Chinese brands dominate consumer technology: low price, good quality and safety concerns

(Deutsche Welle Chinese website) Do you remember the days when GoPro was almost synonymous with action cameras?

At its peak in 2015, the American company sold about 6.6 million cameras a year and dominated the market with a market share of more than 70%. Today, the industry pioneer is fighting to put food on the table.

Why is the hero dying? It’s because of Chinese rivals.

GoPro’s two biggest rivals—DJI and Insta360—entered the action camera market in 2019 and 2021 respectively. Today, the two together account for more than 90% of global smart handheld camera sales.

Alexander Hannemann, who often uses an action camera to film his motorcycle rides, said he switched from a GoPro to a Shadow Stone about two years ago.

"The picture quality is much better than a GoPro, even when I'm accelerating and cornering at around 80 kilometers per hour," he told DW.

Expanding lead: “Made in China” no longer equals cheap

GoPro's experience is not unique. Since about 2010, a number of Chinese brands have not only caught up but surpassed their once-dominant Western rivals across the consumer technology industry, from smart TVs to robot vacuum cleaners.

The days when "Made in China" represented cheap products are fading away.

"China is still making affordable products today," said Chris Pereira, a Canadian entrepreneur and author with more than 20 years of experience in China, "but many of them are also of high quality."

Pereira added that it is for this reason that more than half of the world's new consumer technology products come from Chinese suppliers.

BYD, Xpeng and other Chinese automakers sold nearly two-thirds of the world's electric vehicles last year, outpacing established players such as Tesla. In the field of sweeping robots, Chinese brands dominate the global market, making it difficult for the former pioneer and American company iRobot to resist.

How to win: Fierce competition, supply chain and regulatory efficiency

So why are Chinese companies increasingly outperforming their Western rivals?

iMpact, a consulting company founded by Pereira, specializes in helping Chinese companies explore overseas markets. He believes that China's success stems from fierce domestic competition in cities such as Shenzhen, Hangzhou and Shanghai, highly integrated supply chains, and a business culture that enables companies to innovate quickly and respond to problems quickly.

Other key reasons for China’s competitive advantage include unparalleled industrial automation, strategic use of artificial intelligence in manufacturing, rapid regulatory response, and relatively cheap labor. Together, these factors make China's production costs far lower than those of the world's most developed economies and its innovation cycles much faster.

Joey Cheng, who went to the United States to study for a doctorate more than 20 years ago, is familiar with both American consumers and Chinese manufacturers.

His startup is based in the United States, but almost all production is done in Shenzhen. Shenzhen produces a large portion of the world's hardware and consumer electronics.

"To reduce costs and develop products quickly, Shenzhen's supply chain is basically unavoidable," Cheng said. “Especially as a startup, you have to get the product out as quickly as possible or you’ll be completely obsolete.”

Privacy and security concerns: Chinese companies need to pay a “trust premium”

Even as consumers flock to Chinese companies, some concerns remain.

A recent poll found that more than 90% of Europeans distrust Chinese technology companies with their data, and about 80% distrust American companies. Germans have the highest level of distrust.

Nadine, a German travel blogger who uses DJI and Shadowstone products, said she would not use any Asian products at home.

"My sweeping robot is from a German company for exactly this reason: so that the data complies with German regulations. After all, the manufacturer can directly connect to the device's camera," she said. She was referring to an incident involving the hacking of the cameras and audio of sweeping robots.

However, Pereira said Chinese companies expanding overseas must pay a "trust premium."

“This trust deficit means they have to be exceptionally competitive in product and price for the market to choose them,” he said. He added that the gap could be narrowed by setting up entities in overseas markets, such as BYD's first passenger car factory in Europe, which is expected to start production in Hungary later this year.

Chinese companies say they comply with EU data protection rules. However, China's domestic security laws may require companies to hand over data to authorities. German officials also pointed out that there is very limited supervision on whether data is transferred from European servers outside the country.

In addition to privacy concerns, Chinese consumer technology companies have come under scrutiny for espionage and other risks, most recently involving connected devices such as electric vehicles.

A new round of fierce battle: Chinese companies accelerate the establishment of overseas factories and attack high-end products

Given security concerns, trade deficits and China's overall dominance, the United States and several other Western countries have targeted Chinese imports and companies through tariffs, blacklists and strict requirements. In late July, the Trump administration banned the import of humanoid robots manufactured outside the United States.

A representative from Chinese robot manufacturer Primebot told DW that all Chinese consumer technology companies are feeling the impact.

"We may look to partner with a local American company. Another possible solution is to build a factory there," he said.

European countries and the EU are also considering imposing more tariffs on Chinese companies.

Pereira expects the tariffs to accelerate two major trends among Chinese companies: moving more production overseas and increasingly challenging top-tier Western brands with high-end products.

"Chinese officials and companies recognize that production requires a certain degree of localization. One reason is to ease export difficulties, and another is to build trust locally," Pereira concluded.

"Another trend is that once tariffs wipe out the price advantage at the low end of the market, the remaining profit margins are at the high end. So Chinese brands are increasingly competing head-on with established Western brands, where trust is most important."

Market segmentation and regulatory efficiency: Can Western firms still compete?

As China's dominance continues to expand, Western companies are looking for ways to stay competitive.

Kaz Merchant, who works at a British IT hardware import and export company, said that smaller companies, especially, must carve out a geographical market segment.

"They need to find their own unique selling point for a product that Chinese companies may not have in that region yet. Or they need to partner with a Chinese company," he said.

According to Pereira, a key issue that needs to be addressed in Europe is the speed of regulatory response.

"Chinese regulators tell you very clearly and quickly what you can do. This speed helps companies iterate and succeed overseas," Pereira said.

“If you have to wait weeks for a response, you’re going to lose business.”