Some reports floating around on the internet seem to suggest that some of the Chinese smartphone brands that made an empire by launching high-spec’d, low-priced gadgets over the past few years, are fixing to raise their prices fairly dramatically next year, which might bring about a much-needed image makeover for not just the companies themselves, but the Chinese smartphone industry in general. According to a report carried by GizChina, Xiaomi may be one of the first companies to take that leap of faith and venture into the unknown, by pricing its upcoming Mi 5 at close to 4,000 Yuan ($615), which would put it almost at par with current flagships from the likes of Samsung and LG in the international market and the likes of Oppo and Vivo in the Chinese market.
Now, whether or not the ‘premium positioning’ bit truly happens remains to be seen, but the company had already priced its Mi Note at a higher-than-expected level last year, so it wouldn’t be completely out of the blue if the company does decide to give itself an image makeover. In an effort to go upmarket, Xiaomi is believed to be working on design and is reportedly putting significant emphasis on quality control, especially as the company is looking to launch its products in newer regions like the US and Europe. With the Chinese market reaching a saturation point in recent times, profitability is at an all-time low, what with companies like Xiaomi, Meizu and LeTV amongst others, playing the price-warrior game to hilt and undercutting each other with every handset launched. No wonder then that some of these vendors will have the premium market on their radars.
Huawei has already exited from the entry-level market in China because of stifling competition and razor-thin margins, and has since seen its overall market share go through the roof not just in its home market, but also in Europe, where it is now the second largest smartphone brand. The question now is, if Xiaomi does decide to go upmarket, will its closest mainstream rivals in the country, Meizu and LeTV, follow suit? Or will they adopt a wait-and-watch approach before jumping in headlong? Given that premium smartphones will always have a higher margin than budget devices, this strategy might seemingly make more sense from the business perspective, but it will only work if companies looking to take that step up are able to shake off the label of a budget brand and appeal to a different target audience who’ll have access to virtually any handset on the market with their deep pockets.
Whichever way the cookie crumbles next year, it will be interesting to see how well the rumored image makeover comes about and how well brands like Xiaomi, Meizu and LeTV are able to make that transition from appealing to budget conscious customers to making premium, high-end devices that will appeal to the aesthetics and sensibilities of a more discerning set of buyers. All said and done, devices launched at higher price points will have to compete in the marketplace with offerings from global multinationals from South Korea, Japan, the US, Taiwan and indeed, their own backyard! It the aforementioned companies are game for that 2016 may well be the year when Chinese smartphones go premium.