HTC and Samsung in the past, Apple today: The unspoken rules that mobile phone manufacturers will understand only after the cold winter

On June 7, 1742, German mathematician Goldbach proposed a bold conjecture in a letter to the famous mathematician Euler: any even number not less than 4 can be written as the sum of two prime numbers. This is the famous Goldbach conjecture.

On December 24, 2018, HTC removed all products from its Tmall flagship store during Christmas Eve, leaving only one mobile phone and a data cable, which is quite similar to the two prime numbers in the Goldbach conjecture. Considering HTC's unsatisfactory performance this year and the recent "step-by-step" sales of the entire mobile phone industry, people can't help but speculate whether HTC and the entire mobile phone industry are in crisis.

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On December 26, HTC responded that the removal of products from the Tmall flagship store was due to adjustments to store operations and channel integration. Currently, the author is more inclined to the official statement of HTC. The reason is that HTC Chairman Wang Xuehong mentioned slogans such as "Don't lose heart, next year will be better" in her speech on Christmas Eve, which seemed to be cheering for HTC's mobile phone division. From this point of view, HTC is really adjusting its business this time, but these cannot stop people from speculating on the "Goldbach" conjecture about HTC and the entire mobile phone industry.

It only takes three steps to go from a King to a Bronze

The "one data cable, one phone" incident has invisibly promoted the HTC brand, which has been fading in the mobile phone industry. This is an unexpected gain for HTC. It is really sad that the once famous HTC now relies on an "accident" to increase its brand awareness.

According to data from a research institute, HTC's smartphone shipments this year are expected to be around 2 million, which is the same size as small and medium-sized manufacturers such as Meizu and OnePlus. The former king of the Android phone industry is far from the king in the new season, and is even out of touch with the king. What exactly is the reason that HTC phones have gradually become "bronze"?

First, the products lack competitiveness. In the 4G era, HTC phones are far behind other first-tier mobile phone brands in terms of cost-effectiveness, user experience and innovation. Let's talk about the cost-effectiveness of HTC phones first. Since Xiaomi first applied the concept of cost-effectiveness to the smartphone industry in 2012, cost-effectiveness has always been an important way for major mobile phone brands to gain market share. Over time, Chinese consumers, especially students and newly employed white-collar workers, tend to buy phones with high cost-effectiveness. However, HTC phones are not cost-effective. For phones with the same configuration, HTC phones cost 5,000 yuan, while other domestic phones only cost less than 3,000 yuan. HTC's competitiveness is obviously insufficient.

Let's talk about HTC's user experience. Although HTC's mobile phone system close to the original Android system is good news for users who like simplicity, HTC's system close to the original Android system lacks functionality and playability for most ordinary users, especially those in mainland China. In terms of convenience, it is inferior to domestic deeply customized systems such as MIUI, flame, and EMUI, and is even inferior to Apple's iOS system. Therefore, overall, HTC's system affects the user experience.

HTC's lack of innovation is also an important factor that leads to its lack of competitiveness. HTC's insight into the new trend of the mobile phone industry was slow, and it was at a disadvantage in competition because of the generation gap. For example, when it entered the post-full-screen era in 2018, the design of HTC's first flagship U12 was still stuck in the 18:9 of the full-screen era before 2017, while "OV Huami", Apple and Samsung, etc. in the same period have already launched notch screens, water drop screens, sliding screens and even "magic eye screens". Considering various factors such as cost-effectiveness, user experience, and innovation, it is not surprising that HTC's mobile phones are less competitive.

Second, HTC's product positioning is unclear. HTC's products are positioned in the mid-to-high-end, and it wants to compete with brands such as "Apple and Samsung". Therefore, it gave up the low-end product line and fully developed mid-to-high-end products. But in fact, HTC's brand value is not enough to support the development of high-end products across the board. In the latest "Global Top 500 Brand Value List" released by Brand Finance, a well-known British consulting company in 2018, Samsung ranked fourth in the world, while HTC did not make the list. Even a strong company like Samsung has not given up its low-end product line. The product positioning of HTC products that does not match its brand value is an important reason for the decline in HTC's mobile phone sales.

Third, HTC’s strategic focus shifted to AR/VR, and its investment in mobile phones was insufficient. HTC is also a company that is good at seizing the opportunity. When the AR/VR trend started, it invested part of its resources in the AR/VR industry and reduced its investment in the mobile phone business. This year, HTC completely divested its mobile phone business and invested all its resources in AR/VR, which became the “last straw that broke the camel’s back.”

Three Proponents of the Goldbach Conjecture

The decline of HTC's mobile phone business is just the tip of the iceberg. Currently, the entire mobile phone industry is gradually declining in both sales and shipments, which makes people wonder whether the mobile phone industry has entered a cold winter period. The answer is yes, and the performance of several mobile phone giants that have emerged in the mobile phone industry in recent years can show clues.

First of all, Samsung, once the absolute king of the mobile phone industry, has not only suffered a sales collapse in Greater China, but also a grim situation in the global market. Samsung's mobile phone market share in China has dropped from more than 20% in the past to less than 1% today. According to data released by market research company SA on August 3, Samsung's mobile phone market share in China fell to 0.8% in the second quarter of 2018, falling out of the top ten in terms of shipments and ranking 12th. Samsung's global market share has also been declining. According to data from the China Industry Information Network, Samsung's global market share was still 45% in the third quarter of 2016; two years later, the 2018 global market report for the third quarter released by data research organization Counterpoint Research showed that Samsung's market share was only 19%.

Is the global decline of Samsung mobile phones really caused by the Samsung Noto 7 "explosion gate"? The answer is of course no. The real reasons for the decline of Samsung mobile phones are other. First, the loss of the huge Chinese market has lowered Samsung's share in the global mobile phone market; second, Samsung's mobile phone localization is not thorough enough. For example, its mobile phone system lacks localized elements whether in China or other regions, and is not very adaptable to local consumers' usage habits. These reasons combined have led to the global collapse of Samsung, a generation of mobile phone giants.

Next is Apple, another king in the mobile phone industry, which also showed signs of decline in 2018. Apple is the "evergreen" in the mobile phone industry and the brand with the highest reputation and profits among smartphones. Everything seems so impeccable. However, the stock market does not lie and it still punctured the "window paper" that covered the decline of Apple's mobile phones. In December 2018, Apple's market value almost fell below 700 billion US dollars. Behind the sharp drop in market value is investors' concerns about Apple's mobile phone business.

Specifically, Apple's market share in China dropped from 9.2% in 2017 to 6.7% in the second quarter of 2018, and its global market share dropped from 14.7% in 2017 to 12.1% in the second quarter of 2018. In addition, Apple's global shipments were surpassed by Huawei in 2018, ranking third.

Apple is stuck in the quagmire of declining sales, not due to a decline in quality or the "xx gate" incident, but mainly because its mobile phone innovation is getting weaker and weaker. This coincides with the era when domestic mobile phones are experiencing a surge in innovation, such as the world's first full-screen phones. The lack of innovation has relatively reduced the competitiveness of Apple phones, ultimately leading to more and more users choosing to leave it.

*** is ZTE, the leader of the "China Cool Alliance" in the 3G era. Its market share is so small that it can only be classified as "others". ZTE's decline in mobile phones is due to its slow response to the arrival of 4G and its failure in the low-end market.

Three conclusions of the Goldbach conjecture

Whether it is the continuous decline of HTC and ZTE, or the decline of Apple and Samsung in the past one or two years, it reflects that most smartphone companies in the world are facing the problem of stagnant sales. According to the statistics of Xuri Big Data, the total shipment of smartphones in the first three quarters of 2018 was 1.06 billion units, a decrease of 3% compared with the same period last year. HTC's decline in all products may be due to the development trend of the mobile phone industry and preparation for the "spring" later.

First, the mobile phone industry landscape changes slightly every three years and significantly every five years. The mobile phone industry landscape is about to undergo a major change. The mobile phone industry has formed various patterns since its inception, such as the early dual-strength pattern of Nokia and Motorola, the later dual-strength pattern of Samsung and Apple, and then the "domestic four strong + Apple and Samsung" pattern. In the Chinese market, it is "China Cool Union" to "OV Huami". Judging from the length of time different patterns have existed, the mobile phone industry landscape has changed slightly every three years and significantly every five years. Today's "OV Huami" pattern has been stable for more than two years, and it is almost time for the pattern to change. HTC may also want to use this rule to stand out in 2019.

Second, the smartphone industry will usher in a "short spring" from 2019 to 2020. From the development history of the mobile phone industry, each communication revolution can bring new opportunities for the development of the mobile phone industry. From the 2G to 3G era, feature phones such as Nokia were widely developed, and from the 3G to 4G era, smartphones such as Apple and Samsung flourished. When the commercial use of 5G kicks off in the second half of 2019, the mobile phone industry will usher in a short spring. HTC's adjustment of its current mobile phone resources to next year is probably also waiting for the opportunities brought by 5G.

Third, the Matthew effect in the mobile phone industry is cyclical. There is no doubt that the Matthew effect in the mobile phone industry is gradually strengthening. According to a report released by market research firm Gartner, the top five mobile phone manufacturers accounted for 59.4% of the global mobile phone market share in 2017, and this figure was 60.4% in the third quarter of 2018, an increase of 1%. However, the Matthew effect in the mobile phone industry is similar to the market structure, and both are cyclical. In 2019, as the mobile phone market structure quietly changes, the Matthew effect in the mobile phone industry will also be temporarily weakened. Therefore, the opportunity for HTC will become greater, and the product will be temporarily reduced to prepare for 2019.

In general, the Goldbach conjecture caused by "a mobile phone and a data cable" proves that the development of the mobile phone industry is traceable. Although the current mobile phone industry has entered a trough period, it will slowly recover after 2019. 2019 will be a year of both opportunities and challenges for the mobile phone industry.