There’s good news and bad news for Chinese brands in our survey this year. First, the good news: Chinese brands remain on the ascent, though some of the phenomenal jumps we saw last year from names like Huawei (up 661 spots) and Xiaomi (up 577 spots) and have moderated the higher they climb.
But climbing they still are. Huawei has gained another 44 spots to rank 158th overall, while Xiaomi has done better, leapfrogging 88 places to land at 128, making it China’s top home-grown brand throughout Asia-Pacific in 2018.
It’s certainly been a meteoric rise for Xiaomi, one of the fastest-growing consumer-electronics makers on the planet. Launched only in 2010, it was selling more than 100 million handsets annually by 2016 with an ever-expanding line of consumer products that now ranges from computers to cameras to drones to toys to luggage, clothing and kitchenware sold throughout Asia and much of the world.
Hanish Bhatia, senior analyst of devices and analytics at Counterpoint Research says Xiaomi’s agility and ability to upgrade its budget-conscious product line has been key to its recent success. “In the last two years, Xiaomi launched several spec-heavy smartphones in budget segment, which touched through a mass customer base,” says Bhatia. “Also, Xiaomi follows with a well thought-through and orderly go-to-market strategy. They’ve been quick to respond to the market when it comes to updating the product portfolio regularly.”
Xiaomi’s big product launches are now a global event, with the latest smartphone Mi 8 launching in at least eight other markets besides China, though China and India remain its key markets by far.
“I think Xiaomi has had tremendous success in India by localizing their marketing,” notes Thomas Husson, VP and principal analyst at Forrester. Its decision to join the popular ‘Make In India’ programme in 2015 was highly-publicised. Just last month it announced plans to build three more smartphone plants there, garnering more local support.
Part of Xiaomi’s consumer appeal is generated through its grassroots marketing approach through microblogging, social networking and local events for its millions of “MI (mobile internet) fans” throughout Asia. Central to keeping these consumer activists on side is fostering an ethos of consumers ahead of profits, which is why Xiaomi’s recent pledge to keep net profit margins at five percent or less on hardware only engratiated the brand further with consumers.
For many brands though, such mass appeal is hard to maintain the larger a company gets. Xiaomi could be soon facing a grassroots backlash after two prominent Chinese environmental groups recently accused the brand of not disclosing lapses. An indirect supplier was found to have discharged copper-laced acidic wastewater from a circuit board factory in Suzhou that tested 1000 times higher for acidity than the legal limit.
Xiaomi has made no secret it has global ambitions, further evidenced by this year’s Hong Kong IPO (which might have been in New York had the Chinese government not applied pressure) raising an estimated $10 billion in funding along with plenty of foreign attention. Both Bhatia and Husson say the funding will undoubtedly fuel the brand’s worldwide expansion. But in order to compete with the Apples and Samsungs of the world, they say, Xiaomi will need to build intellectual property and invest much more in R&D.
Lenovo’s brand woes
Now for that bad news referenced earlier. China’s only brand in Asia’s top 100 has tumbled out of it. Lenovo, a name synonymous with a sluggish PC computer market, has fallen sharply from ranking 80th last year to 154th this year.
“Lenovo probably suffered from its presence on the suffering PC market, which had an impact on brand recognition,” Husson said. According to Gartner, PC shipments have been in decline for 14 consecutive quarters, dating back to the second quarter of 2012.
Meanwhile, Lenovo’s mobile unit, led by Motorola, continues to struggle. Bhatia points to the roughly one million devices Lenovo sold in the first quarter of 2018 compared to the 11 million sold at its peak in the third quarter of 2015. “The dual brand strategy is certainly not working well,” said Bhatia, who expects to see a phase-out of the Lenovo brand in favour of Moto, which is stronger.
The fortunes of the two brands may moving in separate directions, but the broad challenges for competing internationally may still hold true for both.
“I think the main challenge is to maintain brand differentiation while growing internationally due to the tougher local competition” notes Husson. “Few Chinese brands have been successful at growing abroad.”
“Even now,” says Bhatia, “Korea, Japanese and other Western brands are trusted more for quality. This perception needs to be changed.”