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Digitimes Research: China smartphone vendors rely on international brands for overseas expansion
Anthony Chen, DIGITIMES Research, Taipei [Monday 10 March 2014]

China-based smartphone players' shipments to markets outside of China currently account for 20% of their total volume. As demand from the local market - which has been their main growth driver - is weakening and the China-based players' combined shipments will only grow by 26.7% on year in 2014, expanding their presence in overseas markets has become a priority.

However, expansion in overseas markets needs a large amount of resources and manpower, and a business models that is completely different than the one used in China. Therefore, despite the fact that many second-tier players are aggressively trying to have a share of the overseas markets, most of them are unlikely to achieve good results in the short terms.

First-tier players such as Huawei, ZTE, Lenovo and TCL, however, have more advantages; they have already been operating in other countries for a while.

In 2013, Digitimes Research's figures showed that ZTE shipped 19.1 million smartphones to markets outside of China, trailed by TCL with 15 million units. Huawei and Lenovo ranked the third and fourth, respectively with both having less than 10 million in unit shipments.

Although TCL is not considered a first-tier smartphone player in China, its strong sales growth from exports had significantly narrowed its shipment gap with the first-tier vendors (Lenovo, Huawei, CoolPad and ZTE), showing that China players are able to quickly stimulate demand for their products in overseas markets by selling them under international brand names.

TCL acquired the handset business of France-based Alcatel in 2004. After three years of losses, the handset business started to turn around in 2007 and since has seen stable growth in shipments to overseas markets. TCL's smartphone shipments to overseas markets surpassed six million units per quarter starting the second half 2013.

TCL only has less than 10% of its handsets shipped to the domestic market in China, and since its TCL brand has a higher recognition than its sub-brand Alcatel in China, the vendor is mainly selling its Alcatel smartphones in markets outside of China, adopting a strategy of pushing different brands for different markets.

Lenovo has already been selling its own-brand smartphones in Asia, Latin America, Eastern Europe and Africa. Digitimes Research expects its acquisition of Motorola Mobility to help the vendor further expand in North America, Europe and Latin America.

For North America and Western Europe, Lenovo will release smartphones under the Motorola brand, but will promote both brands - Motorola for the high-end/mid-range segment and Lenovo for the mid-range/entry-level segment - in emerging markets and China.

By covering all the market segments, Lenovo is aiming to significantly boost its shipments to ease the impact of its different product lines fighting each other on the market.

Lenovo has revealed that it is planning to release products under Motorola in the second half of 2014 and will sell them in both overseas markets and China. With its dual-brand strategy, Digitimes Research expects Lenovo's smartphone shipments to reach 60.9 million units in 2014, surpassing Huawei and become the leader of the China smartphone industry.

TCL, with surging shipments to overseas markets, is expected to ship over 25 million smartphones in 2014, widening its gaps with other second-tier players.

Both cases - Lenovo and TCL - demonstrate the importance of brand recognition in boosting their shipments to overseas markets.

This article is an excerpt from a Digitimes Research Quarterly Data Report (China smartphone market and industry – 1Q 2014). Visit our latest Data reports.

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