The high-end mobile phone pattern is regenerated variables, Huawei is charmed, and Apple is disenchanted

Illustration courtesy of Canva

After more than 20 years of development, the smartphone industry chain is highly mature, consumers' demand for replacement is weak, smartphone manufacturers are struggling to innovate, and the market stock competition has already entered a white-hot stage.

On the consumer side, the replacement cycle of consumers has been extended, and the smartphone track has entered a period of weak growth. TechInsights, a research firm, revealed that in 2023, the replacement cycle of smartphones worldwide will be extended to the longest in history at 51 months. In China, the rate of replacement by consumers has increased slightly, but it is still more than 40 months.

On the supply side, in order to stimulate the "replacement tide", smartphone manufacturers have accelerated product updates and iterations, and they have little effect if they are busy. As the market becomes increasingly saturated, mobile phone manufacturers are striving to improve product quality, betting on new features such as satellite communications and AI functions in order to drive a wave of large-scale replacement and obtain higher profits by raising prices.

In such an environment, product innovation has become particularly important, but it has also become more difficult. Especially standing at the crossroads of smartphone to AI mobile phone upgrades, every smartphone manufacturer wants to seize the opportunity, so the smell of gunpowder among high-end smartphone manufacturers is even stronger.

The high-end smartphone landscape is changing

In the first quarter of this year, the overall global smartphone shipments showed a growth trend, and the Chinese market, as one of the world's largest smartphone consumer markets, is also benefiting.

According to IDC, global smartphone shipments increased 7.8% year-on-year to 289 million units in the first quarter of 2024, marking the third consecutive quarter of growth as the market recovery underway. In addition, in the first quarter of 2024, China's smartphone market shipped about 69.26 million units, a year-on-year increase of 6.5%.

With the return of Huawei's 5G mobile phones, China's high-end smartphone market is facing a reshuffle. Smartphone manufacturers are worried, happy and happy.

On the one hand, Chinese smartphone manufacturers, represented by Huawei, are further carving up the domestic high-end mobile phone market share. According to IDC's Q1 2024 China mobile phone market report, Honor ranked first in the mobile phone market in the first quarter with a market share of 17.1%, while Huawei only had a 0.1% market share difference, followed by 17.0% of the market share, and almost tied for the top spot with Honor.

On the other hand, the pressure on overseas smartphone manufacturers represented by Apple has doubled, and the decline in the Chinese market continues. According to IDC's Q1 2024 China mobile phone market report, Apple ranked fourth with a market share of 15.6%, up -6.6% year-on-year.

In addition, the latest data from market research firm Counterpoint Research shows that Apple's iPhone sales fell 19% in China in the first quarter, falling to third place in the highly competitive Chinese market.

Obviously, Huawei's smartphone comeback has grabbed the share of other mobile phone manufacturers, and because Huawei is currently focusing on the high-end market, the impact on Apple is the most obvious. However, with its unique brand influence and high-end product positioning, Apple still has a solid market share and loyal user base.

A number of data reports show that the domestic high-end smartphone market is facing a new change. Mobile phone manufacturers are actively working to launch competitive products and services, which will further intensify the competition in China's smartphone market.

Apple disenchantment, full remedy

In the Chinese market, Apple is facing increasing competition and is losing some market share. Apple's latest quarterly financial report shows that in the first three months of this year, it achieved revenue of $90.753 billion, down 4% year-on-year; Greater China, its third largest market, had revenue of US$16.372 billion, down 8% year-on-year.

In fact, there have been early signs of disenchantment on Apple's smartphones, which is manifested in the fact that even Apple's mobile phone price reduction promotion cannot boost sales. Since 2024, the iPhone 15 series has had several price cuts in a row. For example, the price of the iPhone 15 standard version 128GB on the e-commerce platform has dropped to 4499 yuan, compared with 5999 yuan at the time of release, a decrease of more than 25%.

Apple fell from the first place in high-end smartphones in China, what is the reason?

First, its own innovation motivation is insufficient. Apple's mobile phone product innovation is conservative, and the introduction of new features and technologies is relatively slow, making it difficult to attract a large number of users to upgrade. JPMorgan Chase once said in a report that "Apple's iPhone 15 does not have a substantial upgrade experience and will not attract a large number of users to upgrade." ”

Apple's lack of innovation in new phones is a perennial problem. Since iPhone11, some users have complained about the lack of new ideas in Apple's new machine, iPhone12, iPhone13 is just an upgrade 5G and the rear camera has moved a position, and iPhone 15 is not much different from iPhone 14 in terms of performance and image performance, appearance design, etc.

In the past, one of the main reasons for users to buy Apple mobile phones was Apple's leading position in technological innovation, and new Apple smartphones often come with new technologies and functions, representing the latest technology consumer electronics. Now that the innovation of Apple's mobile phones is gradually weakening, the improvements and updates at the time of new product releases are not obvious, and users naturally lose interest in buying new products.

Second, the rise of many strong external enemies. The smart ecology of domestic mobile phone brands has gradually matured, and their popularity and market share have gradually increased, resulting in a decline in the status of Apple's smartphones in the minds of consumers.

In terms of products, domestic mobile phone brands such as Huawei, Xiaomi, OPPO and VIVO have gradually caught up with Apple mobile phones in terms of hardware performance, design, camera function, battery life, fast charging technology, after-sales service, etc., and have been favored by more and more consumers. In terms of ecology, domestic smartphone brands have launched a series of smartphones and supporting smart devices, forming their own unique ecosystem, and also opening up the ecology between Android phones and Apple smart terminals such as Macs and iPads.

Domestic mobile phone brands have made significant progress in the past few years, further compressing the position of Apple mobile phones in the minds of consumers, and in order to regain the trust and love of consumers, Apple has tried to remedy it through innovative design and technological breakthroughs.

Apple CEO Tim Cook said in a fiscal second quarter conference call: "Apple will continue to increase its investment in AI technology and seek to work with more partners to promote the development of AI technology." At the same time, Apple will also pay attention to the latest developments and trends in the industry, so as to adjust its strategy and product line in a timely manner. ”

Overall, Apple's smartphone disenchantment is largely due to the strong rise of Huawei, its most powerful competitor.

Huawei is empowering and making a strong comeback

Unlike Apple, which is under pressure, Huawei's smartphones are back after a two-year hiatus, and the new season is full of good news.

For well-known reasons, Huawei's smartphone sales have plummeted. According to public data on the Internet, Huawei shipped hundreds of millions of mobile phones (240 million) in 2019, and only two years later, Huawei's mobile phone shipments in 2023 will reach 40 million units, a decrease of 83.3% from 2019.

After two or three years of hibernation, Huawei has actively adjusted and improved its product strategy, successfully launched a series of smartphones that are very popular with consumers, and are gradually recovering and growing. TechInsights predicts that Huawei will ship more than 50 million smartphones in China in 2024, and its market share will increase significantly from 12% in 2023 to 19% in 2024.

There are several key factors for Huawei's smartphone sales to return to the peak: Huawei Mate60Pro directly drives sales, Kirin chips boost brand effect, and HarmonyOS operating system optimizes the user experience.

First, the hot sales of Huawei's Mate 60 series mobile phones are a key driving force for Huawei to regain the No. 1 sales volume in the Chinese market. In August 2023, Huawei quietly launched the Mate60 series, with unique and novel two-way satellite calls, dual-satellite Beidou satellites and other functions, which have made consumers' eyes shine.

The Mate 60, which is far ahead in sales, has directly increased the market share of Huawei mobile phones. According to public statistics, from August 29 to September 1, the Huawei Mate 60 Pro has sold a total of about 800,000 units online and offline, setting a number of new historical records for Huawei mobile phones.

Second, the successful self-development of the Kirin 9000S chip is the foundation and confidence for Huawei's return to the high-end smartphone market. For Huawei, self-developed chips can independently carry out technological innovation and upgrades, provide more innovative functions and leading technology applications, reduce dependence on external suppliers, and improve production efficiency and product competitiveness.

According to Huawei's public data, it will invest 164.7 billion yuan in technology research and development in 2023, and 1.1 trillion yuan in revenue in the past decade. In terms of proportion, in 2023, Huawei's proportion of self-research in technology will reach 23.4% of total revenue, exceeding Huawei's total net profit.

Third, Huawei continues to optimize the HarmonyOS operating system to enhance system smoothness, stability, and responsiveness, so as to provide a variety of applications and services, improve user experience, and attract more users.

A strong operating system needs to be supported by a well-established ecosystem, including app stores, developer resources, and diverse applications. With Huawei's continuous investment and innovation, the HarmonyOS operating system has gradually demonstrated excellent performance and excellent user experience, giving Huawei's smart products a unique competitive advantage.

In conclusion, the launch of the Mate 60 Pro is an important milestone in Huawei's strong return to the high-end smartphone market, which not only achieves high sales, but also demonstrates Huawei's continuous investment and efforts in technological innovation and innovation, and indicates that Huawei will achieve greater growth in the high-end smartphone market.

Huawei, Apple's next journey: facing AI smartphones

With the development and popularization of AI technology, the introduction of AI large models has become an important trend in the field of smartphones.

According to data released by market research agency Counterpoint, the shipment of generative artificial intelligence mobile phones (AI phones) will grow rapidly from 2023 to 2027, and is expected to account for 11% of shipments in 2024 and reach 550 million units by 2027, accounting for 43%, with an average annual compound growth rate of 49%. The agency expects the market ownership of generative AI smartphones to exceed 1 billion units by 2027.

In this context, major mobile phone manufacturers have added AI-related functions to their products, hoping to attract consumers' attention and enhance product competitiveness through AI mobile phones.

Over the years, Apple has conducted a series of AI-related research and acquisitions, and has released some AI-related technology and functional improvements. According to market sources, Apple will introduce AI models in the iPhone 16 and iOS 18 released this year, which integrate generative AI features to make Siri, Spotlight, Apple Music and other features more intelligent.

Coincidentally, Huawei released the Pangu model early and connected it to the HarmonyOS 4 operating system. With the support of the large model, Huawei's smart assistant Xiaoyi has been upgraded in three directions: interaction, productivity improvement, and personalized service, and new products such as Huawei P70 series and Mate70 series are also planned to be equipped with large models.

There is no doubt that 2024 will be a year for the outbreak of AI mobile phones, and it is also a year for smartphone manufacturers represented by Huawei and Apple to seize AI mobile phones, with opportunities and challenges.

On the one hand, the emergence of AI mobile phones will have a far-reaching impact on user experience, technological development and industrial chain upgrading, and promote the development of the entire mobile phone industry in the direction of intelligence and personalization, thus triggering a wave of replacement. On the other hand, AI smartphones collect user data to provide personalized services, which also brings privacy and data security risks, which can easily lead to user resentment if not careful.

Recall that in September last year, Apple and Huawei released their respective flagship mobile phones Mate 60 and iPhone 15 series on the same day, and then Huawei Mate 60 was praised by the group, and the iPhone 15 was ridiculed by the group, which opened the prelude to Huawei's charm and Apple's disenchantment. In the future, with the full popularization of AI mobile phones, the smartphone market will undergo earth-shaking changes, and those prescient and powerful smartphone manufacturers will become leaders in the era of AI mobile phones.