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China’s Smartphones Get a New Opportunity for US Growth

China’s Smartphones Get a New Opportunity for US Growth

Tuesday, 13 April, 2021 - 05:00

LG Electronics Inc. may have been a pioneer, but the end of its smartphone business shows that being first-mover is rarely an advantage. Instead, its exit will open the way for Chinese brands to take a greater share of the US even as the two nations go deeper into a tech cold war.


It was a slow gradual decline for the company that brought us ultrawide lenses and curved screens. By the end of last year, LG’s global share had fallen so low that it was simply lumped into the others category. But it did have strength in a couple of key markets, notably the US and Brazil, where it was third in each.


Apple Inc. still tops the US followed by Samsung Electronics Inc. In Brazil, Samsung and Lenovo Group Ltd. lead with Apple off in the distance. This current snapshot of the two markets tells us a lot about why LG is on the way out, and who stands to benefit.


As Bloomberg Intelligence analysts Anand Srinavasan and Marina Girgis write, “the substantial price difference between Apple, Samsung and LG smartphones is likely to prevent much of LG’s abandoned market share from moving to Apple.”


Apple stands at the premium end, and to a lesser extent so does Samsung — they hold around 70% of the US by unit sales between them. In third place, though, LG sells handsets at prices around 26% that of the iPhone and 67% of Samsung’s blended average. These devices are not equivalent, to be sure, but there’s a market among budget sensitive consumers and LG met that need. It did so too in Brazil, where Apple’s high price kept it around fifth by share of units shipped.


But now there’s a growing crop of budget offerings from names including Lenovo, TCL, OnePlus, Xiaomi, Oppo, and Vivo. With price competition and home-ground advantage, Chinese companies were naturally disposed toward Darwinian survival than LG, which couldn’t even count on its native South Korea to keep it afloat. The US was its meal ticket, but a shrinking market and stiffening competition meant that couldn’t last.


After then-president Donald Trump stoked the fires of an already brewing tech cold war with China, it had become accepted wisdom that the opportunity for Chinese brands to grow in the US was limited. That may be true for Huawei Technologies Inc. and ZTE Corp. which both found themselves on various blacklists. But Lenovo — which bought the Motorola name seven years ago — and TCL (which owns the Alcatel brand) have soldiered on largely under the radar of Washington hawks.


This means that as LG exits, a 9.5% share of the US market is up for grabs. And there’s a very real chance that the Chinese will be able to build on their 12% combined share.


Cold war or not, the US still has a need for cheap gadgets and China has the goods to fit.


Bloomberg


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