Local smartphone brands Oppo and Vivo have taken the Chinese smartphone market by storm in the past few years. During 2016, both brands -- subsidiaries of BBK Electronics -- surpassed Apple's (NASDAQ:AAPL) iPhone in terms of unit sales in China.

Last week, Oppo and Vivo founder Duan Yongping talked about how Oppo and Vivo took the China sales crown from Apple. "Apple couldn't beat us in China because even they have flaws," he said in an exclusive interview with Bloomberg. "They're maybe too stubborn sometimes. They made a lot of great things, like their operating system, but we surpass them in other areas."

However, it's too early to know whether the Oppo and Vivo brands will have staying power. Moreover, if they have surpassed Apple in terms of unit sales in China, it's only because Apple is letting them win that battle.

Oppo and Vivo are rising rapidly

Just five years ago, Oppo and Vivo together held a measly 3% of the Chinese smartphone market. As recently as 2014, Xiaomi (and to a lesser extent Lenovo and Huawei) was the top domestic smartphone brands in China. Oppo and Vivo were just also-rans.

However, both brands' sales have surged since 2015, thanks to their investments in building a massive retail presence, particularly in smaller cities. The smartphone market in China's tier 1 cities is already quite mature, but in smaller markets, there are still lots of first-time buyers -- and thus, more growth opportunities.

An image of a woman on an OPPO R9 phone screen

Oppo's flagship R9 phone has become a huge hit in China. Image source: Oppo.

Oppo and Vivo really hit their stride in 2016. Combined shipments for the two brands in China more than doubled to nearly 150 million units. For the full year, Oppo led the market with a 16.8% shipment share, while Vivo was in third place with 14.8% market share.

Meanwhile, Apple's shipments in China fell by 23% last year to 44.9 million units. That left it in fourth place with a 9.6% share of the market.

Apple is earning all of the profit

Many pundits have lamented Apple's loss of market share in China to rivals like Oppo and Vivo in the past two years. Duan Yongping attributes his brands' success largely to their willingness to provide high-end features at a reasonable price.

Apple hasn't ignored this strategy because it is stubborn. It has done so in order to maximize its earnings. (And to some extent, to protect the long-term value of the Apple brand.)

Indeed, while Apple posted its first-ever annual decline in iPhone sales last year, it still cleaned up in terms of profitability. For 2016, Apple captured an incredible 79% of global smartphone industry profits with just 14.5% market share.

The iPhone 7 Plus in five different color options

Apple still rakes in the vast majority of smartphone industry profit. Image source: Apple.

Apple probably earns at least $300 of profit on each high-end smartphone it sells in China. In order to appeal to more cost-conscious consumers, it would have to either offer a cheaper, lower-quality iPhone model or create a lower-priced iPhone with all (or nearly all) the same bells and whistles as its flagship devices.

In the first case, Apple would risk tarnishing its brand -- and it still might not gain that many incremental sales. The second strategy would probably drive a big increase in unit sales, but it would cannibalize sales of Apple's pricier phones due to a lack of differentiation between them. If Apple were earning $50 in profit per phone sold in China due to price cuts, it would need to sell six times as many iPhones as it does now just to make the same amount of profit.

Oppo and Vivo have offered a great mix of price and quality in order to gain market share. However, BBK is a private company, so nobody knows whether it is making much money with this strategy.

Can China's home-grown brands maintain their success?

It's also not clear that Oppo and Vivo will be able to maintain their recent sales gains. Not too long ago, Xiaomi seemed to be on the road to dominance in China -- yet it has run out of steam in the past year or two.

In fact, Apple analyst Katy Huberty recently noted that survey evidence points to low brand loyalty among Oppo and Vivo customers. As of last spring, just 24% of Oppo smartphone owners planned to buy another Oppo device when it comes time to upgrade. For Vivo smartphone owners, the figure was 19%.

Many of those Oppo and Vivo customers are planning to defect to Apple. In that same survey, 24% of Oppo owners and 38% of Vivo owners said they wanted to get an iPhone as their next smartphone. The iPhone functions as a status symbol in China, so it's not that surprising that many consumers aspire to trade up to the iPhone when they can afford one.

A market-share shift back toward Apple is likely to begin this fall, when Apple starts selling its 10th-anniversary iPhone. Chinese consumers are particularly keen on buying phones that look distinct from older models, and this year's new iPhone will fit the bill, as it is expected to introduce the first major design change since 2014.

There will always be room for Chinese smartphone vendors like Oppo and Vivo. In a country where an iPhone costs as much as a month of salary for many workers, it's understandable that plenty of consumers will settle for lower-cost options. But talk of Oppo and Vivo outmaneuvering Apple in China misses the point.

Adam Levine-Weinberg owns shares of Apple and is long January 2018 $90 calls on Apple and short January 2018 $140 calls on Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool is long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool has a disclosure policy.