Summary of Key Points
Realme has announced the suspension of new product releases in the Chinese market, with existing operations (sales, after-sales service, system updates) being taken over by OPPO. The company will focus on overseas markets in the future. This decision is driven by several factors: a low domestic market share (less than 1%), meager profits (increasing costs of memory chips squeezing the cost-effective strategy), and competition with OnePlus, which leads to internal strife. Additionally, the smartphone industry is transitioning from a focus on hardware specifications to an emphasis on AI capabilities. As this shift occurs, the survival space for smaller brands is further compressed.
Realme's Three Major Challenges in China
1. Soaring Costs, Making the Cost-Effectiveness Strategy Unfeasible
Realme relied on offering high-specifications at competitive prices (for example, 2000 yuan phones with 16GB+512GB of storage). However, since 2025, the cost of memory chips has tripled, and storage accounts for over 65% of the cost in lower-end models (the storage alone for a 2000 yuan phone costs 1300 yuan), effectively wiping out profits.
2. Internal Competition with Sister Brands
Both Realme and OnePlus target the performance gaming segment. Their respective GT Neo and Ace series compete for customers, leading to the dispersion of research and marketing resources within the OPPO group. It would be more efficient to allocate resources so that OnePlus focuses on the domestic market while Realme targets overseas markets.
3. Lack of Brand Awareness
Despite selling 300 million units globally, many people in China have never seen a Realme phone in person. Compared to Redmi, which is associated with cost-effectiveness, and OnePlus as a performance flagship, Realme's slogan of "daring to surpass expectations" has not taken hold. Realme also lags behind in terms of store presence (only 500 physical stores) and after-sales service, failing to build customer trust.
The Shift in the Smartphone Industry: From Competition on Specifications to AI
In the past, smartphone manufacturers competed based on processor power, fast charging, and camera quality. Now the focus has shifted:
- New Players Entering the AI Space
Companies like Jieyu Xingchen have released "AI-native phones" that can directly integrate services from platforms like Meituan and Didi. Nubia's Doubao 2 model uses AI to perform tasks on behalf of users.
- Established Brands Investing in System-Level AI
OPPO, Huawei, and Xiaomi have developed their own AI technologies. Honor has collaborated with Alibaba on the Agentic OS, aiming to make AI a core feature rather than a supplementary selling point.
Realme's withdrawal reflects the ineffectiveness of the old approach (focusing on high specifications and cost-effectiveness) in the era of AI. Consumers no longer value additional hardware features but seek new experiences, such as AI-assisted tasks like booking flights or writing content.
OPPO's Strategic Move: Focusing on AI
OPPO's decision to let Realme exit the Chinese market is not a sign of abandonment but a calculated move:
- More Profitable Overseas Markets
Realme has established a strong presence in markets like India and Southeast Asia, where pricing margins are higher (for example, the Narzo 100x sells for $245 in India, which is more expensive than its domestic counterpart with similar specifications).
- Domestic Focus on OnePlus
By focusing on OnePlus, OPPO can leverage its existing brand recognition for high-performance phones while avoiding internal competition.
- Investing in the Future of AI
OPPO's AndesGPT technology indicates a commitment to AI development. By freeing up Realme's resources, OPPO can focus on building advanced AI systems and intelligent features to gain a competitive edge.
The Elimination Race in the Smartphone Industry
Realme is not the first brand to retreat from the Chinese market; Meizu has also ceased domestic new product development, and other brands are facing critical challenges. The industry is undergoing significant changes:
- Contraction of the Market
China's smartphone shipments have been declining, with the top six brands accounting for 96% of the market share, leaving little room for smaller players.
- Survival Depends on Unique Value
Brands that lack both scale and profitability, as well as those that overlap in positioning with other companies within the group (like Realme and OnePlus), are at risk of being eliminated.
The survival of brands in the future will depend on their ability to provide irreplaceable value. They must either have a strong brand reputation like Apple and Huawei or make technological breakthroughs in AI to stay competitive.
Can AI Save the Smartphone Industry?
AI-powered phones represent a new opportunity for the industry, but they still face challenges:
- More Than Just Hype
Early AI phones offered basic features like image editing and translation. Today's intelligent devices need to solve practical problems that users can't live without, such as automatically handling work emails or planning trips.
- A Reason for Consumers to Upgrade
Consumers are reluctant to upgrade if their current phones still perform well after three to four years. AI must become an essential part of the user experience to motivate them to make a switch.
Realme's departure marks the end of an era of focusing on hardware specifications and price wars. In the future, only those brands that can integrate AI into indispensable services will remain successful.
In Summary: Realme's withdrawal from the Chinese market reflects the industry's transition from growth-oriented expansion to competition based on core technologies (AI). The elimination race has begun, and those brands that fail to develop new value propositions will be eliminated.