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China tech

Chinese smartphone maker Realme goes home for growth

Brand has won over buyers in India and Indonesia but domestic market is next step

Sky Li, founder and chief executive of Realme (Source photos by Reuters)

SHANGHAI -- Many Chinese tech companies have built their international operations on a strong domestic base. Not so Realme, the upstart smartphone brand, which is taking the opposite approach -- coming home to take on bigger industry rivals after making a name in emerging markets.

That Realme's greatest success has been in India -- where Chinese tech groups have become political targets in recent months after a deadly flare-up in tension between Beijing and New Delhi -- now makes its ambitions at home even more important.

The Shenzhen-based company behind Realme, Ruiermi Mobile Communications, has set 50 million units worldwide as a sales target for 2020, which would amount to double 2019's 25 million global sales. By the end of 2023, Realme hopes for sales of 100 million units, more than the 98 million smartphones sold in China in the second quarter.

Sky Li, founder and chief executive of Realme told the Nikkei Asian Review in a recent interview that the 5G rollout in China would give impetus to the company's plans. "We may be a bit late but the rapid growth of the 5G market is an opening for us," said Li.

Established in May 2018, Realme is wholly owned by Guangdong Oujia Communications, which shares the same investor that controls Oppo, another Chinese smartphone maker. The two brands, as well as Vivo and OnePlus, are all ultimately backed by BBK Electronics, a Shenzhen-based conglomerate.

Thanks to a lean business model that relies on Oppo's factories for supplies and its online marketplace for sales, Realme has expanded to 59 markets and ranks ranks eighth globally with 5.5 million handsets sold in the second quarter, according to Counterpoint Research.

Key to Realme's success has been its penetration into India and Indonesia. The two highly populated markets account for about 80% of sales.

"India is sort of like a home market to Realme," said Flora Tang, an analyst with Counterpoint in Hong Kong. "It also grew well in other emerging markets due to a strong product portfolio, effective marketing strategy targeting young consumers."

As a marketing officer for Oppo in India before setting up Realme, Li saw an opportunity even though the market was dominated by Samsung of South Korean and Xiaomi of China. "The younger generation demanded good quality, design and performance yet at a fraction of the premium price," Li said.

Realme initially targeted India with entry-level handsets that began at $130, according to Counterpoint, later moving into mid-range and above products. Its first few models included high performance quad cameras and "water-drop" full screen design, while remaining in the $100 to $250 price band, capturing the large segment of price-sensitive Indian consumers.

According to Counterpoint, by the first quarter Realme had surpassed Oppo to become the number four smartphone brand in India, with 14% market share. The top three were Xiaomi at 30%, Vivo at 17% and Samsung with 16%.

While sales of Chinese smartphones including Realme took a beating in the second quarter partly due to anti-China sentiment as a result of the border skirmish in June, Realme's "value-for-money offerings sustained overall demand," Counterpoint said in a July 24 report.

Realme has been performing well on India's e-commerce sites, where customers often find attractive smartphone deals. "We continue to meet the demand of Indian customers with the support of Flipkart," explained Li, referring to India's largest e-commerce player that sells Realme devices.

To widen its consumer base Realme has also been expanding offline, including in smaller cities and towns. It said last year that it would establish 20,000 retail outlets across India.

Now Realme is trying to build on China's 5G rollout to address its lack of brand recognition there. China's market is highly concentrated: five brands -- Huawei, Oppo, Vivo, Xiaomi and Apple -- accounted for 95% of the market in June, according to Counterpoint.

Backed by Beijing's ambitions for rapid 5G development, sales of 5G smartphones in China are expected to exceed 100 million units by the end of the year, about one year after launching, according to official estimate.

The price of entry-level 5G devices has dipped under 2000 yuan ($286), from above 4,000 yuan initially as nearly 200 models were approved by the government. Li said Realme had put 4G products onto the backburner.

Analysts said Realme's target of achieving sales of 50 million by focusing on the Chinese and European markets was too ambitious.

"Somewhere between 30 million and 35 million would be a reasonable target," said Nicole Peng, an analyst at Canalys in Hong Kong who derived the figure based on Realme's shipments of 7.7 million in the first quarter. Canalys estimates that Realme sold 6.3 million units in the second quarter -- more than the estimate by Counterpoint.

Realme's display booth at a digital expo in Shanghai on July 31. (Photo by CK Tan)

As part of the strategy to capture the Chinese market, Realme is targeting smaller cities with lower average disposable incomes. It is also strengthening online sales by piggybacking on Oppo's Oujia marketplace, which also shares after-sales services.

One question is whether Realme will cannibalize Oppo's market, both in China and outside the country. But considering the ever-changing demand for smart devices and their market potential, it is common to see different brands created under the same investor. As an example, Vivo and Oppo were created by BBK Electronics, observed Canalys's Peng. BBK started out as an electronic gadget maker in the 1990s, known for its electronic learning tool popular with school children.

Other smartphone makers have also developed sub-brands: Huawei with Honor, Xiaomi with Redmi, and Vivo with iQoo.

"Their target audience is not exactly the same," said Peng, adding that such branding allows better coverage into different target segments.

"It is a matter of whether Oppo could move up to compete in the premium market," observed Canalys' Peng. "That way, Oppo could also build bigger negotiating power with suppliers that include Qualcomm and MediaTek."

Whether in China or elsewhere, Realme's Li is convinced of the brand's potential to compete. "We may be a young shoot compared to other established names, [but] our priority is to thrive," said Li.

Additional reporting by Kiran Sharma in New Delhi

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