that high. There are over a 100 smartphone manufacturers/brands in China. This amount of competition keeps the pricing/margin low.You may be wondering why I didn’t list labor. That’s because in electronic manufacturing, less than 8% of the product cost is assembly (and I’m being quite generous..)So unless you have a powerful brand and key product differentiation (i.e. Samsung, Apple, Huawei), a manufacture will not break into the upper-mid or high tier phone segment. Instead, you’ll be fighting with the other 100+ players who can produce and sell a smartphone for under $25… It’s a brutal industry.
Do you want to enter, in China, the most dynamic and competitive markets in the world?
Yes, China’s market is booming, so its many opportunity. In China, all development related to AI and Internet is on a tear, which are supported by government.