Besides increasing R&D investment in hardware, Chinese brands are creating their own smartphone ecosystems. “The competition among smartphone makers is essentially the competition of their ecosystems,” said Sun Guoqiang, COO of MarketIDX, a Beijing-based market intelligence firm.
Chinese brands lag behind Apple and other global competitors in proprietary operating systems, mostly relying on Google’s Android. Unlike Apple, which boasts higher customer loyalty and can maximize market capitalization with its closed iOS operating system, Chinese brands have been struggling to differentiate their products beyond price. The US sanctions on Huawei, which banned it from using Google’s services, including Android, further exposed the vulnerability of Chinese brands to increasing geopolitical tensions between the US and China.
In response, Huawei launched its own operation system, HarmonyOS, in 2019. But to date, no other major smartphone makers ship with HarmonyOS. Most analysts are pessimistic about the operation system’s future in the global smartphone market.
To address the problem, Huawei’s switched focus to the Internet of Things (IoT), the interconnected galaxy of devices that includes smartphones, tablets, PCs, VR devices, wearables, smart screens, smart audio, smart speakers and stereo receivers. Making HarmonyOS customizable and open source, Huawei launched its 1+8+N Seamless AI Life Strategy in March 2019, which allows users to connect to different devices on the same platform. According to Yu Chengdong, Huawei’s CEO, HarmonyOS was used on more than 300 million devices as of late July.
Other Chinese brands adopted similar strategies. In September 2018, Vivo launched its Jovi IoT, enabling users to control home devices through Vivo’s voice assistant. In January 2019, Xiaomi announced its Smartphone & AIoT (Artificial Intelligence + IoT) strategy, which the company recently upgraded to Smartphone x AIoT. In December 2019, Oppo unveiled plans to build an IoT ecosystem that covers smart devices for four scenarios: personal, family, travel and office.
Just like Apple’s electric car project and rumored team-up with Hyundai on a selfdriving car, Huawei and Xiaomi have ventured into the emerging industry. In December 2021, Huawei launched its HarmonyOS vehicle AITO M5 with carmaker Seres. In August, Bloomberg News reported that Xiaomi is eyeing a partnership with Beijing Automotive Group Co (BAIC) to make electric vehicles.
“As growth in the smartphone market appears to stagnate, tech giants are looking for new sources of growth, and they widely consider electric cars the next big thing,” said Guo Tianxiang, a senior analyst with market intelligence provider IDC China.
According to Guo, Chinese firms need to make longer-term investments in R&D, product quality, brand building and other services to secure their presence in the premium market. “It takes a long time for quantitative changes to become qualitative,” Guo said.