The invasion of Chinese smartphones in Latin America

The historical dominance of Samsung and Motorola in Latin America does not scare rivals on the other side of the world, who are beginning to stick their flags more strongly in the countries of the region

Rodrigo Ghedin

17.Dec.2020 17:14 BRT
UPDATED 17:18 BRT

Ler em português

It didn’t take long for China to transform itself from a mere factory of foreign-branded smartphones to a barn of its brands with global reach and ambitions. Companies like Huawei, Xiaomi, Oppo, Vivo, and Realme are already among the top sellers of smartphones in the world – and they want more. For that, they will have to conquer the demanding Latin American public, especially the Brazilian, which until now has resisted the attractive smartphones “made in China”.

Chinese brands already make up a majority in the global smartphone market rankings of consultancies like Counterpoint Research and IDC. In the latest one, with data referring to the third quarter of 2020, three of them appear in the top 5, with emphasis on Huawei (2nd place) and Xiaomi (3rd) in both, and Oppo (5th in Counterpoint) and Vivo (5th in IDC). In both reports, Chinese-branded smartphones are already more than half of those sold worldwide.

The scenario in Latin America is not perfectly in tune with the global one. In the latest region-specific report released by Counterpoint, from the second quarter of 2020, two brands from China – Huawei and Xiaomi – appear in third and fourth places, but with a relevant asterisk: Xiaomi was the only one to grow in absolute sales volume in the period, which still reflects the COVID-19 pandemic.

Challenging leaders

For now, Samsung and Motorola, the most traditional brands in the sector, still reign in Latin America, which does not mean that they have an easy life. The heat given by Chinese brands in recent years, with their constant inroads in the region and explosive growth in the globe, has affected the strategies of these leaders everywhere.

Ideas originating in the Chinese market, such as accelerating the launch cycle and anticipating new features in intermediate models instead of concentrating them on the tops of the line, were incorporated by the pair.

The maintenance of its positions in Latin America, and even jumps like Motorola’s in the second quarter, which increased its market share by 7.1 percentage points (via Counterpoint), attest to the brilliance of the Chinese way of making and selling smartphones and the cleverness of the incumbents in copying them.

The historical dominance in Latin America does not scare rivals on the other side of the world, who are beginning to stick their flags more strongly in the countries of the region.

Huawei, despite the sanctions imposed by the US government which limit its access to vital components of smartphones and Google’s Android, still holds second place, after Samsung, according to Counterpoint.

Xiaomi, after a disastrous passage through Brazil in 2015, returned last year doing homework trying to officialize the vast gray market of direct imports and almost always without taxation, which flourished in the country.

It is already top 5 in Brazil, fourth in Mexico, third in Chile and Peru, and vice-leader in Ecuador and Colombia. And Realme, the youngest of these brands, has already arrived in Colombia and is preparing to land in other countries with ambitious goals.

Crystal Gong, marketing director at Realme Brasil, said in an interview with LABS that the company’s goal is to be among the five largest technology brands in Latin America and among the three largest in Brazil within five years. Besides Colombia, Realme is about to officially enter Mexico, Peru, and Chile, in addition to Brazil – in the latter, with its e-commerce in early 2021.

It seems that the younger the company, the more audacious its positioning is. Realme was founded in 2018 by the former vice president of Oppo, another major manufacturer of smartphones and smart products in China.

In this short interval, Realme became the seventh manufacturer that sells the most smartphones in the world – in the third quarter of 2020, according to Counterpoint, there were 14.8 million devices, a spike of 45% about the same period of 2019 and of staggering 132% over the second quarter. (This expedient, of established brands generating smaller ones, is very common. The latest of its kind is Poco, gestated at Xiaomi. Honor, which was born within Huawei, has just become independent in an attempt to gain access to technologies again targets of the sanction imposed on Huawei.)

The boldness of the newcomers is also present in the speech. Crystal, from Realme, says that the recipe to differentiate yourself in competitive countries that are less receptive to newcomers, such as Brazil, is to have good products at fair prices.

So far, nothing new – it is, after all, the promise of many brands of popular appeal, such as domestic rival Xiaomi. But she says that these other companies still do not deliver what is possible: “The price of Xiaomi products in Brazil is too high for their performance. We will bring better products with better prices,” promises the executive.

Our goal in Brazil is to challenge Motorola as we did in other markets. We have already overtaken Motorola and LG in many markets and others, we have already overtaken Samsung. Realme comes here with a long-term strategy.
Crystal Gong, marketing director at Realme Brasil

There are also more pins in rival brands outside China: “Our goal in Brazil is to challenge Motorola as we did in other markets. We have already overtaken Motorola and LG in many markets and others, we have already overtaken Samsung. Realme comes here with a long-term strategy.”

This is what people like

For the luck of the Chinese, or the result of their work, the Latin American consumer is changing. “He is in the fourth, fifth cell phone, and has already left the low-end category, that of cheap products,” explains Renato Meireles, consumer device analyst in the smartphone category at IDC. “He knows that a product with a better processor costs more, and is willing to pay more for it.”

IDC monitors consumer behavior and discovered, in recent research, a change of priorities in the Brazilian public that goes shopping. If brand and price were the most decisive criteria in making purchasing decisions before, explains Renato, today what matters most to the consumer is a specification, especially internal memory and size screen. Not by accident these are aspects that the Chinese mobile brands tend to invest heavily, delivering more for more affordable prices. The rise of Huawei and Xiaomi in Latin America confirms the new trend.

Another behavior change has been benefiting the Chinese firms: the perception of products designed by local brands. The association that was made until a few years ago, between products from China and low quality, is dissipating.

“The young audience is very present in the technological scenario,” explains Renato, “and has this perception of a Chinese industry that brings news to the market.”

Bold cell phones, such as Xiaomi’s Mi Mix line, and Huawei models with advanced cameras made in partnership with Leica, help to establish this image. It is a multi-sector change, and that manufacturers work well when expanding their lines of products for related areas, such as the internet of things accessories and own stores in shopping centers in major cities.

The arrival and consolidation of Chinese smartphone brands in Latin America is a godsend for consumers. In 2021, 5G should be a reality here; combined with the expected resumption of consumption after the massive vaccination against COVID-19, analysts like Renato believe that the smartphone sector will go through a new cycle of high sales.

It will be time for manufacturers, Chinese or not, to show their best bets by charging as little as possible for them. “We have, as consumers, a lot to gain from these new technologies; the fight between manufacturers is good for us,” says Renato, “due to price and spec competitive applications, brands will have to fight to have an interesting position for the consumer, and in the end a greater offer of products for a demand that is still happening.”

(Translated by LABS)