How to Save a Small China Smartphone Manufacturer from Ending up

Monday, March 28, 2016

post img
View More

Actually the mobile phone market in the year of 2015 is undoubtedly very competitive, in our previous reports, we have also reported the news that many mobile phone vendors have gone bankruptcy. Small and Medium mobile phones manufacturers are suffering from more and more pressure to survive the harsh competition. Last January, the news has been verified that BFB (a small mobile phone manufacturer in China) was closed down. Last October, Dakele mobile phone founder announced that he would leave the enterprise and Dakele bankruptcy took place. Last December, K-Touch was reported of poor mobile phone sales record and employees had to be on leave during to the terrible turnover. These surprising news make us think about the problem of which way Chinese mobile phone should take.

Because of the bad competition in China smart phone market, the development is growing very slowly and all the good resources are gathering to big enterprises. Some small vendors are closed down for good rapidly.

Phenomena NO.1: Polarized

IDC data reveals that Chinese mobile phone Huawei, Xiaomi, OPPO and Vivo have taken up 45% of Chinese smart phone market in 2015, comparing to 2014, the rate is 10% higher. However, China is now turning into a more mature market, smart phone yearly sales volume is 1.2% higher comparing to last year. In 2014, it goes up at a speed of 20%. Accordingly, we can see that mobile phone four giant is now gradually seizing the market share.

MediaTek vice executive manager and COO president Mr. Shangzu Zhu told his point of view to the Sohu Science and Technology column that MediaTek would always keep an eye on this problem and would evaluate clients’ financial status.

Mr. Zhu said, this year you can see, there are several greater amount of domestic mobile phone brands, clearly it is centralized tendency. However, no increase of the total market takes place, only single-digit growth.  Shangzu Zhu claimed that the use of MediaTek chip count, Xiaomi is doing fine, while Huawei cell phone is in share upward. He Gang, president of Huawei Terminal phone product line, said in an interview, that Sohu science and technology, and as Mate7, Mate8 supply is indeed a problem, Huawei factory production accounted for only 10%, 90% and other products from Foxconn foundries to do. As for the current consolidation as well as some domestic mobile phone manufacturers supply chain "on foot" problem, Mr. He just said Huawei will select quality suppliers to make sure of a balanced and steady development for brands, channels and services.

Phenomena NO.2: Small brands channels are extrude.

According to Chinese mobile phone League Secretary General old Yao, in 2015, Huawei, OPPO Vivo these  three mobile phone vendors’ profits are more than one billion US dollars (about 6.4 billion yuan), in particular, Huawei cell phone profits will exceed 100 billion yuan.
Lei Feng, chief marketing officer, vice president of global Vivo revealed that the phone line channels involved in logistics, efficiency, distribution, especially county and township (four, five markets) that store maintenance more difficult. Vivo only in 2010 - 2012 transition, including all agent company, took a huge amount of money to support. For example, the Henan market comes up with nine million yuan to subsidize, so the retailer agents do not lose money, it has become a mature business model, Vivo still continue to do in this business mode in another 3--5 years. 

Huawei cell phone market ambitions for the next line is constantly increasing, beginning this year, Huawei is also increasing brand experience shop, core retail area, the construction of the counter. At present, Huawei has been the core business district in China's major cities have established more than 300 shop experience (except the county level), more than more than 10,000 area counters. For Huawei, this is probably not a small investment, in addition to high rents, generally do not experience the store to generate sales revenue.

Huawei’s ambitions for the offline market is constantly expanding, in the beginning of this year, Huawei is also increasing the construction of experience shops, core retailing areas, and the counter. At present, Huawei has been the core business district. In China's major cities, Huawei have established more than 300 shop experience (except the county level), more than more than 10,000 area counters. For Huawei, this is probably not a small investment, in addition to high rents, generally do not experience the store to generate sales revenue.

Phenomena NO.3: De-stock "price war" intensified

According to IHS Technology statistics, Vivo and OPPO had achieved 39.9 million and 38.1 million shipments, ranked among the Chinese market shipments as fourth and fifth, behind Huawei and Xiaomi in the domestic mobile phone. OPPO brand even Vivo’s combined shipments exceed the combination of Huawei and Xiaomi. Recently, however, there is news that this year, OPPO, Vivo dealers in order to complete the task, channels, and the price has been corrupted.

It is reported that the channel profit selling mobile phones has two parts, one is to make the difference between the selling price and the purchase price, a rebate is to complete a certain number of tasks after. "Agents will give us a purchase price, for example, give us 2,000 yuan, the official price is 2400 yuan online, we can follow the 2400 yuan to sell. In addition, sales of certain indicators have rebates, such as selling enough 30 per phone back to $ 50, also at least 30 yuan season and off-season task indicators are not the same, such as off-season sell enough 15, 20 have a rebate. "

Low-end domestic mobile phone price war bring disaster to the entire supply chain channel, MediaTek have to target high-end mobile phone chip supply, not only a waste of resources, but not conducive to the development of chips and other suppliers. One for eight years, told Sohu buyers chip technology, the chip can not be sold for the price of high-end price, which makes them feel increasingly small profit margins Road. "Due to the low end of the price war Xiaomi, kidnapped MediaTek, the analysts pointed out that due to the low end of the price war has been

to doing Xiaomi, huge purchases, chip manufacturers have to deal with stock pressure.

A chip supply insiders said the 10-year, mobile phone rebate is superficial, what is easily overlooked is the high-performance mobile phones to sell at a loss, for high-end chips but then the low-end configuration of the phone, resulting in a whole chain unhealthy development. IResearch analyst Linren Xiang predict the near future, the mobile phone industry will consolidate the position of a few large companies: Large manufacturers suppliers have a stronger bargaining power, can achieve lower production costs than smaller companies. "

As a result, you can not even lower the price of a small mobile phone manufacturers were forced to close. Oneplus one Liuzuo Hu lamented to reporters, and now the domestic mobile phone market environment is too harsh, a bit like a slaughterhouse, others believe it was slaughtered. "Elephant dance, ants suffer, for a large company may not be added, however, we believe it is likely to be a plus friendly fire." This is not just Liu Zuohu a person's feelings, many have lamented the Friends, the domestic mobile phone market competition is fierce, and small brands have been eliminated just a matter of time great.

Xiang Ligang communications industry observers believe that the domestic body to compete more and more, "now certain well-known domestic mobile phone brand no less than 20, with less well-known, it is estimated more than 100 are" so many competitors gathered, plus they basically do not have core competitive advantage, so the price has become one of the few means of competition.

"Closures" may continue

Let alone the domestic mobile phone "polarization", stock issues and the price war intensified the situation, that the chiefs phone, mobile phone manufacturers can survive 3-5 become a "consensus" 2016 mobile phone "closures" may continue to be staged.

1, "Speculation" is decreasing

Previously, Huawei CEO Yu Chengdong inference, future global mobile phone brand may be only 1-2, but Vivo Lei Feng, vice president of Global, said, can not enter the top five mobile phone brands definitely out, remember the user's mobile phone brand is also 3-5 a. Jin Liu Lirong, chairman believes that "the future of the global mobile phone brand is not a two, nor is 20, but a 6-10 brands which is more reliable."

In China old mobile phone manufacturers like the ZTE Huawei Coolpad and Lenovo have promised to pursue the "machine sea tactics," mobile phone brand overnight lead reduced by 80%. Nubian phone co-founder bought the East China Sea revealed that two years ago, China has about 500 brands of smart phones, but now reduced to about 100 numbers.

In addition to reducing foreign brand mobile phone manufacturers are rapidly reduced.

Sohu interview science and technology channel, made "three-line" phone is disappearing at an alarming rate. Internet phone, except mobile phones in some peppers can also see three or four markets, grand mobile phones, mobile phone Mito, Disney phones, Han Geng Release Phone, Cui Jian's blue bone cell phones, and Wang Feng and Kolena Release custom machine, and Jay Chou’s uGate, now have already faded out of sight.

Feng Xing music, as the phone president in an interview with Sohu Science and Technology said in an interview, "the domestic mobile phone market peaked, competition intensified industrial structure will be centralized in the process, natural finish survival of the fittest. In addition, the manufacturers expand their business extension, introduce other category products become a trend, meaning everyone in the layout of the emerging markets. "

2, Capital "burn" can not be sustained

Recently, Suning Run East 1.93 billion yuan investment subsidiary of ZTE Nubia, shares accounted for 33.33%, after Alibaba invest $ 590 million stake in mobile phone manufacturers Meizu, Baidu investment in Lenovo's magical plant (Lenovo ZUK phone) and 360 television and music Cool and other investment shares and, therefore, triggered a boom in the mobile phone industry investment.

Some industry analysts believe that, compared to two years ago, Meizu shipments of one million, after investing in Alibaba shares, made no small Meizu sales growth. 2015 "double October", depending on the music, the odd cool, Meizu Metal, etc. come to the fore in terms of volume, the use of injection of funds (subsidies change direction) have a role in the amount of the hedge. However, there is no core competitiveness, by injection of "burn" reluctantly support, I am afraid not last long.

More alarming is that, between the interests of the game already, "not bad money," the major shareholder, so that the original can survive through innovative phone company suffered heavy losses. According to Cool announcement, only the "odd cool war" Cool Group to bring at least more than 200 million US dollars loss.

Competition in the mobile phone industry competition to the capital, a large Coke phone encounter funding strand breaks, this may be an important cause of the failure. Large Coke phone's founder and CEO Ding Xiuhong said, "We face the greatest difficulties - financial pressure, they did not quite make it." Business Information display, large phone-Cola parent company registered capital of 30 million yuan, mainly by shareholders natural constitution, and no record company or investment institutions. There are also reports that large cola major investor in Nietzsche mobile phone, which had for four to six line market open channels of low-end brands, but later disappeared due to financial pressure.

3, Supply chain "crisis"

The crisis spread to the mobile phone manufacturers supply chain crisis, a vicious circle. We know that the evening of 8 October 2015, Shenzhen Fu Chang crashing down mobile phone supplier, Huawei, ZTE is this "sudden collapse" of the victims. However, everyone knows, big companies usually pick Fuchang similar such electronic scale enterprises, small fierce competition between suppliers."Select the quality suppliers, resulting in many small suppliers were eliminated." One industry sources, similar to Huawei, Xiaomi such a big brand manufacturers will not owed upstream capital, but concentrated in the hands of Foxconn and other advantages of the supply chain, and small foundries face the risk of a small mobile phone manufacturers, encountered a similar large Coke said close to closing the mobile phone manufacturers even greater risk, leaving a small supplier uncomfortable, some small mobile phone manufacturers owed money in most 3-6 months, even more than a year.

Smartphone industry , China phone makers

Leave your comment