Note: The article was first published on TechNode China written by Evan Huang and translated by Zinan Zhang.

In the dynamic AI era, venture capital is increasingly attuned to the transformative potential of this technology. As generative AI advances in creating text, images, and videos, a plethora of opportunities and challenges are emerging. This article explores the pivotal role of the Scaling Law, the emergence of super apps, and the promising future of AI-driven innovations. Highlighting insights from industry leaders, it underscores the potential for AI to revolutionize various sectors and entrepreneurial ventures, providing valuable directions for future venture capital investments.

The utility of the Scaling Law

The training and inference stages of large models demand substantial computational resources. The Scaling Law suggests that significant advancements in intelligence are achieved through consistent investment in vast amounts of data and powerful computing, provided the algorithmic architecture remains stable.

OpenAI, a strong proponent of the Scaling Law, has showcased the potential of generative AI across various fields by leveraging transformer architecture, extensive training data, and considerable computational resources.

Recently, Kevin Scott, Microsoft CTO, mentioned in an interview with Pat Grady and Bill Coughran of Sequoia Capital that they have yet to observe diminishing returns from scaling. He announced that the next generation of OpenAI models would soon be available, offering cheaper, more powerful solutions capable of tackling more complex problems. “This is the story with each generation of models as we scale up,” he remarked.

On May 18, Yang Zhilin, founder of Moonshot AI, discussed the computational aspects of the Scaling Law. He noted that initial improvements in model performance are driven by enhanced computational power and efficiency. However, further advancements require increased computational investment and ensuring that this investment effectively translates into intelligence. “This involves two issues: sustaining computational investment and maximizing the intelligence output of each computation unit,” he explained.

In an interview with TechNode, Wu Yunsheng, vice-president of Tencent Cloud, shared his perspective. “Currently, there are different viewpoints, including realistic and idealistic views. Some believe the Scaling Law has reached a plateau, where continued investment yields diminishing returns. Others argue it is still in a phase of rapid development.” He emphasized that the Scaling Law remains significant, citing rapid progress in multimodal research over the past year. “In this field, various capabilities improve significantly with added data or computing power. We will continue to explore and observe its development and changes across different scenarios and technologies,” he added.

The super app is on the way

As of March 28, 2024, there are 117 large models registered with the Cyberspace Administration of China, including Baidu’s ERNIE Bot, Alibaba’s Tongyi Qianwen, and the open-source ChatGLM. The rapid development of AI large models is becoming a key driver of innovation and breakthroughs in super applications. 

As these large model technologies mature and improve, they are gradually permeating various industries, sparking a range of entrepreneurial opportunities. From healthcare to fintech, from smart manufacturing to cultural creativity, the application potential of AI is limitless. 

Zhou Zhifeng, Managing Partner of Qiming Venture Partners, pointed out at the  World Artificial Intelligence Conference in Shanghai that compared to the timeline of application deployment during the internet wave, he predicts that the explosion of applications in the current AI wave will occur significantly earlier. Currently, generative AI is gaining substantial user favor in three “C fields” — Copilot, Creativity, and Companionship — showing a development trajectory similar to internet applications and transitioning from efficiency-enhancing applications to those aimed at providing enjoyment. He noted that the internet reduced the marginal cost of information distribution to almost zero, while the core of generative AI is to reduce the marginal cost of digital content creation to nearly zero, indicating that AI technology is bound to release enormous value.

When discussing the future of AI-driven super apps, Zhang Fan, COO of Zhipu AI, expressed optimism, arguing that although creating super apps is not easy, the AI era will see many unimaginable applications emerge. This process requires advancements in computing power, networks, hardware levels, and user habits, following the principle of gradual development from small-scale applications. Zhang emphasizes that by embracing and utilizing existing AI technologies to gradually transform current applications and products, the future will undoubtedly usher in super apps in the AI era.

Regarding the challenges of implementing generative AI applications, Zhou Zhifeng believes that reducing the cost of model usage necessary for the widespread adoption of generative AI, improving the effectiveness of large models, and enhancing user retention rates of generative AI applications are crucial. Since the growth period from zero to one for generative AI application companies is longer than in other fields, they need to overcome both TPF (Technology-Product Fit) and PMF (Product-Market Fit) challenges simultaneously. Therefore, the founding team needs greater patience, determination, and understanding of the technology, the product, and the world.

Embodied intelligence, infinite imagination

There were 45 intelligent robots, including 25 humanoid robots, showcased at WAIC this year. A video of a humanoid robot walking on the Great Wall was repeatedly played at the event. The humanoid robot L2 in the video has successfully conquered the steep slopes of the famous structure, achieving steady walking on it.

At the recent Huawei Developer Conference 2024, Zhang Ping’an, Executive Director and CEO of Huawei Cloud, unveiled the Pangu Model 5.0. During the introduction of the Pangu model for embodied AI, he showcased the broad potential of the KUAVO humanoid robot, equipped with the Pangu model, in both industrial and household scenarios, attracting widespread attention.

Chen Jianyu, an assistant professor at Tsinghua University and founder of the humanoid robot company Robot Era, believes that humanoid robots will be the ultimate form of general-purpose robots. This is not only because the pure humanoid form with two legs and two arms is more compatible with existing environments, but also because it’s easier to transfer training data from the human world. Technically, an end-to-end integration of the brain and cerebellum will be a crucial research direction in the future. Using human language as the interface between the brain and cerebellum is limited, and it is better to borrow from the end-to-end joint training process of autonomous driving, where physical layer data is directly fed back to the text and image models, significantly enhancing overall model performance.

Last week, Tencent, in collaboration with Shanghai Jiao Tong University, released the Top Ten Trends of Large Models 2024: Entering the Era of ‘Machine External Brain’ report, which pointed out that the combination of robot technology and large models provides a “body” for the machine’s external brain. In the future, humanoid robots will not only be able to perform physical tasks but also interact with humans more naturally and intuitively, endowing physical products with intelligent “brains”.

The report states that the development of humanoid robots relies on two major technical pillars: motion control and task training. The application of large models has greatly improved the robots’ learning efficiency and ability to execute complex tasks. The integration of these technologies not only drives technological innovation in humanoid robots but also opens possibilities for their widespread deployment in practical applications. This also heralds a future of human-machine symbiosis, where humanoid robots will play increasingly important roles in various industries, from household services to high-risk industrial operations, showcasing their efficiency and safety. Through continuous technological innovation and application expansion, humanoid robots will play a key role in improving the quality of life and work efficiency, further integrating into human daily life as indispensable assistants and the ultimate carriers of artificial intelligence.

Conclusion

In conclusion, the era of AI is not just a technological revolution but a transformative force that is redefining the landscape of innovation and investment. As we look to the future, the challenges of implementing generative AI applications remain significant.      The need to reduce costs, improve effectiveness, and enhance user retention rates is crucial for the widespread adoption of these technologies. However, the potential rewards are immense, offering a glimpse into a world where AI is not just a tool but an integral part of our daily lives, from household services to high-risk industrial operations.

In summary, the dynamic AI era presents a wealth of opportunities for venture capital and entrepreneurial ventures. As we continue to explore and invest in AI-driven innovations, the future holds huge promise for transforming industries, enhancing human-machine interactions, and ultimately, improving the quality of life for all.

Note: The article was first published on TechNode China written by Evan Huang and translated by Zinan Zhang.

The Apple store in Jing’an district is still designed by the renowned British architectural firm Foster+Partners, which previously designed Apple’s new headquarters in California and created many innovative stores for Apple, such as the floating sphere in Singapore (Apple Marina Bay Sands), the Italian flagship store with a water curtain, and the bamboo-surrounded flagship store in Macao.

As the eighth Apple retail store in Shanghai, the opening of this store signifies that there are 57 Apple Store retail stores in Greater China. The opening of Apple Jing’an district store undoubtedly injects new vitality into Apple’s retail business in China.

The inspiration for the logo of this new store comes from the city flower of Shanghai, the magnolia, symbolizing the city’s innovation and pioneering spirit. The opening of this new store further solidifies Shanghai’s position as an important market for Apple’s retail business. Since the opening of the Pudong distric store in Shanghai in 2010, Apple’s retail business has made significant progress in Shanghai. Over the past 14 years, the seven retail stores in Shanghai have served over 160 million customers, and the online store has also attracted a large number of visitors.

Apple has had a 31-year development journey in China, achieving significant success in the Chinese market and establishing deep connections with local communities. The Apple Jing’an district store is no exception. Previously, Apple has been inviting local artists, musicians, and creative individuals to participate in activities, showcasing and teaching their creative processes, further enriching the shopping experience for customers. The Apple store in Jing’an district will continue this tradition of engaging with the local community.

This new Apple store has over 150 well-trained employees, including hearing-impaired individuals, musical theater actors (part-time), retired university professors, and etc.  In addition to Mandarin Chinese, the team is proficient in English, Japanese, Korean, German, Spanish, and Malay for communicating with customers. Employees can also speak 25 dialects, providing personalized service to Chinese customers from all over the country. Additionally, nearly one-third of the team members are from Shanghai, providing them with a deep understanding of the city and its residents.

On March 12th, Apple announced on its official website that it would expand its application research laboratory in China to support product manufacturing.   Apple stated that it would enhance the capabilities of its research center in Shanghai to provide support for reliability, quality, and material analysis for all product lines. Later this year, Apple will also open a new application research laboratory in Shenzhen.

In fact, despite the increasingly competition in the Chinese market, Apple still believes that this market holds significant opportunities worth cultivating, which is also the signal conveyed by this new store.

Note: The article was written by Evan Huang and translated by Zinan Zhang.

Get ready for the annual insights from TechNode Content Team! The year 2023 can be considered a groundbreaking year in the technology field. As wrapping up this year, we gathered different insights from our content team. We’ll present nine Q&As, with timely updates every Wednesday and Friday in the following weeks!

Today, our Q&A comes from Evan Huang, reporter at TechNode. Evan Huang is a tech reporter based in Shanghai who focuses on consumer electronics, hardware, and AI.

1. Which company has impressed you the most in 2023?

Huawei. Under U.S. sanctions for over three years, Huawei’s business faced setbacks. However, the launch of Mate60 Pro on August 31 sparked a wave of enthusiasm. Huawei, now using self-developed chips again, is considered to break the U.S. technological blockade, showcasing the strength and resilience of Chinese technology.

2. Which company has surprised you the most in 2023?

Apple. iPhone, as a trendsetter in the smartphone industry, experienced minimal overall upgrades in 2023 which needed to be improved. Moreover, it is the first time that Apple hasn’t released any new iPad in the entire year. Since the initial launch of the iPad in 2010, Apple has consistently introduced new iPads each year, making 2023 an exception.

3. Which industry professional/entrepreneur/startup founder has left the most profound impression on you in 2023?

Lei Jun. On November 29th, Lei Jun, the founder, chairman, and CEO of Xiaomi Group, made a personal donation of RMB 1.3 billion to Wuhan University where he graduated from. This is the largest individual cash donation received by any university in China. Lei Jun believes that basic disciplines have been relatively disadvantaged in universities in recent years. Therefore, he donated this amount to support fundamental research in six disciplines (mathematics, physics, chemistry, literature, history, and philosophy), technological innovation in the field of computer science, and the education of university students.

4. What is the most memorable overseas event for you in 2023?

In November, OpenAI CEO, Sam Altman, faced a sudden dismissal, after a series of twists, he briefly joined Microsoft before ultimately returning to OpenAI to reclaim his position. Throughout this process, the major disagreement between Altman and former Chief Scientist Ilya at OpenAI revolved around the pace of commercialization. Ilya advocated for a slower approach, emphasizing the importance of interpretability and safety in AI products. In contrast, Altman and former President Greg held a stance of technological optimism, pushing for an active pursuit of commercialization paths and a new round of financing.

5. If you were to recommend one significant industry trend for everyone to follow, what would it be?

In September, Huawei announced the launch of HarmonyOS applications. It is said that the next-generation, HarmonyOS NEXT system base, is completely self-developed, eliminating traditional AOSP code and only supporting applications based on the HarmonyOS kernel and HarmonyOS system. This new design reduces 40% of redundant code, completely breaking free from the “skin” of Android. At the same time, by focusing on the development of HarmonyOS applications, Huawei can expand the influence of the HarmonyOS system and enhance the independent and controllable level of related technology and ecology.

6. What industry buzzword have you encountered the most in 2023?

Large Language Models. With the rapid development of technologies such as deep learning and big data, significant breakthroughs have been achieved in the training and application of large models. Large language models exhibit stronger generalization capabilities and higher performance, demonstrating outstanding abilities in areas such as speech recognition, natural language processing, computer vision, and more. The industry widely recognizes their enormous application potential in many commercial scenarios.

7. Which phrase or sentence best summarizes your perspective on the field you’ve been following in 2023?

“Seeking Change”. The Consumer Electronics Market is undergoing unprecedented transformation, with various emerging technologies and products continuously emerging. AI has brought a new atmosphere to hardware products in areas such as smartphones and smart homes, providing consumers with more choices and better experiences. At the same time, market competition is becoming increasingly fierce, and manufacturers need to keep pace with the times to meet consumer demands.

8. What product/company/technology/industry are you most looking forward to next year?

AI Agent. The AI Agent will connect to other services and solve practical problems, making the interaction between humans and AI more profound, rather than just simple input-output interactions.  For example, a mature AI Agent can significantly reduce the cost of software production.  Microsoft founder, Bill Gates, has expressed, “Whoever wins the personal agent, that’s the big thing, because you will never go to a search site again, you will never go to a productivity site, you’ll never go to Amazon again.”

9. Do you believe AI has the potential to threaten humanity?

AI is a double-edged sword, and my answer is temporarily uncertain. AI creates more opportunities and possibilities, reshaping global business, technology, education, and other fields. Additionally, with the continuous improvement of AI’s capabilities in decision-making and execution, there may be some unpredictable and uncontrollable situations.   Moreover, the widespread adoption and application of AI may lead to excessive reliance on technology, potentially weakening certain fundamental skills and judgments in humans.   In this process, it is essential to closely monitor and establish appropriate regulatory and ethical frameworks to ensure that the development of AI has a positive long-term impact on humanity.

Note: The article was first published on TechNode China written by Evan Huang and translated by Zinan Zhang and Jake Newby.

On Dec. 5, 2023, Pete Lau, the founder of OnePlus (now Senior Vice President at Oppo), held a press conference to mark the Chinese mobile phone brand’s tenth anniversary where he answered a series of screened questions from netizens, posted on the social media platform Weibo. These questions led Lau to offer a retrospective on OnePlus’s entrepreneurial history, discuss its brand positioning, and evaluate some of its classic products from the last decade. 

OnePlus was founded on Dec. 17, 2013, and released its first product, the OnePlus One, in Beijing five months later. Time magazine later praised the phone as a “Phone of Dreams” in an article that made OnePlus the first Chinese smartphone brand to be reviewed by the outlet. Yet in recent years the brand has struggled to differentiate itself from Oppo, with whom it shares a large amount of investment, leading to several restructurings in the relationship between the two firms.

Understandably, the tenth anniversary milestone found Lau in a reflective mood, but he also laid out some of his ambitions for the brand’s future and repeatedly emphasized that OnePlus’ has its place in a crowded mobile phone market.

Material innovation

One area in which Lau feels the brand has excelled – and differentiated itself – in the last ten years is in the materials it has used.

As early as 2014, with the OnePlus One, OnePlus introduced two innovative materials: “baby skin” and bamboo. The baby skin white variant, featured a three-layer evenly brushed back cover, with a delicate and smooth texture due to its spray-on material extracted from natural cashew nuts that didn’t retain sweat stains. The bamboo version, using the grass as its back cover material, provided a warm and smooth feel.

With the OnePlus 3 series protective cases, OnePlus introduced another new material: ebony wood. This is a scarce wood with a tight structure, hardness, and corrosion resistance, showcasing distinct wood grains.

With the OnePlus 5T, OnePlus once again challenged traditional material usage and craftsmanship modes, using a new spray-on material and process on the white back cover. Through four new high-precision spray processes, sandstone white and metal materials were organically fused to provide outstanding tactility.

AG glass, widely used in current phones, gained its popularity from OnePlus. On the OnePlus 6T, AG etching was used to create AG glass, providing an impressive matte feel. Today, OnePlus has adopted the fifth-generation AG glass technology, achieving a haze of the glass surface to 72%, and delivering a matte texture resistant to fingerprints and sweat stains.

OnePlus’ pursuit of material innovation extends beyond this. In the spring of this year, OnePlus launched the OnePlus 11 Jupiter Rock Limited Edition, using 3D microcrystalline rock, a material that has never been used before in the industry.

OS issues: From independence to adoption

OnePlus phones were originally equipped with an in-house developed operating system, HydrogenOS. HydrogenOS was known for its simplicity. The “smoothness” of HydrogenOS was highly praised by many early users and was considered a competitive advantage for OnePlus.

As other domestic smartphone systems became more localized, however, HydrogenOS, which leant more towards Android systems, began to see that competitive advantage significantly reduced. 

ColorOS, developed by Oppo, is a more comprehensive operating system compared to HydrogenOS, offering rich and stable functionality. Therefore, with the OnePlus 9 series in 2021, OnePlus directly adopted ColorOS, aiming to gradually replace its HydrogenOS with a higher caliber system. On Nov. 13, Oppo announced that ColorOS’s global monthly active users exceeded 600 million. 

The recently released OnePlus 12 comes equipped with ColorOS 14, debuting the all-new AndesGPT model and integrating deeply with the PANTANAL system to break down barriers between data and services.

OnePlus and Oppo integration

Due to Pete Lau’s connections with Oppo, OnePlus has always had a close relationship with the mobile phone giant. In 2021, OnePlus and Oppo fully integrated, with the former becoming an independent sub-brand under Oppo. 

Lau has always been keen to emphasize that OnePlus and Oppo are two completely independent companies, with overlapping relationships only in terms of investment. However, OnePlus has benefited from the support and resources provided by Oppo in areas such as product development, technology, supply chain, and channels. To seize new opportunities and promote the healthy and long-term growth of OnePlus, collaboration with Oppo is needed to enhance the former company’s brand strength, while also bringing positive synergies to both sides, Lau said.

In recent years, OnePlus has opened up a new Ace series product line, as part of an attempt to differentiate its brand from Oppo. The Ace series is intended to enable more people to gain access to what Lau terms “premium flagship” products but with lower price points. 

After the release of the Ace series, OnePlus achieved a year-on-year growth of 9.6% in total domestic sales in the third quarter of last year, with a month-on-month growth of 44.3%. In the first half of 2023, OnePlus’ smartphone sales increased by 335% year-on-year, making it the fastest-growing mobile phone brand in the industry during the same period. Therefore, Lau jokingly remarked that competitors should be grateful that OnePlus has yet to venture into products priced below RMB 2,000.

Thinking globally

At the OnePlus tenth anniversary event, Lau repeatedly emphasized the mantra of “making good products”. Yet he also stressed that for OnePlus, this philosophy doesn’t mean that they excessively emphasize the differences between countries. Whether in design style or product experience, there is no deliberate effort to create different products based on regional distinctions. He believes that “internationalization is a false proposition.” Truly good products are universal and have no borders, he said – as long as the product is good enough, it will be accepted by users both domestically and internationally.

Looking back over the past decade, Lau admitted that OnePlus has many dreams yet to be realized. In the future, Lau said, the company will continue to persist in making good products, continually pursue higher performance, and bring users more quality products and experiences.

Note: This article was first published on TechNode China (in Chinese).

Ever since Huawei announced its push into the Chinese electric vehicle (EV) space last year, the industry has been watching the telecom giant’s moves. 

Huawei had some modest successes in the past year, first partnering with BAIC and Changan on their self-driving technologies. It also provided the powertrain system to a little-known Chinese automaker Seres, and its SF5 model debuted last April.  

Now it looks like the tech giant has pinned its hopes on a new car model released in partnership with Seres. Last December, the two companies released Aito M5, the first EV model equipped with HarmonyOS, Huawei’s alternative to Google’s Android operating system. (Huawei developed Harmony after Washington banned Google from working with Huawei in 2019.) 

On Feb. 18, TechNode China had a chance to test drive the Aito M5 in the southwestern city of Chongqing, home of the Seres’ factory. So how did Huawei do in EV tech? Here are our takeaways. 

Seamless connectivity for existing Huawei users

Aito M5 is the first luxury EV model manufactured by Seres. The hybrid sports utility vehicle claims to reach 1,242 km (772 miles) on a single charge and tank, with a price range from RMB 249,800 to RMB 319,800 ($39,518 to $50,592). By comparison, Chinese EV maker Li Auto’s plug-in hybrid crossover Li One, the best-selling medium-to-large size SUV in China last year, features a maximum range of 1,080 km and is priced from RMB 338,000.

The in-car version of the HarmonyOS shares a similar design language with Huawei’s smartphones along with some of the most frequently-used features. For example, we could activate most of the car’s functions by voice control. The car dashboard also has a shortcut bar for fast access to the most used features.

Aito M5 came with many apps, including a navigation map app, streaming services such as Tencent-backed Ximalaya FM, and Alibaba’s Youku. You can use Youku to watch videos or relax with music or audiobooks while driving when stuck in traffic. An alert system will also notify users of significant changes in road traffic.

Huawei’s ability to integrate its ecosystem with the car differentiates Huawei from other EV players. Huawei devices, smartphones, tablets, smartwatches can seamlessly work with the vehicle. Phone calls and messages could be synced on Huawei’s devices, including the car’s dashboard. That will probably become one of the biggest competitive advantages for rival EV players. 

Fast and accurate voice assistant

Huawei also brought a powerful in-car voice assistant called Xiaoyi to the car. The assistant is powered by Huawei’s in-house cloud infrastructure. During the test drive, the assistant provided accurate responses promptly. It recognized voice commands from riders in the front passenger seat and from the rear seats, opening windows and unlocking the doors for the respective speaker, for example. Huawei said Xiaoyi can control all the features in the vehicle.

Riders can even issue multiple commands to Xiaoyi without repeating the wake word (“Xiaoyixiaoyi” in Chinese). The assistant will continue to listen for another request after it completed the previous ones.

Huawei’s virtual assistant also serves as a voice guide. For example, Xiaoyi suggested turning on the in-car air purifying function when the car drove into a tunnel and encountered bad air quality. It also searched for a charging station and navigation when the vehicle battery ran low. 

Speaking to a virtual voice assistant for those control functions within the car is well-developed in the industry. Major rivals such as Nio and Xpeng have similar offerings. Nio owners could start a conversation with a voice assistant using the three-syllable phrase “Hi, Nomi,” while Huawei’s wake word “Xiaoyixiaoyi” has four syllables. Alibaba-backed Xpeng in late 2020 said each of vehicle owners used its voice assistants effectively 25 times per day on average, compared with 13 times from part of Ford models, Chinese financial media Caixin reported.

Integrating home and auto 

The Aito M5 helps Huawei build a connection between an EV and its wide range of digital and smart home devices. That connection is taking shape as Huawei and its auto partner have introduced dashboard-based smart home management tools for users to integrate their homes into the vehicle.

Being able to sync all their Huawei devices means users can read and send text messages directly by voice command in the car, then continue listening to music and podcasts at home exactly where they left off from the in-car system. However, the integration may not work as seamlessly for non-Huawei users. 

Challenging road ahead

The Aito M5 showcases in-car technologies that Huawei offers: a dashboard that performs many of the same functions as Huawei smartphones and a network that allows remote connectivity to a plethora of its home appliances.

And yet, the Chinese telecom giant and its obscure manufacturing partner will need to build a reputation for building quality cars. The Aito M5 is entering a Chinese EV market crowded with established players, competing heads on with similarly-priced rivals, such as Tesla’s Model Y and Li Auto’s popular crossover Li One. 

The global economic downturn caused by Covid-19 was always going to hit the smartphone market. But as smartphone makers shifted their conferences online, pandemic conditions eased up in China, making it the only phone market in the world that saw sequential growth in the second quarter of the year.

A ‘new’ 5G Iphone?

Apple’s Chief Financial Officer Luca Maestri told investors on a recent call, “Last year we started selling new Iphones in late September; this year we expect supply to be available a few weeks later.” The new phone may launch on time, but delivery and sales will face delays.

It may well be that Tim Cook isn’t worried about the delay. Last year, even though Apple was forced to accept price cuts and massive discounts, the new Iphone 11 became one of the best-selling phones in China. Alongside it came the revamped Iphone SE, whose strong value for money made it the most popular Apple model in the world. Global shipments of the new Iphone SE reportedly reached 12-14 million units in Q2 2020.

The success of these two phones gives Apple reason for confidence. According to data from market research firm CINNO, in Q2 2020, Iphone sales in China increased 62% year-on-year to 13 million units.

With this momentum, the launch of the 5G Iphone, expected in fall 2020, is hotly anticipated.

5G is becoming an essential selling point in the Chinese market. Statistics from the China Academy of Information and Communications Technology show that domestic 5G mobile phone shipments reached 13.911 million units in July. The data shows that 5G smartphones accounted for 62.4% of domestic mobile phone sales, exceeding 60% of the total for the second consecutive month.

The wave of 5G replacements is likely to build over the next few months. Analysis by research firm Counterpoint suggests that more than 50% of global 5G phone sales this year will come from China.

The survival of Huawei

At the end of March, Huawei rotating chairman Xu Zhijun said that 2020 was Huawei’s most difficult year, and called for the company to come together to overcome its difficulties.

When it rains, it pours.

According to international media reports, Huawei’s temporary reprieve from a ban on importing US technology expired on Aug. 13 this year. There has been no word of a renewal.

Its relationship with the Google Play Store has been severely disrupted. Huawei devices that came with pre-installed Google mobile services can still download and update Google applications through other channels. But newly released phones, such as the P40, cannot use such services.

Huawei is working to mitigate the loss of the Google Play Store. Its phones come equipped with a Huawei suite of mobile services, and a homegrown operating system called HarmonyOS, or HongmengOS in Chinese, is coming to smartphones in early 2021, the company announced Sept. 3.

On the existing foundations of the HarmonyOS ecosystem, breaking into overseas markets may take a while. Few of the world’s most popular apps are available in Huawei’s app store, although some can be installed independently. Richard Yu has predicted that apps like Facebook will eventually join the Huawei app store.

Harder to evade are the US’s new restrictions on the company’s semiconductor supply chains.

Huawei’s executive director Richard Yu said at the China Informatization Hundreds Conference 2020 that due to the second round of sanctions by the United States, Huawei will lose its chip making capacity on Sept. 15. As a result, the company’s smartphone shipments this year might be fewer than last year’s 240 million, Yu said.

The dwindling supply of chips will severely challenge Huawei’s market competitiveness in the phone business. Coupled with the ban on overseas GMS services, its vitality in overseas markets has been struck a heavy blow, and this has cast a long shadow over Huawei’s confident New Year vision.

Xiaomi at ten: a fork in the road

When Covid-19 hit China, Xiaomi’s shipments were already lowest among the four leading manufacturers, which also include Huawei, Oppo, and Vivo.

Despite strength in online sales channels, the epidemic era hasn’t been kind to it. In Q2 2020, the company accounted for only 10.4%, or 9.1 million, of the 87.8 million smartphone units shipped in China, its 21.9% year-on-year drop in sales second worst among the major brands, data from IDC said.

Xiaomi’s setbacks overseas have been worse as it lost production and order capacity due to the virus. In India, one of its strongest markets, Xiaomi’s overall shipments fell 48.7% year-on-year.

Xiaomi models do not have a reputation for value, and it hasn’t come up with an alluring flagship model to attract consumer attention. Its surround-screen model , announced with much fanfare last year, was indefinitely delayed in 2020. The same holds true for chips. After the first generation of its phone chips was released in 2017, Xiaomi hasn’t released any plans for a second generation.

Xiaomi also lags its peers in R&D spending. In 2019, Oppo and Vivo both increased their R&D spend to RMB 10 billion ($1.46 billion) . Xiaomi only invested RMB 7.5 billion in 2019, and plans to reach RMB 10 billion this year.

Lei Jun, Xiaomi’s co-founder and CEO, has pursued business diversification for a while. But despite growth in IoT sales prior to 2020, Xiaomi remains a smartphone company. Its handset shipments account for 50.1% of its total revenue.

Internet of Things (IoT) products have performed well in recent years. But even in this market, Xiaomi is slowing down, weighed down by excessive reliance on hardware sales and the complicated supply chain logistics of selling hundreds of products. Its Q1 2020 earnings report shows little growth in IoT.

Oppo is diversifying

Meanwhile, Oppo has increased its investments overseas and established a semiconductor company called Zheku Technology.

Zheku may be Oppo’s way out. The company has always focused on marketing and offline channels and has suffered a lot during the Covid year. Its eye-catching advertisements—often seen on other manufacturers’ gadgets—are increasingly unable to cover up performance shortcomings. These are now compounded by anti-China sentiment in India, which sent shipments to India plummeting in the second quarter by 51% year-on-year. Oppo has lost more than any other of the top five brands in India.

For Oppo, this year may be the most difficult since it got into smartphones. This is despite Oppo’s accomplishments in 2019: reorganizing its product line, strengthening finances, establishing an independent chip department, developing independent sub-brand Realme, and launching IoT products; it also began to increase R&D to compete with its rivals.

A painful readjustment is now necessary. In the face of these challenges, Oppo recently announced that OnePlus founder and CEO Pete Lau (who will remain founder and CEO of OnePlus) has returned as senior vice president of shared parent company Ouga Holdings, and is fully responsible for the Ouga ecosystem’s product planning and experience, including Oppo.

In desperate times, Oppo is rallying its troops, and wants to reorganize its product line by bringing back veterans of the brand, strengthen differentiation, guard its market share, and regain the attention of its customers—who have very much glanced away.