Google Exec Shakeup: More Proof of Chinese Phone-Makers’ Mettle

by Alyssa Oursler | August 29, 2013 12:51 pm

Google Exec Shakeup: More Proof of Chinese Phone-Makers’ Mettle

Today, news broke that Hugo Barra — a top member of Google’s (GOOG[1]) smartphone team — has jumped ship, and will instead be working for Chinese phone maker Xiaomi.

Why should you care?

Well, the move is just another piece of proof that, in China, domestic phone-makers are a big deal. And no — not just a big enough deal to steal away Android’s vice president of product management. They’re also a big enough deal to steal away some market share.

According to a recent report, Chinese handset-makers now account for around 60% of the country’s market share[2], thanks in part to a 115% year-over-year jump in domestic production during the first half of the year.

And in the most recent quarter, Xiaomi — whose CEO, Lei Jun, is often called a wannabe Steve Jobs — actually overtook Apple (AAPL[3]) in terms of market share. Apple iPhone shipments in China fell year-over-year by 4 percentage points during that time period, cutting the company’s market share nearly in half and sending it to the lowest level since 2010.

Samsung (SSNLF[4]) still leads the way with overall market share, but it’s not immune to the same struggle. Exhibit A: Xiaomi’s Mi 2S beat out the Galaxy S4 as the top-selling smartphone for the first half of the year, according to USA Today[5]. Meanwhile, other domestic names like ZTE (ZTCOF[6]) and Lenovo Group (LNVGY[7]) have been going strong as well.

And the reason is simple: Their phones are cheaper. Until the plastic version of the iPhone makes its debut, Apple loses big-time in terms of price point. As Reuters recently reported[8], “Apple sells the iPhone 5 on its China website from 5,288 yuan. Xiaomi this month will offer a handset priced at 799 yuan.”

One interesting thing to add: Xiaomi could be bringing the cheap-phone battle beyond China. Barra will be in charge of international business development[9] and, according to USA Today, “joins a group of Chinese Google, Microsoft (MSFT[10]) and Motorola veterans in guiding Xiaomi’s expansion.”

Considering that we already are approaching “good enough”[11] smartphone territory, increased competition and price wars could smell trouble for the current smartphone kings.

And we’ve already seen that no gadget-maker is invincible, no matter how big their lead.

Just ask BlackBerry (BBRY[12]).

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

Endnotes:
  1. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  2. 60% of the country’s market share: http://www.chinadaily.com.cn/business/tech/2013-08/27/content_16923138.htm
  3. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  4. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  5. according to USA Today: http://www.usatoday.com/story/money/business/2013/08/29/google-exec-leaves-for-chinese-company/2726011/
  6. ZTCOF: http://studio-5.financialcontent.com/investplace/quote?Symbol=ZTCOF
  7. LNVGY: http://studio-5.financialcontent.com/investplace/quote?Symbol=LNVGY
  8. As Reuters recently reported: http://www.bloomberg.com/news/2013-08-09/apple-loses-china-smartphone-market-share-to-cheaper-models-1-.html
  9. international business development: http://news.cnet.com/8301-1023_3-57600545-93/google-loses-android-vp-to-chinese-firm/
  10. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  11. “good enough”: http://investorplace.com/2013/06/apple-samsung-should-fear-good-enough-smartphones/
  12. BBRY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBRY

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