157% Mobile Innovation Has Entered A Bottleneck

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The man of the moment in the tech industry is named Li Bingzhong. The reason is evident in the results report presented by the company he founded two years ago and of which he is CEO: despite the general market decline, Realme grew 157% in the first quarter of 2020 and was the only mobile phone manufacturer that managed to grow its business at a double-digit rate (11%) in the second. After having multiplied its sales by eight in 2019, when it sold 25 million units, it has already become the seventh global brand, present in 59 countries and regions and with more than 40 million users.

Li arrives with British punctuality, greets with a gentle handshake and a shy smile, and takes a seat at the end of the table that presides over a pristine white meeting room. The backdrop is Spring Bamboo, a glittering bullet-shaped skyscraper that perfectly reflects the aggressive development of Shenzhen. Through the generous window of her company headquarters you can also see the bridge that connects the Silicon Valley of China with Hong Kong.

Li does not lavish on the press. “Chinese entrepreneurs are more pragmatic, we prefer to keep a low profile and focus on our business,” he justifies. The one granted to EL PA TTS Retina is her first in-depth interview, and face to face, with a foreign medium.

Although you clearly understand English, you prefer to converse in Chinese. He speaks in a calm tone and recognizes that Realme’s success rests on the same strategy that other brands in the Asian giant have used before to make their way around the world: offering an unbeatable value for money to a young audience.

Li has surrounded himself with young talent. The average age of those who crowd Realme headquarters is only 29 years old. 51% of the workforce is employed in the R&D department. The marketing one, however, is comparatively small. “The price of mobile phones is mainly influenced by two elements: hardware , whose components do not fluctuate much, and the cost of the sales channel. It is difficult to save in the first section without damaging the attractiveness of the product, so the difference is made in the second. At Realme we avoid traditional channels and bet on the Internet.

Both for sale, where intermediaries are eliminated, and for promotion. We prefer word of mouth to old-fashioned ads and sponsorships, ”he explains.
Although Li does not mention it, it is evident that the synergies that belong to the powerful conglomerate BBK, under whose umbrella they are accompanied by Vivo, OPPO, and OnePlus, also help to keep prices low. With the latter two it shares production infrastructure in the nearby city of Dongguan.

But it is obvious that this matter strikes a chord and Li responds by extending his index finger. “I want to clarify that Realme is not a sub-brand of OPPO. It is true that we share investors and some resources, such as production lines and assistance in supply chains, and we could say that we are brothers. But we compete in the same markets with different products and strategies. The same happens between OPPO and Vivo, which were originally branches of the same company, ”he says.

Realme has also followed a different path than other Chinese brands that waited to gain size at home before playing abroad: “We debuted first in India and Southeast Asia, where we are already the fourth best-selling brand. When we became strong, we decided to attack the markets of China and Europe, a critical continent for our strategy ”, recalls Li, who gives Spain as an example that his strategy works. “We arrived in October of last year and in December we were already the fifth best-selling brand. This result encourages us to redouble our efforts in the European market. We believe that Europe has great potential in the segment of mobiles of less than 300 euros ”, he adds.

The manager has followed in the footsteps of the competitor Xiaomi in the design of its business strategy, baptized as 1 + 4 + N: the mobile is the hard core, four pillars support it (speakers, headphones, televisions and smart watches), and one constellation of accessories belonging to the AIoT, the artificial intelligence of things, orbit around it. Although Li predicts that the fierce competition in the sector will cause “a sea of blood”, he hopes to launch 50 products of his ecosystem this year, end 2020 with 50 million terminals sold and reach 100 million in 2022 or 2023.

Of course, Li acknowledges that the obstacles that Realme will have to overcome to achieve those ambitious goals are enormous. “The coronavirus pandemic has a clear impact on the technology sector. Our growth has slowed significantly in the second quarter, and the difficult economic situation will affect the market in the short term. People are going to extend their useful life by two or three more months and will have less budget to purchase new terminals, ”he explains.

Despite this, the founder of Realme is optimistic when it comes to consumption. “I believe that in the second semester we will recover our moment and that there will be new peaks in demand because consumption has been suppressed during the confinements but it will not disappear,” he advances. He also considers that the rise of electronic commerce during the pandemic will be a great ally and rules out changing strategy as Xiaomi has done, which has launched itself on the offline market and has considerably increased its prices. “Another factor in our favor is going to be the demand for better value for money,” says Li.

These good expectations may be turned upside down if the relationship between China and the United States continues to deteriorate. The possibility that a veto like the one that Huawei suffers extends to the rest of Chinese manufacturers seems remote but it is not completely rulable, and Realme uses different American components in its terminals. Although the Public Relations department asked to put aside political issues in the interview,

Li does not shy away from them. “Obviously, these tensions can affect the sector. But these geopolitical factors are not under our control, ”he says.
“In the long term, the pandemic and the current geopolitical situation will delay the deployment of 5G networks and, with it, the replacement of 4G mobiles with new ones,” he adds. And that is a double problem. On the one hand, because “Realme aspires to become the brand that popularizes new networks.” To achieve this, it has just launched in China the V5, the cheapest 5G terminal in the world (it costs about 175 euros) and will present another model this year below 1,000 yuan (125 euros). On the other hand, the manager believes that 5G is the only element with disruptive capacity that the industry has seen in recent years.

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