China rising with branded products strategy
The buds of such transformations are visible everywhere here, in a city that has come to be known as the factory of the world.
A growing number of traditional design houses and white box vendors –who design products according to customer specs – are now trying, on the side, a new “branded” strategy for their new smartphones and tablets.
While success is hard to come by (these initiatives could easily disappear in a matter of months), many are resilient enough to re-emerge again under different brands.
Xiaomi, a wildly successful smartphone brand here, may be an exception to the rule. Started by Lei Jun, a key investor in the early Internet scene in China, Xiaomi demonstrates how a no-name brand in China can quickly rise to one of the top brands – a la Apple –through the heavy use of the Internet, focused brand marketing and a charismatic leader.
Xiaomi’s success hasn’t escaped the notice of China’s telecom equipment behemoths like ZTE and Huawei, who had been content as handset leaders on the business-to-business market.
Next, enter Nubia, a sub-brand created by ZTE just a year ago.
Ninety percent owned by ZTE, Nubia is a brand still virtually unknown in the West. But Nubia-branded smartphones are expected to find their way into the U.S. market later this year.
For an exclusive interview with EE Times at its headquarters here on Tuesday (March 27), a young, tall, friendly Ni Fei, CEO of Nubia entered a conference room, suited up in Adidas gym gear, with a spring in his step. Fei is in every sense the polar opposite to the senior executive you’d expect to meet at a stodgy Chinese telecommunication company like ZTE
Ni Fei, CEO of Nubia
Something of a celebrity in China, Fei is 37 years old. Nubia’s Z5, the company’s first smartphone, seems to have been designed exactly for someone like Fei. Nubia’s “target audience” is said to be young, rich, tall, urban, its individuals craving recognition as taste-makers and disdainful of the less hip buyers of iPhones or Galaxy handsets.
ZTE’s success in B-to-B market
ZTE, thus far, has succeeded with handsets mainly by selling through operators around the world. Some of those phones are branded as ZTE, while others sport the operators’ brands. Earlier this year, the market research firm Gartner pegged ZTE as the world’s fourth largest handset vendor, after Samsung, Nokia and Apple, based on handsets sold worldwide in 2012.
Why Nubia now?
Asked why ZTE is launching Nubia now, Fei pointed out two reasons.
First, rapid proliferation of social media among consumers is turning the smartphone into a must-have device for who fancies himself a trendsetter.
ZTE’s first attempt, in 2005, to move into the business-to-consumer market — through its own ZTE brand — went nowhere. But “the situation today is dramatically different,” Fei explained. A smartphone like ZTE’s Z5, with a big emphasis on social media and photography, will have a big impact, he added.
Second, driving ZTE’s Nubia is the Xiomi factor.
Xiomi, coming out of nowhere, “became famous in just two years,” said Fei. Although ZTE sees the operator market as static and somewhat limited, the company can’t afford to lose ground to a newcomer. Xiomi, which has had zero presence in the operator market, is now talking about moving into the b-to-b market, “which is our own backyard,” said Fei. “We need to move into their backyard, namely, the b-to-c market.”
Nubia’s Z5, priced at 3,456 yuan (roughly $550), is a high-end smartphone loaded with bells and whistles. But Nubia takes a pride in a few unique features. One is built-in software geared toward heavy social media users. Another is hardware designed for consumers hoping to take better pictures with their smartphones.
Asked why Nubia is so focused on social media, Fei said, “Social media is popular because everyone wants to get recognized by others.” In essence, it’s human nature. He added, “And for many of those users, getting recognized for their photos may come easier than their words.”
Z5 is a five-inch 1080p Android phone featuring Qualcomm’s 1.5GHz quad-core Snapdragon apps processor, along with a 13-megapixel F2.2 main camera. It features five-element optics by Konica Minolta, in addition to separate touch focus and touch exposure in the app, and a two-megapixel front-facing camera. The “professional mode” of the smartphone camera function is perfect for those who think they’ll become famous if they post a great-looking photo on social media, according to Nubia.
The Z5 supports WiFi Display and MHL output, making it possible to beam content to a larger screen.
Anyone who holds the Z5 smartphone for the first time will notice how lightweight it is. Only 7.6mm thick – one of the thinnest among five-inch phones, the handset weighs only 126g — including a 2,300mAh battery. The screen comes with a bezel only 2.67mm thick. Z5, through the use of laser-direct structuring, has all the antennas – ranging from primary antenna, to WiFi/GPS, NFC and diversity antennas — on the back cover of the handset.
Integrated with Qualcomm’s modem module, the Chinese edition of the Z5 supports both CDMA2000 (800MHz, for China Telecom) and WCDMA (2100MHz, for China Unicom); and when Nubia eventually launches it worldwide, it will be capable of supporting LTE as well.
Nubia goes to the U.S. and Russia
Nubia’s first-year plan  is dedicated to building a strong Nubia brand in China. “We want to make it as attractive as possible,” said Fei. “China is a tough market. But if we can win China, we can win anywhere in the world.”
Later this year, the company will test the waters both in the U.S. by leveraging its operator connections, and in Russia by pursuing a strategy based on channels — which in Russia are more powerful than operators.
Nubia was born from a small team of young engineers at ZTE who wanted a phone based on their own dreams – instead of just following operator specs. “There were about 10 of us in the beginning. We worked day and night,” said Fei. “We wanted to design a phone that would make people curious and say, ‘let me try it.’”
Nubia CEO, stressing that software is the key, shows off a wallpaper app based on ‘crowd sourcing’
Today, Nubia’s engineering team has between 300 and 400 employees. Eighty percent are focused on software development, the rest on hardware, according to Fei.
Because Nubia phones and ZTE phones [for operators] are based on the Android platform, there is a fair amount of shared engineering resources between the two, according to Fei. In fact, the experience, expertise and knowledge accumulated at ZTE’s handset division — where Fei spent seven years before heading up the Nubia group — is giving Nubia a leg up, explained Fei, in terms of partnering with the supply chain, third-party app developers and key device vendors like Qualcomm.
Nubia’s ZTE connection turns out to be also critical in shortening the time to market for Nubia’s products and ensuring a steady supply for key components such as Sony’s CMOS image sensors and Sharp’s full-HD resolution LCD screen, he added.
Asked what’s next after Z5, Fei said Nubia hasn’t decided on screen size yet but it is interested in adding a new user interface like gesture controls, by using MEMS. A lot of new features will come from the development of software, he added. “The key is that we must hide technical complexity.”
Fei, who is said to have a million followers on Sina Weibo (China’s twitter), acknowledged that he has slacked off on his Weibo blog posts. A series of heated public arguments on Weibo — between executives at Xiomi and rival Huawei about their smartphones — is getting just about everyone’s attention here these days.
That might explain Fei’s less frequent blogs lately, said an industry source who spoke on the condition of anonymity. Fei, a great advocate of social media, said, “You can use Weibo to get your messages out, but you can’t control it.”