Smartphone Market Porter 5 Forces
In Smartphone Market, It’s Luxury or Rock Bottom
By CHRISTOPHER MIMS Feb. 1, 2015 8:53 p.m. ET (WSJ)
For Apple Inc. and Xiaomi, the Chinese smartphone maker often described as the “Apple of China,” it is the best of times. For most of the companies’ competitors, not so much.
In December, Xiaomi became the world’s most valuable tech startup, worth $46 billion. And last week’s blowout quarterly results for Apple were credited to just about everything—from consumers’ lust for big phones to Chief Executive Tim Cook ’s steady hand on the tiller—except for the most important factor of all. Apple and Xiaomi’s successes reflect the world’s growing income inequality.
Take a look at the chart accompanying this article. It shows the average selling price for smartphones from Apple, Xiaomi and all makers of Android-based phones. It succinctly captures a trend that has damaged the fortunes of just about every smartphone maker other than Apple, Xiaomi and a couple of other companies at the low end of the market: a hollowing out of demand for smartphones priced in the middle range.
The falling price of the average Android phone is driven by supply and demand, of course. As smartphone components become ever-cheaper, devices by Xiaomi, Coolpad Group , Vivo and countless no-name Chinese manufacturers whose wares are rebranded and sold throughout the developing world, keep driving down the price at which a smartphone is “good enough” for most users.
Xiaomi is masterful at this game, and its online-only sales and narrow range of products allow it to sell its phones at rock-bottom prices, says ABI Research analyst Nick Spencer. (Xiaomi also has curated a massive user community that serves as a powerful marketing engine.) This has forced competitors to react.
In the most recent quarter, profits of Samsung Electronics ’ mobile division plunged 62% from a year earlier, leading the South Korean company to declare that it would attempt to sell less-expensive phones, just like Xiaomi.
By CHRISTOPHER MIMS Feb. 1, 2015 8:53 p.m. ET (WSJ)
For Apple Inc. and Xiaomi, the Chinese smartphone maker often described as the “Apple of China,” it is the best of times. For most of the companies’ competitors, not so much.
In December, Xiaomi became the world’s most valuable tech startup, worth $46 billion. And last week’s blowout quarterly results for Apple were credited to just about everything—from consumers’ lust for big phones to Chief Executive Tim Cook ’s steady hand on the tiller—except for the most important factor of all. Apple and Xiaomi’s successes reflect the world’s growing income inequality.
Take a look at the chart accompanying this article. It shows the average selling price for smartphones from Apple, Xiaomi and all makers of Android-based phones. It succinctly captures a trend that has damaged the fortunes of just about every smartphone maker other than Apple, Xiaomi and a couple of other companies at the low end of the market: a hollowing out of demand for smartphones priced in the middle range.
The falling price of the average Android phone is driven by supply and demand, of course. As smartphone components become ever-cheaper, devices by Xiaomi, Coolpad Group , Vivo and countless no-name Chinese manufacturers whose wares are rebranded and sold throughout the developing world, keep driving down the price at which a smartphone is “good enough” for most users.
Xiaomi is masterful at this game, and its online-only sales and narrow range of products allow it to sell its phones at rock-bottom prices, says ABI Research analyst Nick Spencer. (Xiaomi also has curated a massive user community that serves as a powerful marketing engine.) This has forced competitors to react.
In the most recent quarter, profits of Samsung Electronics ’ mobile division plunged 62% from a year earlier, leading the South Korean company to declare that it would attempt to sell less-expensive phones, just like Xiaomi.