Asus have announced that they expect to sell 8 million smartphones this year but their target for 2015 is to double this to 16 million. This ambitious target this isn’t going to be easy thanks to operating in a very competitive marketplace. Asus’ stiffest competition is likely to come from Xiaomi, the Chinese manufacturer, according to supply chain businesses based in Taiwan. It isn’t news that Asus considers Xiaomi to be a major competitor and their focus on selling handsets into the domestic market corresponds with aggressive sales around the world (as an example, Asus have recently started selling the ZenFone via UK based retailer PC World, but also sell handset in Russia and Brazil).
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Economics tells us that to sell products in a competitive market requires you do something different to the competition – even if that difference consists of selling a similar product cheaper, or perhaps a better product at the same price. Ideally, you want to be selling a better product at a cheaper price but still be making a buck out of it too. In order to manage this, Asus are looking to squeeze prices lower whilst improving the appeal of their products: at Android Headlines, we generally like and enjoy using the ZenFone devices. Sure, they’re inexpensive (I don’t like using the term “budget”) and lack some features or bleeding edge specifications, but the ZenFone 5 and ZenFone 6 especially offer a lot for the money. Most of these devices are powered by Intel Atom processors and Tom recently wrote about some of Asus’ 2015 handsets not running with the Atom processors, but instead having Qualcomm Snapdragon silicon inside. That might make the devices more appealing but probably won’t improve margins. Could Asus be instead considering using a less expensive processor, perhaps something from a Chinese manufacturer (and here “MediaTek” springs to mind, but of course there are plenty of other chipset manufacturers)? Asus expect 40% of their 2015 handsets to have LTE and the new chipset devices will sell at around half the price of the Intel models.
Xiaomi aren’t going to make this easy for Asus; they’ve recently dropped prices for their entry level Hongmi smartphone to celebrate China’s Singles Day promotions. Asus are a comparatively new entrant into the smartphone market and are still losing money on smartphone sales: if they can double sales, they’ll start to make a profit. Meanwhile, all Xiaomi need do is keep the pressure on Asus and prevent them from turning in a profit (either by not selling enough handsets, or selling them at too low a price). Hopefully, Asus’ other regional sales will keep them in the smartphone market, because competition at the less expensive end is very welcome.