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Analysts have been predicting for well over 10 years that new Chinese entrants will be taking the US market by storm. Yet, there has been limited change on this front. Globally, Chinese handset OEMs own more than 43% of smartphone market share. Yet, in the US it is 18%. ZTE and Alcatel have cracked the top 5 breaking through with solid volumes within prepaid channels. Motorola (Lenovo) remains a niche but well-known vendor within Verizon. Others have been relegated to the US open channel with very limited growth prospects. Why is it so difficult for OPPO, vivo, Huawei and others to grab a foothold in the US?
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There are many barriers for new players in carrier controlled markets
Carriers continue to hold the power in the US controlling over 70% of sales. US carriers are not interested in building handset OEM brands. Carriers expect brands to either bring in users on their own recognizance or for brands to spend big money to do so. Further, carriers are going through increasingly competitive times. It is expensive to carry many brands, many SKUs—especially when many do not sell well. It is expensive to support the costs of testing, training, marketing, and handle returns of low volume brands. New brands must present very unique or compelling cases to carriers.
There has been a shift in many of the large, COR (corporate owned retail) stores to only carry high volume SKUs. Many carrier direct & indirect stores are only dedicating shelf space to high-volume models. All others are ordered on-demand (or, stocked but without shelf space). Either way, this has drastically hurt second-tier suppliers. Without shelf-share presence volumes will be fledgling. Virgin Mobile is an extreme, announcing they are selling exclusively iPhones.
Carriers are interested in known brands bringing full portfolios. It is a quicker and easier sale for store reps to sell well-established brands. A clear example of this is it is easier for carriers to sell a full suite of Samsung Galaxies at multiple price points than smaller brands who only address certain price points.
US carriers are concerned that young handset OEMs are not fully paying for all required IP. Carriers are concerned that they will have to deal with embargos and lawsuits if there is litigation following new OEMs they have ranged. Yes, the Qualcomm licensing agreements made with both the Chinese government and multiple Chinese OEMs will help. However, overcoming past mindsets and recent litigation will take time.
Costs entering the US market are significant
Open and online channels are a great way for initial entry into the US market, but they are not long-term, profitable channels. So, at some point, OEMs will be forced to go through the rigorous carrier lab process'. There is a significant cost to get a device through a carrier lab—the largest being the technical team needed to support the process. If multiple carrier labs are entered, a lot of the work does not carry over for each carrier, adding to the expenses. Successful vendors entering the US market have seen success' going through the lab process even if they are not formally ranged by the carriers. ZTE and alcatel are prime examples. Despite the costs, the insights gained by the process will help the handset OEM once formally ranged by a carrier. It will also help the carrier channel build confidence in the OEM. However, since the costs to support are significant, most Chinese vendors have not submitted devices into carrier labs.
R&D costs can really grow when a global variant cannot be used if an OEM abides by all the carriers' requirements. This loss of economies of scale is difficult to overcome unless volumes are significant within a carrier channel. OEMs must be ready to induce these high costs even while channel volumes will likely be low early on.
The US market has grown into an all-or-nothing market. Spend big on marketing campaigns or a device will be drowned out by the major launches. Carriers are looking for large, flashy ad campaigns to bring subscribers into stores. And, often carriers will throw in money to these large campaigns. Big spending has become a normal mode of business for the major carriers. Large and costly marketing campaigns are requirements to launch a device within a carrier channel. Further, spending through mid-life and beyond is needed to keep momentum and longevity. This has made the US a costly and challenging market even for large, established suppliers such as LG.
Most importantly, the US market is a mature smartphone market and over 50% of subscribers have purchased multiple Apple & Samsung smartphones. So, to become a top 5 OEM in the US market will take the hardware, heavy marketing, and a strong value offering to switch a subscriber from another OS and/or another OEM ecosystem.
To crack the US market will take a multi-year plan and will take a considerable amount of patience. It is not reasonable to believe a new OEM will be ranged in all or even two of the major carriers first attempt. It will take a multi-year approach to slowly grow the support and R&D teams needed to grow in small channels and move into the more expensive, competitive, and larger sales channels.
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To see Counterpoint Research's latest US Reports visit: https://www.counterpointresearch.com/research/
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Carriers are interested in known brands bringing full portfolios. It is a quicker and easier sale for store reps to sell well-established brands. A clear example of this is it is easier for carriers to sell a full suite of Samsung Galaxies at multiple price points than smaller brands who only address certain price points.
US carriers are concerned that young handset OEMs are not fully paying for all required IP. Carriers are concerned that they will have to deal with embargos and lawsuits if there is litigation following new OEMs they have ranged. Yes, the Qualcomm licensing agreements made with both the Chinese government and multiple Chinese OEMs will help. However, overcoming past mindsets and recent litigation will take time.
Costs entering the US market are significant
Open and online channels are a great way for initial entry into the US market, but they are not long-term, profitable channels. So, at some point, OEMs will be forced to go through the rigorous carrier lab process'. There is a significant cost to get a device through a carrier lab—the largest being the technical team needed to support the process. If multiple carrier labs are entered, a lot of the work does not carry over for each carrier, adding to the expenses. Successful vendors entering the US market have seen success' going through the lab process even if they are not formally ranged by the carriers. ZTE and alcatel are prime examples. Despite the costs, the insights gained by the process will help the handset OEM once formally ranged by a carrier. It will also help the carrier channel build confidence in the OEM. However, since the costs to support are significant, most Chinese vendors have not submitted devices into carrier labs.
R&D costs can really grow when a global variant cannot be used if an OEM abides by all the carriers' requirements. This loss of economies of scale is difficult to overcome unless volumes are significant within a carrier channel. OEMs must be ready to induce these high costs even while channel volumes will likely be low early on.
The US market has grown into an all-or-nothing market. Spend big on marketing campaigns or a device will be drowned out by the major launches. Carriers are looking for large, flashy ad campaigns to bring subscribers into stores. And, often carriers will throw in money to these large campaigns. Big spending has become a normal mode of business for the major carriers. Large and costly marketing campaigns are requirements to launch a device within a carrier channel. Further, spending through mid-life and beyond is needed to keep momentum and longevity. This has made the US a costly and challenging market even for large, established suppliers such as LG.
Most importantly, the US market is a mature smartphone market and over 50% of subscribers have purchased multiple Apple & Samsung smartphones. So, to become a top 5 OEM in the US market will take the hardware, heavy marketing, and a strong value offering to switch a subscriber from another OS and/or another OEM ecosystem.
To crack the US market will take a multi-year plan and will take a considerable amount of patience. It is not reasonable to believe a new OEM will be ranged in all or even two of the major carriers first attempt. It will take a multi-year approach to slowly grow the support and R&D teams needed to grow in small channels and move into the more expensive, competitive, and larger sales channels.
Very helpful chapsDon't be put of mate, its a dead easy job as long as you take a weekend out to do it and don't rush. Lucas epic injection pump repair manual repair.
To see Counterpoint Research's latest US Reports visit: https://www.counterpointresearch.com/research/
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