Why Chinese Car Giant Geely Bought Struggling Smartphone Maker Meizu

Chinese billionaire Li Shufu’s Geely has acquired Meizu, one of China’s earliest smartphone makers, in a move expected to help the Chinese car giant develop vehicles with features that are linked to the power of handsets.

Hubei Xingji Shidai Technology, a subsidiary of Geely, completed the purchase of a 79% stake in Meizu. Geely, which also owns Volvo and a stake in Mercedes-Benz Group, sees the acquisition mainly as a way to absorb technology for modern vehicles, analysts say. They note that Meizu uses its homegrown Android operating system, Flyme, which is customizable and lets smartphone users install non-Android apps.

“By acquiring the entirety of Meizu, Geely would have access to Meizu’s Android-based operating system, the Flyme OS, which can help Geely gain a front-row seat in key insights on the feasibility of intelligent and autonomous driving,” says Yang Wang, London-based senior research analyst at Counterpoint Research.

“It seems to all the players agree that the car will become a more standard piece of hardware, with software being the bedrock for future cars and software upgrades, experiences and data being the key differentiator between brands,” Wang adds.

In another bid to work with consumer electronics, Geely formed a manufacturing venture last year with Taiwanese assembler Foxconn Technology.

The Meizu acquisition goes against a trend of big-name developers in consumer electronics buying into electric vehicles over the past three years. Sony, for example, announced in March it was joining forces with Honda to develop electric vehicles. “Once a leader in consumer electronics, Sony has some advanced software and sensor offering in its arsenal which will be used to make a mark in the automotive industry,” Counterpoint senior research analyst Soumen Mandal said of Sony’s electric vehicle plans.

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Geely last year released the Geometry EX3 electric car, which it called its most affordable EV release to date at $9,200. Its Zeekr electric-car brand created last year may run the Flyme OS, a Geely fan club website says.

Meizu could be looking at options outside the phone space, too. Its handsets commanded less than 1% of the Chinese market in the first four months of 2022, Wang notes. The company, which was founded in 2003, reached a China market share of nearly 17% in 2017 before falling behind other Chinese brands. Meizu says it now has 600 retail outlets plus 1,000 employees.

The smartphone developer’s chairman, Shen Ziyu, has been quoted saying his company and Geely believe they can find customers by offering differentiated products, particularly premium ones.

Smartphones and modern vehicles show signs of working in tandem, says Neil Mawston, executive director with market research firm Strategy Analytics. “Smartphones are a gateway to the future car,” he says. “Smartphones can unlock doors, start engines, deliver unlimited content to the head-unit, park the vehicle and remotely control a battery charger.

“The Geely-Meizu deal may be a nod to Apple,” Mawston adds. “If Apple launches an iCar in the future, it will surely be integrated with the iPhone, iPad, Watch, and any VR (virtual reality) or AR (augmented reality) glasses. Geely could be smarter than we realize.”