The mid-to-high-end segment is increasingly becoming more and more important for Chinese OEMs as consumers continue to upgrade their smartphones. Higher-value phones also offer more profitability for OEMs, which are witnessing a decline in shipments due to the shrinking of the Chinese smartphone market.
Over the past year, Vivo has made significant progress in China’s mid-to-high-end segment. Its market share in the $500-$599(38,005-45,530 INR) price range has risen from 10% in September 2020 to 20% in September 2021.
This was driven by the strong performance of the Vivo X70 Pro, which launched in September. Vivo continues to move up the value chain with relentless efforts in terms of research and innovation in camera technology, including entering a strategic partnership with optical technology leader ZEISS.
A report from Counterpoint Research expects China’s smartphone market to see flat growth in 2021. It is a challenging market for all OEMs, especially considering the hardware situation. With a slow market size growth rate, leading OEMs tend to move into the game of revenue and average selling price.
Further, Chinese OEMs are no longer satisfied with associating themselves as the “king of affordable”, which usually means in the $157-$314 (11,904 INR-23,962 INR) range.
They are looking to grab more share in the $470 (35,866 INR) and above range, the entry for the premium segment range which was a strategic territory for all Chinese OEMs.
In Q3 of 2021, Vivo, with all the efforts of strategic portfolio planning and continuous channel evolution, took the leading place in the $500-$599 (38,156 INR-45,711 INR) segment, driven by the outstanding performance of the X Series.
Vivo launched its S Series in April 2021, aiming to free the X Series from the $470 and below segment. Before that, the X Series had blurring boundaries. While it was supposed to be in a higher priced segment, it was still priced in the $470 and below segment.
To the market, the X Series was meant to increase Vivo’s Average Selling Price but was unsuccessful as the S Series came at the right time because it was not only different from the Y Series, which had already impressed the market with its entry-level products but also let the X Series focus on the premium segment. The restructuring strategy has proved to be a success.
As we may recall, the $500-$599 (38,156 INR-45,711 INR) entry premium segment used to be dominated by Huawei, Honor, which has now been carved out of Huawei as a separate company, who eyes Apple as a role model, which its CEO George Zhao has admitted publicly a few times, and will definitely launch products in this segment.
Xiaomi‘s Q3 2021 earnings brief also states that the company is performing well in the premium segment. Therefore, the $500 (38,156 INR) and above segment will be the next battleground for all Chinese OEMs.
With the average selling price of the Chinese mass-market expected to continuously increase in the coming two years, the mid-tier S Series holds great strategic importance for Vivo.