Gionee— The Rise & Fall of China’s ‘Nokia’
By: Lance Ng
Tags: Business, China, Technology, Mobile, Tech

Once China’s top domestic mobile brand, Gionee’s creditors are forcing the company to liquidate.

On November 23rd, 2018, as the western world celebrated Thanksgiving, China’s Gionee faced its bleakest day in its 16 years of history.

The company’s debt financiers, to whom the company is rumored to owe billions, have unanimously agreed at a creditors’ meeting to force the company into liquidation.

At its peak in 2010, Gionee was ranked #1 in domestic mobile phone sales. Only Nokia and Samsung sold more phones in the China market.

Even in 2016, it still shipped 40 million phones, only 2 million units less than Xiaomi. Now its fate appears to have been sealed, and bankruptcy seems imminent.

Meteoric Rise

Gionee was founded by Liu Lirong in 2002. By the end of 2003 the company had broke CNY 800 million (USD 115 million) in sales. The next year sales doubled.

By 2005 Gionee was given the license to produce its own mobile handsets. That same year, the company hired Andy Lau to endorse its brand. (He’s one of the most famous Hong Kong movie actors of our times.)

A commercial was shot by China’s top director Feng Xiaogang, and released with the tagline “Conquering the world with gold standards”. (The company’s Chinese name comprises of two words that means ‘gold’ and ‘established’)

Liu’s rise was just as impressive. He graduated from university at 22 and became vice president of a major electronics maker at the age of 25. He was implicated in a smuggling case which ended his corporate career and landed him under house arrest for half a year.

After the case was over, with support from his old distribution partners he founded Gionee at the age of 30.

Gionee founder Liu Lirong

Dramatic plunge

Gionee’s decline started just as it hit its sales peak in 2010, when the iPhone begun the era of smartphones.

Like Finland’s Nokia, it was slow to adapt to the popularity of smartphones and made mistake after mistake when it did.

The company moved away from its traditional brand positioning and appeal as a ‘serious, business use’ phone and tried unsuccessfully to go after the trendy and young buyers’ market. When it finally settled back to its heritage, it tried to price its phone higher than the iPhone to position itself at the high-end of the market — a devastating mistake.

As sales declined and it got more desperate, instead of being conservative it upped the ante on its marketing efforts, spending huge to sponsor popular TV shows. Gionee reportedly spent more than CNY 6 billion (USD 870 million) alone in 2016–17 on marketing.

Hong Kong superstar Andy Lau in a Gionee ad during its heydays

Meanwhile, newer competitors like Xiaomi, OPPO, Vivo and Meizu were all catching up or even overtaking. The company’s sub-brand IUNI, set up to compete with internet sellers like Xiaomi and Honor (sub-brand of Huawei), filed for bankruptcy in July 2016.

By 2018 the troubles were bursting at the seams and the press was reporting woe after woe.

Gionee reportedly owed its employees bonuses from 2016 and many suppliers’ invoices for more than a year. It retrenched thousands of workers twice — in March and September, and sold its India operations for a paltry sum to local partners in June 2018.

Liu himself was reported to have had his assets frozen by a district court in January 2018, including his 41.4% shares in Gionee. Rumors spread that he had lost over USD 1 billion at the casinos, to which the company denied. Articles of suppliers meeting him in Hong Kong to negotiate payments, where he had been reportedly staying for many months, surfaced in the media.

Things came to a head in end October 2018, when CNY 10 billion (USD 1.44 billion) worth of privately syndicated bonds fell due. Gionee was only able to redeem about half of the amount. Creditors for the outstanding amount decided to push for liquidation.