Chinese Smartphone Makers Vie for the Mid-Range Market: Independent Sub-brands and Price Cuts Emerge as New Trends

Chinese Smartphone Makers Vie for the Mid-Range Market: Independent Sub-brands and Price Cuts Emerge as New TrendsThe slowing growth of the smartphone market and rising prices of high-end models have prompted domestic Chinese smartphone manufacturers to turn their attention to the more promising mid-range market. They are employing various strategies, including independent sub-brands and price cuts, to compete for market share

Chinese Smartphone Makers Vie for the Mid-Range Market: Independent Sub-brands and Price Cuts Emerge as New Trends

The slowing growth of the smartphone market and rising prices of high-end models have prompted domestic Chinese smartphone manufacturers to turn their attention to the more promising mid-range market. They are employing various strategies, including independent sub-brands and price cuts, to compete for market share.

The Mid-Range Market: A Battleground for All

According to IDC data, in the third quarter of 2024, high-end models priced above $600 accounted for only 29.3% of the Chinese smartphone market, while mid-to-low-end models below $600 captured a 70.7% market share. This signifies that the mid-range market, compared to the fiercely competitive high-end segment, possesses significantly greater growth potential and has become a focal point for major manufacturers.

To better capture this large market, China's four major smartphone manufacturers Xiaomi, Honor, OPPO, and vivo are launching sub-brands or new product lines to aggressively target the mid-range segment. Realme was first to establish its Neo series as an independent brand, aiming for greater market agility. Xu Qi, Realme's Vice President, Global Marketing President, and President of China, stated that the Chinese market has approximately 500 million users, with about 50% using phones in this price range, and the Neo series aims to achieve the number one market share in the online mid-range market. Honor followed suit with its Honor GT series, reinforcing its core strengths in internet-centric phones to more precisely target young users. Xiaomi, through its Redmi brand and the upcoming Turbo series, is gradually taking over from the K series, further solidifying its competitiveness in the mid-range market. Lu Weibing, President of Xiaomi Group, President of the Mobile Phone Department, and General Manager of Xiaomi Brand, noted that as Xiaomi moves upmarket, it will break into higher price segments, freeing up space for Redmi's ascent. The Redmi K80 series achieved over one million sales in its first 10 days, demonstrating its strong performance in the mid-range market.

According to Zhan Junhao, founder of Fujian Huace Brand Positioning Consulting, brands choose to establish independent sub-brands in the mid-range market primarily for strategic reasons of market segmentation and precise positioning. As consumer needs diversify and become more personalized, a single brand struggles to satisfy all user groups. Launching sub-brands focusing on specific demographics (e.g., young people) or features (e.g., gaming performance) allows companies to better meet the needs of target customers, improving market penetration and user loyalty. This explains why Realme and Honor have opted for independent sub-brands to adapt to market changes.

High-End Price Increases, Mid-Range Price Cuts: Divergent Market Strategies

In stark contrast to the general price increases or upgraded base configurations of high-end flagship phones, a price-cutting trend has emerged in the mid-range market. This year, high-end flagship phones have generally increased their prices or upgraded base configurations due to rising electronic component prices. However, the mid-range market presents a different picture. Except for some high-performance versions, the starting prices of most mid-range phones remain unchanged compared to the previous generation, or even show price reductions. For example, the OPPO Reno13 series and Realme Neo7 series maintained their starting prices despite core configuration upgrades; while the vivo S20 series and Honor 300 series saw price reductions of 100-200 yuan depending on configuration.

This differentiated pricing strategy reflects manufacturers' subtle calculations. Some industry insiders point out that mid-range phones have relatively low profit margins; low-configuration versions are sold at a loss to attract more target users ("loss leader" strategy). The supply of low-configuration versions is relatively limited, allowing manufacturers to rely on high-configuration versions for profit by controlling supply.

Furthermore, the decline in storage chip prices has also contributed to mid-range phone price cuts. A report by TrendForce shows that in the fourth quarter of 2024, smartphone memory prices started to fall quarter-on-quarter. Specifically, LPDDR4 memory prices are expected to decline by 8%13% quarter-on-quarter, and LPDDR5 memory prices by 5%10%. This trend is projected to continue into the first quarter of 2025. Lu Weibing also revealed at Xiaomi's Q3 2024 earnings call that supply chain prices began rising in the first two quarters, peaking in the third quarter, and are expected to decline in the fourth quarter.

However, cost pressures remain. Tan Ruitao, product line head of Realme's GT and Neo series, noted that while memory chip prices have shown some signs of easing, the prices of advanced process chips are still rising, creating significant cost pressure. Overall, the cost of mid-to-high-end models is expected to remain under pressure for the next year or two.

Conclusion

In the context of slowing smartphone market growth, the mid-range market has become a focal point for major Chinese manufacturers. Independent sub-brands and price-cutting strategies are key tools for gaining market share. While declining storage chip prices offer some cost advantages, rising advanced process chip prices still put pressure on manufacturers. In the future, manufacturers will need to make greater efforts in product innovation, market positioning, and cost control to stand out in this highly competitive market. The differentiated strategies employed suggest that future competition in the smartphone market will be even more complex and diverse.