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Winning the Fight for 5G Market Share: Will Xiaomi Rise to the Top?

by David Kerr | Nov 15, 2018

We are at the dawn of a new age with 5G expected shortly to be unleashed in US, Korea, Japan and China. European operators are moving at a slower measured pace awaiting cheaper equipment and wringing the last few quarters of return out of their 4G investment. 

The 2020s decade will see another generational change in the mobile industry as we move to higher data rates, lower latency and much more flexible network design and value proposition development. 

There are lots of uncertainties but based on an examination of history in the mobile device business, it is highly likely that the current top 3 vendors globally (Samsung, Huawei, Apple) will not survive intact.  

With each new  Air-interface (GSM, WCDMA, LTE) we have seen major changes in design language and use cases. Generation-led design changes have disrupted the status quo on numerous occasions:

  • Motorola was king in analog pre 2G, followed by Oki
  • Nokia peaked in 2G and lost 1/3 of its share in 3G and disappeared in the 4G world.
  • Motorola lost four-fifths of its global handset market share in the transition from 2G pea to 3G peak (2012).
  • Japanese vendors missed the 3G transition through failure to customize/localize for international markets.. NTT DoCoMo dictated demands for Japan which didn’t resonate in Europe.
  • Samsung grabbed opportunity in the transition to 3G, doubled its share, expanded to be a global leader  with a “first with tech” brand claim.
  • Chinese vendors burst onto the global stage in 4G with Huawei surging to #2 globally with its fast follower, affordable tech mantra.

Our Device Technologies program tracks vendor share by generation (2G-5G) as well as a basket of over 250 enabling technologies

With 5G will there be a disruption? Absolutely! 
 
We don't yet know what 5G will drive from a use case standpoint, but that change will lead to smartphone design changes like foldables/rollables, and some vendors will miss that change because they will be too wed to their existing design language, use-cases and legacy positions.

One scenario below is for 5G to be disruptive with Huawei and Samsung neck and neck in volume terms by 2028 and Xiaomi emerging.
 
The rest of China Inc vendors gain share as 5G prices decline towards 2026-2028.

5g

Will Huawei's strength in China and around the world overcome its disadvantage of being excluded temporarily from the US market? 

Huawei, assuming it can gain presence in India where it is currently struggling, can put Apple further in its rear view mirror (at least in terms of volume) and vie with Samsung for #1 position in the 5G era. Will the multiple brand strategy with Honor continue to succeed? Can it play in the Americas where Huawei name has negative connotations?

Samsung has strong scale and extensive brand exposure and equity in addition to its significant technology expertize in chipsets, displays, memory in the mobile space. 

It also benefits from strong multiproduct ownership in the leading global CE markets. Samsung will undoubtedly be early and proclaim its leadership in 5G to fit with its overall technology leadership brand position. Samsung for the last 20+ years has built a reputation for being first (even if that is in concept only) and will push hard for 5G volumes in both traditional and new (foldable, rollables) form factors. 

Samsung has global scale and is the only other brand that can realistically command the $1000 levels of an Apple but does it have a balanced portfolio for volume 5G products? 

Samsung has great strength in US, Western Europe, Latin America and AME but remains weak in the volatile Chinese market. Will weakness in China cost Samsung its number one crown? If Samsung can continue to rebuild its position and share in the fast growing Indian LTE 4G market and maintain its product innovation cycle, r&d and marketing advantages, it may be able to buck the trend and retain its number one slot. For Samsung repelling the main Chinese rivals in the mid and high tier price points will be critical for global volume leadership. The biggest threat to Samsung may be missing out on the timing of mid-tier 5G volumes. 

So what about Xiaomi? Could Xiaomi emerge from the relative shadows to become the world’s largest 5G vendor by 2028/2030?  Maybe!

To win globally (long-term), you have to be positioned as top 1 or 2 in the “big 3” regions of China, India and US, because those three make up ~50% of the entire market. The other ~50% is the remaining ~200 countries.

The most China-friendly, India-friendly and US-friendly brand today is Xiaomi. Strong in China, strong in India, about to be strong in US and a growing presence in W. Europe.  Huawei's loss in being unfairly barred from the US market will be Xiaomi's gain. Xiaomi fresh from its IPO has huge funding and has started an aggressive campaign which has seen it breach the top 5 position in many markets. Our Country Share Tracker program provides quarterly vendor volume share tracking in over 65 markets. 

Xiaomi is still in its infancy in terms of supporting dozens or hundreds of international markets but it does have many assets it can bring to disrupting the global mobile market in a 5G world.

The history of the mobile device market clearly shows that vendors who become overconfident (Motorola) or too tied to their own platform (Nokia, Microsoft) struggle to adjust in time to new design languages brought by new waves of innovation on the network and infrastructure side. 

Winning the fight for market share in 5G will require a compelling mix of product/technology innovation, price positioning, portfolio management and perhaps most importantly deep consumer insight and massive marketing budgets. 

Go to market will be critical of course but the biggest challenge for vendors in the 5G world will be identifying priority segments or clusters that can be teased away from existing leaders. 5G will be first and foremost about replacement sales in mature markets so to win, one must take customers away from competitors. 

Which customers of Samsung, Huawei, LG, Motorola, Xiaomi, vivo, Oppo are most secure? Which are at risk? 

What value propositions will resonate with customers (consumer or business) in 2019/2020 and at what price points

What product features and technologies will be required in 2020 and beyond by price tier by customer segment?

 

Strategy Analytics dedicated team of consultants and experts look forward to working with you in the new 5G era. Product excellence is the bare minimum requirement whether a niche player in limited markets or a vendor with ambitions to push into the top 3 globally. Deep insights into the partnerships, channels, promotions and brand factors will be critical to avoid the fate of previous stars like Nokia, Motorola, LG, Sony and others who missed a design changes with new mobile technology generations.

Please contact us at custom@strategyanalytics.com to explore how we can provide you with an edge in the global 5G market from consumer insights, user experience benchmarking, gap analysis and go to market strategic planning support.

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