The ecosystem that permitted the meteoric rise of Xiaomi’s valuation to over $45 billion no longer exists. A year-long contraction in the Chinese smartphone market has yielded a consolidated field of players struggling to find new inroads to a saturated market, and the latest casualty has fallen.
DaKele founder Ding Xuhong
Dakele, or “big coke”, the Chinese smartphone maker that once aimed to emulate Xiaomi, has suspended R&D along with marketing and business operations, according to the company’s Ding Xiuhong, the former deputy editor-in-chief at online news service NetEase. The rumor of Dakele’s collapse reared its head late last year and the announcement on Mr. Ding’s microblog has finally confirmed it.
“The shuffling of the smartphone industry is much faster and tougher than we expected. We have survived competition in product [and] marketing, but the entry of more internet giants has brought the rivalry to operating capital,” said Mr. Ding.
“The unexpected capital shortage across industries cut our funding sources that were settled earlier.”
Dakele released a total of eight smartphones since their launch in June 2012. All their products are budget phones retailing less than 1000 RMB ($153 USD), featuring big screens and Kele UI, the company’s proprietary OS. Dakele’s selling point, like most Chinese smartphones, is their low price and decent specs. It’s the same strategy that boosted Xiaomi above the pack, though it’s not a method that has as much success in the current market.
The lack of powerful upstream support accelerated the collapse of Dakele. The company’s OEM subsidiary Shenzhen Yunchen Jiye Telecom Co. Ltd., which was shut down in October last year, reported local media.
For Chinese smartphone companies, there are two ways out: find more growth momentum in emerging markets like India and Latin America, or focus on higher-tier markets. Xiaomi has committed to the former, cementing sales channels to emerging markets. Huawei on the other hand rocketed into the high-end market with the Huawei Mate S. Strategies aside, it’s clear that a solid brand and mountains of capital are the fundamental tools required to survive the market squeeze.