Better and cheaper? Chinese companies are threatening Apple and Samsung

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While the profits of Apple and Samsung declined by the end of 2018, those of Huawei, Xiaomi, and Lenovo increased

Earlier this year, Apple and Samsung reported considerable losses in their profits. This is apparently due to the high levels of competition generated by Chinese companies that produce low-cost Smartphones. Among these companies are Oppo, Vivo and OnePlus (all belonging to BBK Electronics), Huawei, founded by Ren Zhengfei, Xiaomi, founded by Lei Jun, and Lenovo , whose property is divided among the Chinese government, Legend Holdings, Limited, IBM , Texas Pacific Group, General Atlantic and Newbridge Capital LLC.

Leer en español: ¿Mejor y más barato? Las compañías chinas que amenazan a Apple y Samsung

These companies have products that compete with those of Apple and Samsung in terms of quality. To cite some examples, Vivo has a cell phone with a fingerprint scanner under the screen, Huawei offers the only one with a triple rear camera, Oppo has the best lossless zoom in a camera, among others.

However, the real reason behind the success of these companies is the difference in prices between these teams and Samsung and Apple brand equipment. So, for example, while the iPhone X with 64 GB capacity with 12 MP + 12 MP camera, 2716 mAh battery and 3GB RAM costs around 1,280 USD, the Xiaomi Mi7 with 64GB capacity, 16 MP camera + 16 MP, 3350 mAh battery and 6GB RAM, costs around 390USD, according to the Gadgets Now portal.

According to the Android Authority portal, the reasons for these price differences are four. First, according to a Deloitte report, manufacturing costs in China are lower than those in Taiwan, Japan and the US (countries where Apple and Samsung manufacture their products) thanks to differences in export and import models.

Second, the profit margins with which Chinese factories operate are lower. This means that, although it is difficult to make small orders, it is possible to make large orders at lower costs by increasing the size of the production. Third, there is the question of salaries, which are lower in China not only for cell phone manufacturers but also for engineers, marketing, administration and customer service personnel.

Read also: A new chapter in the US war against Huawei

Finally, Chinese Smartphones companies tend to invest less than Apple and Samsung in both advertising and retail channels. These companies prefer to sell their products through their own websites or working on exclusive deals with particular retailers, which allows them to keep their costs to a minimum.

How are profits affected?

As a result of all the above, both Apple and Samsung have suffered heavy blows to their profits. According to the BBC, with respect to the last quarter of 2017, Samsung's profits fell by 29% for the last quarter of 2018 and Reuters analysts expect that these continue to fall this year, while Apple's they closed USD 5,000 million below the estimated 89,000 million. Also, by February of this year, Apple presented a 5% drop in revenues, this being the first fall in the first half of the year reported since 2016.

For its part, Huawei closed 2018 with a 25% increase in profits, Lenovo with a rise of 19% and Xiaomi with 68%.

LatinAmerican Post | Sofía Carreño

Translated from "¿Mejor y más barato? Las compañías chinas que amenazan a Apple y Samsung"