【Original by Tidal Business Review】

"Last year was a challenging one for phone makers. Almost every brand adjusted prices and managed inventory cautiously. Even Huawei, which once didn't share goods with us, became a major part of my inventory. However, this year started on a positive note. When the national subsidy program kicked off on the 20th, foot traffic in stores and phone sales surged significantly. Manufacturers have been visiting us daily to discuss policies and quantities." A dealer in Ningbo, Zhejiang, expressed mixed emotions about the current mobile phone market and brand landscape.

The smartphone industry is poised for a major reshuffle and significant changes this year!

The "national subsidy" mentioned refers to the mobile phone replacement subsidy policy that has been gradually rolled out nationwide since January 20th. Additionally, on January 17th, a significant event occurred in the mobile phone industry when Zhao Ming, the iconic figure behind Honor, announced his resignation as CEO due to health reasons, sparking heated public discussions.

These consecutive news events at the start of 2025 have made the competition among mobile phone manufacturers unpredictable. One thing is certain: with Huawei's return, the existing brand landscape will be disrupted, and the market may revert to the "Huawei Era" before the pandemic. Consequently, besides holding onto their original bases, other brands may need to intensify their efforts to expand overseas.

01 Major Shifts: Mobile Phone Market Revives, with Brands "Rising and Falling"

The recovery of the smartphone industry is highly probable. In 2024, the mobile phone market witnessed its first growth after two consecutive years of decline. CIDC data shows that smartphone shipments in mainland China reached 286 million units in 2024, a 5.6% year-on-year increase. With the optimization of the consumption environment and the advancement of AI technology, growth is likely to continue.

This growth is primarily fueled by continuous innovation in mobile phone products across the Chinese market and the introduction of consumer stimulus subsidy policies, gradually unleashing pent-up demand for phone replacements.

"Manufacturers' technological innovation has notably led to high-end prosperity and the recovery of mass demand in the Chinese market. For example, Huawei's pure-bred HarmonyOS and Xiaomi's Mi Turbo OS, Honor's large-mAh Qinghai Lake battery, and innovations in foldable screen formats continue to intrigue high-end users and prompt consumers to upgrade their devices," a senior analyst at Canalys pointed out in a related report.

Since the beginning of this year, there has been notable structural growth in the high-end mobile phone segment. Data from authoritative institutions indicates that in the first three quarters of last year, Huawei's sales share of high-end phones surged by 34%, while Xiaomi achieved an 88% increase with the Xiaomi 15 series. On the product side, the OPPO Find X8 series, for instance, saw a 66% year-on-year increase in shipments during its first sales quarter compared to the previous generation, making it the flagship model with the largest growth among various manufacturers.

In the mass market, Honor, OPPO, vivo, and other manufacturers continue to offer consumers products that are high-end in design, durable, and affordable in the 1K-3K and above 4K price ranges, thereby encouraging users to replace their phones.

Public statistics reveal that in 2024, Redmi released 10 new models, OPPO released 19, vivo released 28, and Honor also released 28 new models. The launch of these new models has propelled the development of the mobile phone market and increased consumers' demand for purchasing phones.

Coincidentally, with the密集 launch of many models, purchase subsidies followed, further stimulating the increase in mobile phone sales.

"As long as you buy a mobile phone within our Jiangsu Province, you can receive a subsidy of up to 15%. For Huawei's P series, which originally costs around 5,000 yuan, consumers only need to pay a little over 4,000 yuan. During the month when the subsidy started, store sales almost tripled, and every brand showed significant growth," said a telecommunications dealer from Jiangsu.

With the national subsidy program landing on JD.com on January 20th this year, mobile phone sales increased by 200% compared to the previous month within 12 hours of launch.

Thus, with numerous favorable factors, the growth of the mobile phone industry seems inevitable. However, behind the industry's recovery, mobile phone manufacturers are experiencing a mixed bag of fortunes.

From a yearly market share perspective, vivo emerged as the leader with a 17% share, while Apple's shipments declined by 17%, marking the largest drop among all brands. Huawei's return momentum is evident, with shipments increasing by 37% year-on-year in 2024, totaling 46 million units. It is anticipated that in 2025, Huawei will soon surpass vivo and reclaim the domestic top spot.

Therefore, a notable phenomenon is that the landscape of top smartphone manufacturers in the domestic market will shift from five to six in 2025, and domestic competition in the next 2-3 years will intensify further.

02 Intense Rivalry: Huawei as the Biggest Variable, and the Smartphone Battle Royale's Survival Challenge

The biggest variable in this scenario stems from the certainty and uncertainty brought about by Huawei's return.

It is certain that Huawei will further squeeze the mobile phone market space of other brands and revert to its peak era in 2020. It is reported that as early as Q2 2019, Huawei surpassed Apple to become the world's second-largest mobile phone manufacturer. In 2020, with a market share of 44.1%, it overtook Apple to lead the high-end market.

Despite past difficulties in chip supply and other aspects, after several years of recovery and development, the latest supply chain news indicates that Huawei has set a strategic goal of becoming the top domestic mobile phone market share holder and entering the global top five by 2025.

What remains uncertain is how long other mobile phone brands can endure under this pressure? At least, from the current situation of major brands, we can observe that:

Apple is starting to lose ground in the high-end market;

OV's market share is affected offline;

Honor is also under considerable pressure;

Xiaomi lacks scale for the time being.

This can be seen from the actual status of the cooperative channels that operate these brands. Wang Ming (pseudonym), an authorized dealer of iPhone and OV in Hangzhou, Zhejiang, for over a decade, considered switching to domestic mobile phone manufacturers in December last year. He also candidly expressed his views on several brands.

"At that time, the premium for Huawei Mate 70 was obvious, and the original nova and P series were also selling well. More and more consumers chose them, and Huawei's sales share increased from about 10% of the original system to about 45%, while the sales of other brands declined significantly, and some didn't even open on a daily basis. Even for Apple's high-end models, sales here also declined by more than 30%."

Even Honor, which was spun off from Huawei, is facing considerable pressure. "The 15% mobile phone national subsidy may be accelerating the differentiation of industry sales. For example, compared to the first half of last year, our Honor has seen a reduction in purchases, especially during the end of the year. After all, many stores now mainly promote Huawei," said a mobile phone dealer.

In contrast, OV's offline channel system faces more issues related to internal friction and costs.

"More than 90% of stores are competing on price. The profit margin is said to be 18%-25%, but in reality, it's impossible to buy at the full retail price now. Sometimes, a machine worth two or three thousand yuan only makes a profit of a hundred yuan or so," said a store owner who runs an OV business.

It is rumored that in May last year, vivo clearly stated that authorized stores meeting the criteria could apply to the manufacturer for a 40%-50% rent subsidy. However, faced with the requirement of adding new vivo stores, different channel providers remain cautious.

Taking the situation in the county market as an example, a well-located and well-decorated vivo authorized experience store incurs an annual rent cost of 80,000-100,000 yuan, a decoration cost of 50,000-70,000 yuan, and a stocking cost as high as 200,000-300,000 yuan, not to mention daily operating costs.

Even if the store meets the manufacturer's standards and can obtain a 40%-50% rent subsidy, given that the overall gross margin is less than 10% and the annual mobile phone shipments are only between 100-200 units, the calculation of the payback period becomes a crucial issue. More importantly, in the township market, high-end flagship models such as the vivo X series and X FOLD series, priced far above 3,000 yuan, are basically unsellable compared to Huawei's P series and other models.

Only Xiaomi is faring better. Unlike other brands tied to distribution channels, Xiaomi relies primarily on opening exclusive stores to survive in the offline market. Nevertheless, Xiaomi's market volume is much smaller, and it didn't rank in the top five in last year's domestic market share rankings.

In fact, the smartphone battle royale, where survival is challenging, may become a major industry theme in 2025. In this regard, finding new growth breakthroughs will become the strategic focus of most brands, and continuously increasing efforts to expand overseas may be one of their inevitable choices.

03 Evolution: Accelerating Overseas Expansion, Shifting to New Battlegrounds to Craft Stories

The rationale behind accelerating overseas expansion is that under Huawei's relentless pressure, other brands have only two strategies: besides holding onto the domestic base, they must expand overseas to survive.

From the domestic base perspective, it's uncertain whether Huawei's return can maintain the same momentum as in previous years, given that other brand manufacturers have also built up comprehensive competitiveness. For instance, Honor has created competitive AI-driven products, with its Magic7 introducing multiple functions such as YOYO Assistant and AI Magic Photography.

Given that the outcome is still uncertain, and considering that Apple was the brand with the steepest decline last year, there's a high probability that domestic brands will comprehensively encircle Apple in 2025. As for other domestic brands, while Huawei will affect their market share, their fundamental base should remain, especially offline, with tens of thousands of counters and stores still in operation.

However, facing a strong competitor like Huawei, precautions must be taken. Therefore, further intensifying the layout of overseas markets has become the unanimous choice of many domestic brands, evident from their overseas performance.

In December this year, Honor announced that its overseas sales volume has reached 50%, equal to that in China, and vowed to further increase its presence in European and American markets; OPPO's overseas shipments account for about 60%, and it continues to expand the construction of overseas offline zones; vivo has also begun to focus on localized operation strategies in various markets; Xiaomi, on the other hand, started entering South Korea on January 15, 2025.

The reason behind this is twofold. Firstly, there's still room for growth in the global smartphone market. IDC data shows that global smartphone shipments increased by 6.4% year-on-year in 2024, totaling 1.24 billion units, and it is predicted that this figure will reach 1.27 billion units in 2025, with a year-on-year growth rate of no less than 3%. This pie of benefits offers new imaginations to every domestic brand aiming to expand overseas.

Secondly, considering that Huawei's mobile phones have been declining in overseas markets for years, the complex overseas environment makes it unlikely that Huawei will suddenly make significant efforts in this regard at present, and its focus will still be on the domestic market. This means Huawei has temporarily ceded the global market, providing more opportunities for other brands.

Meanwhile, although Apple and Samsung remained the top two in global shipments in 2024, under the strong onslaught of Chinese mobile phone brands, their shares decreased by 0.9% and 1.4% year-on-year, respectively. Xiaomi's annual shipments reached 168 million units, with a year-on-year increase of 15.4%, the most significant growth rate.

However, the overseas market is the core base for Apple and Samsung, and the focus of domestic brands lies in adopting a strategy of targeting major countries one by one to craft stories in new battlegrounds. For example, in Europe, Honor has chosen the Magic series and the Digital series, directly aiming at the high-end market. However, in Indonesia in Southeast Asia, it targets the mid-to-high-end market segment above $300. This differentiated approach caters to the needs of various regions and groups of people, enabling Honor to quickly enter the market and gain consumer favor. OPPO and vivo, on the other hand, adhere to localized methodologies by establishing production bases overseas to achieve supply chain diversification and localization.

The overseas mobile phone market is vast, offering ample opportunities. Similar to the collective international expansion of Chinese new energy vehicles, other domestic mobile phone brands are now enhancing their overseas strategies amidst competition from Huawei and others. They are accelerating their transition from the initial overseas 1.0 era to a more comprehensive 2.0 era, ensuring that overall sales remain robust.

04 Conclusion

Since the advent of the iPhone 4, the era of smartphones as intelligent terminals has spanned over a decade. The competition within China's mobile phone industry, however, appears relentless, evolving from simple price wars to technical parameter battles and ultimately to brand strength competitions. From Apple's early dominance to the domestic supremacy of today's six mainstream brands, the industry has formed a landscape of "one superpower and multiple strong players."

Within this landscape, Huawei's offensive is set to intensify. As Hu Baishan, Executive Vice President and Chief Operating Officer of vivo, noted, "Huawei's re-entry into the Chinese mobile phone market has emerged as the most significant variable, essentially aiming to reclaim its rightful market share."

This dynamic suggests that by 2025, it remains uncertain which domestic mobile phone brand will falter first and which will discover new growth avenues through overseas expansion and other strategies.