Two SIM Cards and Better Selfies: How China's Smartphones Are Taking On Apple

SHENZHEN, China -- The top player in Africa's fast-growing smartphone market isn't Apple Inc. or Samsung Electronics Co. It is Transsion Holdings Ltd., an obscure Chinese manufacturer that won customers by offering handsets with features targeted to local markets.

Transsion -- whose products are sold under the Tecno, itel and Infinix brand names -- developed handsets with two SIM-card slots after research showed people were carrying additional cards to avoid making out-of-network calls to save money. It also optimized its cameras to better highlight the features of people with dark skin tones.

"We didn't want to bring what we had," said Arif Chowdhury, Transsion's vice president. "We wanted to bring what customers need."

That kind of thinking partly explains how Chinese manufacturers managed to snare more than 40% of the global smartphone market in the first quarter of 2017, double what they had five years ago, according to industry researcher IDC. Meanwhile, Samsung's and Apple's share of the global market has begun to slip, down 3.5% last year.

The other answer can be found in the Pearl River Delta, China's southern tech corridor. With few exceptions, notably Beijing-based Xiaomi Corp., most of the more than 20 Chinese smartphone makers are there, a region rich in the technical know-how and manufacturing infrastructure.

Shenzhen is home to Huawei Technologies Co., ZTE Corp. and Transsion. BBK Electronics Corp., the parent owner of the popular Oppo and Vivo smartphone makers, and TCL Corp. are both less than 60 miles to the north.

It is a volatile market, as shown by Xiaomi's fall from the No. 1 Chinese phone maker in 2015 to the No. 5 position last year. The fight is all about staying competitive in pricing and features, and Shenzhen is the battleground.

Once known as little more than a hub of contract manufacturing for Western technology giants, the region has given birth to an array of domestic upstarts by marrying low-cost production and high-tech engineering

"The impression that Chinese companies are not good at innovation was accurate three years ago but not any more," said Li Dongsheng, chairman of TCL, whose smartphones are ranked in the top five in the U.S.

Oppo, China's largest smartphone maker by market share last year, started producing phones eight years ago that were notable only for simple design flourishes such as a camera molded into the shape of a smile. Today, its biggest selling points include a "beautify" function that smooths and brightens users' selfies and a fast-charging battery.

"We do customer channel checks and survey our large sales force to find out what consumers need and want from their phones, and try and innovate that way," said Alen Wu, Oppo's vice president and marketing director for its China market.

In 2016, Oppo sold more than three phones in China for every two sold by Apple. A year earlier, it was the other way around.

Now, Oppo is taking the same playbook overseas. In Southeast Asia and India, where Oppo found that consumers love taking selfies, they rolled out wide-angle camera lenses designed for group selfies. The Chinese vendor announced plans this year to expand its Indonesia factory, open one in India and push into the Middle East and North Africa.

Similarly, Huawei has streamlined its lineup of smartphones and has put greater emphasis on its phone cameras, including its own version of the depth effect pioneered by the iPhone 7 Plus -- with the background blurred and foreground in focus -- in a phone costing a third of the iPhone's price.

"In the smartphone space, what we're going to do is catch up with our competitors through innovation," Shao Yang, president of strategy marketing at Huawei's consumer group, told reporters at a briefing this year. "In the next phase, we hope to take the lead by offering the best user experience and the best products for our users."

At Transsion, company executives introduced the dual-SIM-card phone after noticing how African users often carried two SIM cards and swapped them around because call rates between different telecom networks were more expensive than intra-network calls.

The company also found that customers enjoyed taking selfies but were disappointed at how poorly darker skin tones turned out, Transsion's Mr. Chowdhury said. It tweaked the algorithm on its smartphone camera to allow more light exposure, boosting photo clarity.

It paid off. Transsion was the top phone maker in Africa last year, with 38% market share, topping Samsung, according to IDC.

In emerging markets such as Africa and India, low price is crucial to success. But Chinese makers are also making strides in the U.S. Smartphone makers from China increased their market share to 19% in the U.S. last year from 13% in 2012, at the expense of Apple and Taiwanese maker HTC Corp., IDC data shows.

TCL, which bought the rights to BlackBerry's phone brand at the end of last year after helping the brand manufacture its smartphones, plans to use the once-ubiquitous marque to enter the high-end segment in the U.S., TLC's Mr. Li said.

U.S. customers are practical and, apart from Apple users, brand loyalty isn't strong, he added. This has created an opportunity for Chinese brands to muscle in.

Still, the similarities among Chinese makers and the lack of Apple-like brand cachet means that Chinese smartphone makers are mostly fighting one another for customers.

The challenge for those companies is how to differentiate themselves as they expand beyond their sales strongholds, said Kiranjeet Kaur, a research manager at IDC in Singapore.

"Chinese phone makers stand out from their foreign peers because of its features but less so from each other," Ms. Kaur said. "As they enter new markets, they will face more competition from each other."

--Junya Qian in Shanghai contributed to this article.

Write to Liza Lin at Liza.Lin@wsj.com and Dan Strumpf at daniel.strumpf@wsj.com

(END) Dow Jones Newswires

June 07, 2017 05:44 ET (09:44 GMT)