Different stages of development: Apple standards should not be used to require domestic mobile phones

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The reason why I found this article after several days is that in the era of mobile Internet, as an old media person, my reading position has naturally shifted to mobile phones. Clients, Moments and Weibo basically meet my daily news and information reading needs. It is also because of this that mobile phones have changed from a communication tool to a multi-purpose digital assistant. I once compared mobile phones to another Wife! Now, I think no one doubts it. It is also because of this that the annual global mobile phone shipments of 1.6 billion have become a supermarket that many companies are competing for. In view of the large differences in data from various consulting agencies, I use my own algorithm to interpret the problems reflected at the digital level, rather than emphasizing the numbers themselves.

Market share of domestic mobile phones under the 80/20 rule

If we use the 80/20 rule to simply break it down, with 1.6 billion as the benchmark (the average of the past three years, including feature phones. In 2014, there were about 1.2 billion smartphones, which basically meets the inverted 80/20 rule), the global high-end phone market is 320 million units per year (800 US dollars), which is basically dominated by a few manufacturers such as Apple, Samsung, and Sony. 256 million units are mid-range phones, and 1.024 billion units are low-end phones. Although it is a bit absolute, I think it is pretty close. My boundary for mid-range phones is 500 US dollars, which is 3,000 RMB. This may be somewhat different from the division of domestic manufacturers. In China, 3,000 yuan may be considered high-end. Therefore, we can also see that the market truly occupied by domestic companies is the market below 3,000 yuan. If we also calculate according to the 80/20 rule, domestic companies account for as much as 819.2 million units (including feature phones), which is the total number of mobile phones produced by domestic companies. The market above 3,000 can be ignored in terms of total amount!

The reason for analyzing this set of data is to talk about the article mentioned at the beginning, "Domestic mobile phone manufacturers are abandoning the basics and pursuing the trivial: seeking market share instead of reputation". This article has a high number of readings and comments, which shows that its views have resonated with many people. The core of the article is to criticize my country's mobile phone companies for abandoning the basics and pursuing the trivial. It uses a certain technological innovation of Apple to criticize my country's mobile phone companies for not knowing how to develop at the technical level, but focusing on various marketing levels, and pursuing market share unilaterally with low profits. I agree with the basic views of this article, and I have mentioned these issues many times. But I think that the article still ignores a core issue. Each company has its own way. You can't ask Chinese mobile phone companies to do this and that by Apple's standards. Because of different starting points and different environments, the strategies of Chinese companies are naturally different. In addition, any fully competitive field will eventually be dominated by only a few players. The current chaos in China's mobile phone industry is only a short-term phenomenon during the explosion of smart phones in the past three years, and it is also a special phenomenon of the explosion of China's mobile Internet. It can be said with certainty that 2015-2017 will be three years to eliminate some companies and reshape the global mobile phone landscape.

Therefore, I think that "seeking market share instead of reputation" is a false proposition at this stage (of course, I am not criticizing the author of this article, but just saying that this proposition only sees the surface phenomenon and generalizes). It does not mean that Chinese companies do not seek reputation or profit, but that they have not accumulated enough and their capabilities are not strong enough. They have not reached that stage yet. The practices of individual companies are not all that Chinese mobile phone companies do. There are also reasons for doing marketing (in fact, marketing is also very important, especially at this stage)! Only by recognizing the overall situation of domestic mobile phones and making preparations for long-term development can we realize the possibility of having both market and reputation mentioned by the author.

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Classification of 20 domestic mobile phone companies

There were once hundreds of companies in China making mobile phones (more than 500 during the heyday of copycat phones). By the time the era of smart phones entered the elimination stage, there were about 100 companies that were registered. According to the 80/20 rule, there are no more than 20 companies that have their own brands or can be remembered by media reporters (according to my personal impression, Huawei, Xiaomi, Lenovo, Coolpad, ZTE, TCL, OPPO, VIVO, Meizu, Tianyu, Lephone, Xiaolajiao, OnePlus, Haier, Hisense... I can't remember them anymore). Therefore, it can be said that there are only so many companies that can speak out through themselves, the media, and social networks. The shipments of these 20 companies basically account for 80% of the shipments of domestic mobile phones.

Therefore, to study Chinese domestic mobile phone companies, you only need to study these 20 companies. According to my personal understanding, these 20 companies can be basically divided into five categories: telecommunications equipment (Huawei, ZTE, Coolpad), IT equipment (Lenovo), home appliances and derivatives (TCL, Haier, OPPO, VIVO, etc.), Internet brands (Xiaomi, OnePlus, etc.), and copycats (Tianyu, Lephone, etc.).

So, what do these five types of companies rely on to conquer the world? They can be roughly divided into the following four categories.

Technology-based winning category: mainly refers to telecommunications equipment, represented by Huawei and ZTE, which rely on naked technical features and comprehensive cost control capabilities to win the world. Therefore, it can be said that telecommunications equipment mobile phone companies in my country belong to the technical faction. If we only talk about patents, Huawei and ZTE also have the most. Coolpad is relatively weak, so it gave up telecommunications-related equipment and focused on mobile phones. Although it is focused, it is far behind the first two, and too much telecommunications thinking also restricts Coolpad's development.

Large-scale manufacturing: IT (Lenovo) and home appliance companies (TCL, etc.) can be classified into this category. These companies are basically centered on large-scale manufacturing and cost control. Although Lenovo and TCL have gained more market share through internationalization strategies and mergers and acquisitions, they have also obtained a lot of patent reserves. But you have to know that relying on capital to purchase technology is generally just reinforcement, and core technology is difficult to obtain with capital (unless you spend a lot of money, but the seller is not stupid and knows the purpose of keeping the patent in his hands). I believe everyone should be very clear about Lenovo's acquisition of Motorola. And TCL's acquisition of Palm, etc., can only be said to be an outdated acquisition. OPPO and VIVO are similar to Coolpad. They have also left the home appliance system to focus on the mobile phone field, and they have indeed put a lot of effort into innovation and marketing. However, they are very similar to HTC. They lack core technology and are more micro-innovations and characteristics. They can be regarded as fighting for a way, but the shortcomings are also very obvious.

Internet model category: This category should be the core competitiveness of the so-called Internet brands. In particular, Xiaomi has brought the Internet's capabilities to the fullest, and has achieved quite good results by relying on business models and brand marketing without much technical accumulation. Nowadays, even good wine needs to be hidden in a remote alley. The core of marketing is to let the market and consumers get in touch with the product first, and then gain word-of-mouth and sustainable development. Subsequent companies such as Hammer and OnePlus all use these models. This is also true for the so-called Internet sub-brands of several large companies. It's nothing more than everyone learning from Xiaomi, but many have been led into the ditch.

Shanzhai Xiashan category: There are only two ways to win, one is price advantage, the other is special channels. I won’t say much about this, I believe everyone is very clear about its survival model. Overall, Shanzhai Xiashan category has a large market share in the domestic and international markets because of its unique competitive advantages. In a multipolar society, it has its survival space.

Four common characteristics of domestic mobile phone companies

So, what are the differences or similarities between these companies and the international brands we are familiar with, such as Apple, Samsung, etc.?

***, there is no core technology for mobile phones! What is the core technology of mobile phones? Simply put, it is the two engines, the core chip (AP+CP) and the operating system. In the past two years, Huawei is the only company that can do something in the core chip. You can see my previous article "Looking at Huawei's Box Strategy from Kirin 930". Of course, it does not mean that other things are not important, but that other things are completed by the entire industrial chain. For mobile phone companies, the key is to see your integration capabilities. As for the cross-industry chain integration capabilities like Apple, it is still far away, so let's save it.

Second, brand awareness is very low, and some even have no brand awareness at all. I remember an Internet celebrity told me that it is easy for international brands to destroy Chinese brands, and a price war can do it all. From a side view, it means that Chinese corporate brands are very fragile. Because of this, the products of enterprises in many fields in China are exchanged for market share with high cost performance. For example, although Xiaomi uses various marketing models to build its brand, its core is still based on high cost performance products. This is destined to make most domestic mobile phones have very thin profits. It is also a so-called ending of having market share but no profit. At present, Huawei and Xiaomi are the only two mobile phone companies that can really make achievements in domestic and global brand operations. For example, Huawei became the first mainland Chinese company to be listed in the 2014 Global Most Valuable Brands List 1000 Brands announced by Interbrand. But this brand awareness is only a high improvement compared with other domestic companies, and there is still a big gap compared with international brands.

Third, innovation is basically in system optimization, appearance design and application optimization. Another is the cost optimization and control capabilities under supply chain management. Why do I say that? In addition to the two core engines mentioned above, a mobile phone is composed of at least 500 parts. These parts are almost all provided by dozens or even hundreds of suppliers, which is determined by the mobile phone itself. This has in fact caused domestic mobile phone manufacturers to play the role of an assembly plant and an optimization plant (on the contrary, Apple, Samsung, LG, Sony, etc., more or less master some core components or core technologies themselves), and even many companies are sales-oriented companies, and the products are basically handed over to solution companies and foundries. The openness of Android allows everyone to optimize the system, and the increasing number of applications for smart phones allows everyone to work hard on application optimization, and of course, appearance design. But as mentioned in the second point, the cost-effective strategy is to compete with cost optimization and control. Therefore, we can see that domestic manufacturers that do well in the above four items naturally have high brand premiums and guaranteed sales, such as Huawei, Xiaomi, OPPO, VIVO, etc. If there are always two or three of the above four points that are not done well, sales, brand, etc. will naturally not be done well. You can apply these four points to any domestic manufacturer and the results will be clear.

Fourth, the protection of intellectual property rights is generally not high. Why do I say this? Because this is precisely one of the main reasons for the large number of Chinese mobile phone companies and chaotic competition. Next, going overseas to seek new markets will make more companies understand the power and importance of intellectual property protection. Companies that previously relied on marketing and integrated product capabilities will face challenges in this regard when they reach a certain stage of development. It is nothing more than the poor protection of intellectual property rights in the Chinese market that provides soil for these companies to grow and develop.

Through the above four points, I want to say that we cannot use one standard to measure Chinese mobile phone companies, or use Apple's standards to measure the innovation of Chinese companies. After all, it is not easy for domestic mobile phone companies to do so in today's competitive environment and on the basis of the past years. Despite various problems, the growth is obvious to all. As for the breakthrough in technology, I still use the 28 or more ideal 37 principle to illustrate that in the new round of competition model from 2015 to 2017 (domestic companies in the domestic market are fighting each other in price wars, and some companies have difficulties in seeking development in the international market, and only a few companies can obtain a larger international market development space), there are only 4-6 companies that can truly have international market capabilities, truly have some core technologies, and can break through the bottleneck of Chinese brands. From the perspective of companies that have already had international capabilities, there are only four "China T Union". As for which of the other one or two can be shortlisted, everyone can judge for themselves or wait and see.