Chinese smartphone maker Oppo is the latest brand to make a push into the high-end segment to escape price wars at home, but the move comes just as overall industry sales are slumping due to the impact of the coronavirus.

Oppo, the world’s fifth largest smartphone vendor, earlier this month launched a 5G flagship phone with the starting price of 5,499 yuan (US$784). The Find X2 series, the most expensive ever released by the company, signals its growing ambition in China’s higher-end smartphone segment currently dominated by Huawei with a more than 80% share.

The launch follows a similar move by local rival Xiaomi and is part of a strategy to promote the brand in mature overseas markets at a time when Huawei is facing headwinds selling internationally after being put on a US trade blacklist that prohibits it from using Google mobile services.

Oppo’s overseas success so far has largely been in developing markets like India and Southeast Asia. (Picture: Handout)

Oppo, headquartered in Dongguan, Guangdong, has previously offered smartphones in the mid to low price range with entertaining marketing strategies targeting young people in the country’s lower-tier cities. The new flagship phones also show it has ambitions to expand its overseas presence from developing markets in Asia to Europe where smartphone users are more willing to shell out for premium models.

Data from research firm Counterpoint shows that higher-end smartphones gained in popularity last year, with demand for models in the US$800 to US$1,000 price range jumping 60% year on year in the third quarter, accounting for one fifth of sales.

“The high-end is a growing segment and we have to enter that market,” Oppo vice-president Alen Wu said in a group media interview after the company live-streamed the launch of the product amid nationwide restrictions on travel and large gatherings because of the coronavirus outbreak. “The Find series will be the main models in our higher-end segment and we will have a new generation of [the series] every year.”

The 5G-compatible Find X2 series features an optical in-display fingerprint sensor as well as a small hole-punch cutout for the selfie camera, pitting it against high end models from Huawei and Xiaomi, which both recently released 5G models.

“[Oppo’s] specifications on paper are definitely competitive,” said Nichole Peng, vice-president of mobility research at Canalys. “The move to the high-end is not merely a pricing strategy but also demonstrates the company is gaining confidence in their technological know-how … they will face the ultimate test from high-end consumers though who are constantly looking for the full package of user experience.”

The Find X2 series, available in 30 countries and regions outside mainland China, could also take global market share from Huawei, which has seen its international sales hurt by the US ban on it using Google mobile services, including popular applications such as Gmail, Google Maps and YouTube.

Bryan Ma, vice-president of client devices research at IDC, believes Huawei’s inability to install Google software is an opportunity for other Android players in overseas markets, including western Europe.

“Oppo is doing high-end phones not only to show off its engineering abilities, but also because it helps the company’s efforts in markets like western Europe where its brand is still not as well-known,” Ma said. “It helps keep the brand from being pigeonholed into a reputation for focusing on lower-end products.”

Oppo grew to become the fifth largest global smartphone brand with its strong presence in lower-tier Chinese cities and developing markets including Southeast Asia. (Picture: Bloomberg)

Established as a budget handset manufacturer under BBK Electronics, Oppo grew to become the fifth largest global smartphone brand with its strong presence in lower-tier Chinese cities and developing markets including Southeast Asia.

The company is known for its flashy ad campaigns featuring movie stars and music celebrities as brand endorsers, run online and in offline places like shopping malls, high-street billboards and airports. The exposure has been instrumental in helping Oppo gain a strong following, especially in China’s small cities and rural areas. However, Oppo is not well-known in Europe.

Oppo’s Wu said the Find X2 flagship will target China, western Europe and Asia-Pacific, expanding this year to new markets such as Romania, Portugal and Mexico.

Oppo said it has partnered with major European players Orange, Vodafone, Deutsche Telekom and Telefonica, for the roll-out of its 5G handset.

“Oppo’s challenge is in building out its channels in mature markets like Europe,” said Ma. “Its overseas success thus far has largely been in developing markets like India and Southeast Asia where channels are fragmented with lots of small offline retailers.”

Oppo said that since September more than half its smartphone shipments have been outside mainland China, and the company expects its proportion of overseas sales will increase with its push into new markets.

Conversely, Oppo, Xiaomi and Vivo have faced stiffer competition at home after Huawei doubled down on efforts to expand domestic sales amid the US blacklist that curbed its efforts to woo overseas buyers. Oppo’s domestic sales fell 20% last year, according to IDC.

Canalys and Strategy Analytics both expect shipments of smartphones in China to drop 50% in the first quarter from a year ago due to the coronavirus, while IDC sees a 30% slide.

Oppo’s Wu said 80% of the company’s smartphone production had resumed by early March - after some of its lines had been allocated to making surgical masks in the early days of the coronavirus outbreak - but he expects shipments this year to remain flat at around 340 million to 360 million units.

Oppo is also expanding its product line from smartphones to internet of Things (IoT) devices, including watches and TVs.

“We see [diversified consumer demand] rising with the development of 5G, AI, and cloud and big data technologies over the past two years, so we will have more IoT products ranging from personal mobile devices, devices in the home, to office equipment as well as devices for travel and vehicles,” said Oppo vice president Bobee Liu.