It is apparent that local smartphone brands gained share from foreign brands in 2012. Although Samsung remained the market share leader throughout the year, local brands, especially Lenovo, made significant progress. At the end of 2012, local brands’ combined market share was 61%, and we expect this to edge up to 66% in 2013, as brand names outgrow whitebox players.
As Operators derive higher profits from local brand smartphones than from Apple / Samsung smartphones local brands are likely to gain more subsidy share, even though overall operators’ subsidies could remain flat. Further, a successful flagship model also helps promote brand image, thus increasing sales volume across the product line. Notably, all flagship models (quad-core, 4”+ touch display, 8MP, etc.) from local brands are priced at below USD 600.
Lenovo has outpaced Huawei to be the No.2 smartphone brand in China – Lenovo’s rapid share gains to its – well-covered distribution channel and strong brand awareness, leveraging the PC business, competitive cost structure thanks to economies of scale from component procurement and close relationship with MediaTek.
ZTE’s TD-SCDMA Bets Paying Off ZTE will benefit from its larger volume in TD-SCDMA compared with peers. We forecast ZTE smartphone shipments of 35mn in 2013, with 30% in TD-SCDMA, 30% in CDMA, and 40% in WCDMA.
HTC could benefit from the replacement cycle if it remains one of the top brands in the high-end segment. However, given One X failed to gain traction, and Butterfly has faced some supply constraints, the company’s mindshare has been declining. HTC dropped out of the top three in December given the lack of an iconic flagship model to boost brand awareness.
Huawei changed its handset strategy in 2012, focusing on the mid-market to high-end segment. Sell-through volume decelerated in 2012, but the launch of the U9508 suggests the emergence of a flagship model for the brand.
Coolpad (under China Wireless) is one of the few brands that sticks to a mid-market to low-end handset strategy. Coolpad also continues to focus on the operator channel, which contributes over 90% of its volume.