Oppo falters as handset rivalry picks up speed

Bloomberg reports that Chinese phone maker Oppo says it will cut 20 percent of the staff in its software and device teams. Oppo plans to merge operations with OnePlus, another phone brand in the BBK stable.

With Huawei, in effect, out of the picture, Oppo was one of a handful of Android phone makers with global reach. For a while it was the top-selling brand in China and it has been the number three brand in New Zealand.

Over the years Oppo’s phones have been serviceable, but otherwise unremarkable Android handsets. In the company’s early years it went to extraordinary lengths to make its Android hardware and software resemble Apple’s iPhones.

Higher prices

More recently Oppo has attempted to push its prices higher without delivering enough features and functionality to justify the extra cost.

The report says:

Oppo… is retrenching after expanding too rapidly on the hiring front in recent years and attacking a premium segment dominated by Apple Inc., people familiar with the matter said.

The cuts affect important units including a team that customizes Android into its in-house ColorOS, and an Internet of Things division that develops a spectrum of wearables such as smartwatches and earbuds, said the people, asking not to be identified discussing a private matter.

…heavy investments to expand into markets from India to Southeast Asia and Europe have not paid off as expected against fierce competition from the likes of Xiaomi Corp. and Apple. It’s now contending with a Chinese retail slowdown as Covid’s resurgence locks down parts of the country.

Forays into adjacent arenas also haven’t worked out. After several years, Oppo’s share of the global smartwatch market remains under one percent, while it accounts for a mere 1.7 percent of earwear shipments, IDC analyst Bryan Ma estimated.”

Profitless Android

Oppo’s move underlines a recurring theme on this site: Aside from Apple and, to a lesser degree Samsung¹, there is little profit in making Android phones. Nearly all the value in an Android phone goes to Google who gets to clip the advertising ticket almost every time someone picks up their phone.

This is unlikely to be the last phone market consolidation. You can expect to see more brands to merge or leave the business over the next 24 months or so.

1. Samsung makes more profit selling phone components to Apple than it makes from its own hardware sales.↩︎