Why was the strategy of flooding the market with devices abandoned? Blame it on the operators

A few days ago, Huawei's Consumer Business Group CEO Yu Chengdong complained, "In the past, all we had in mind were operators. In the future, I don't plan to play with the operators' ultra-low-end customized phones." As a result of this announcement, Huawei's total number of models in the second half of the year was reduced by 80%, and the proportion of non-operator channels increased to 80%.

Earlier, Zeng Xuezhong, senior vice president of ZTE in charge of terminal business operations, had made a similar statement, saying that ZTE would selectively say "no" to operator customized phones and at least reduce the number of customized models by about half.

Some analysts said that this series of changes made by mobile phone manufacturers in the telecom operator channels are hard not to associate with the recent adjustments to the operators' terminal subsidy policies, and there is a certain connection between the two.

After telecom operators were included in the pilot program of business tax to value-added tax (business tax to value-added tax), the model of giving away mobile phones with the purchase of phone bills was gradually replaced by the model of giving away phone bills with the purchase of mobile phones. The main reason is that after the mobile phone is given as a gift, telecom operators cannot deduct the value-added tax paid when purchasing it.

At the same time, the State-owned Assets Supervision and Administration Commission of the State Council has proposed a requirement for the three major telecom operators to cut marketing expenses by 20% for three consecutive years. This makes it imperative to reduce terminal subsidies in order to reduce the increase in marketing costs.

The policy adjustment had the most significant impact on mobile phone manufacturers such as ZTE and Huawei. In terms of the proportion of mobile phone shipments, more than 50% of their total sales were sold through telecom operator channels.

Therefore, Yu Chengdong's statement of "no more playing" seems very reasonable. Moreover, Huawei CEO Ren Zhengfei's speech at the end of last year has already shown his determination to "tilt high-quality resources to high-quality customers." Obviously, telecom operators are not high-quality customers, and the latter's channels have always been difficult to contribute to the company's profits.

Policy adjustment is just an excuse

However, Deutsche Telekom analyst Tan Yanming said that changes in telecom operators' policies may just be an excuse for mobile phone manufacturers to adjust their product layout and market strategy.

The main reason is that the adjustment policy of operators is still unclear. The main characteristics of users in the Chinese market are that the large population base leads to strong demand for products of different price levels. However, at the request of the State-owned Assets Supervision and Administration Commission, the adjustment of terminal subsidies by telecom operators only shows a reduction attitude, and the specific operation details have not yet been released.

Recently, China Mobile scrapped the policy announced in March that it would not subsidize three-mode TD phones (supporting only GSM, TD-SCDMA and TD-LTE networks) that were put into storage after May 31. Commentators said that this adjustment was made because China Mobile had to lower the price of mobile phones to attract users in order to meet its 4G user quota. The cost of five-mode phones is relatively high, while three-mode phones can attract users at a low price.

Compared with China Mobile, which is actively developing 4G users, China Unicom still hopes that the 3G network can play a greater role. At a mobile phone product launch conference in August, its marketing general manager Xiong Yu said that there is a very large market for low-end and mid-range users who mainly use 3G. The implication is that China Unicom still has a huge demand for 3G terminals.

As for the so-called 4G thousand-yuan phones benefiting from subsidies, it is just speculation in the industry at present, because telecom operators, especially China Mobile, have not made it clear that subsidies for well-known terminals will be tilted towards them. Some people in the telecom industry said that most of the people promoting the thousand-yuan phone concept are mobile phone manufacturers.

The sea of ​​machines tactics has failed

The rapid industry upgrade in 2013 has led these mobile phone manufacturers to frequently launch new products. CPUs have gone from dual-core to 16-core, memory has gone from 2G to 16G... various external sensors, software system upgrades, and all other comparable configurations have been used by manufacturers to claim they are superior to others.

Coolpad Vice President Cao Jingsheng recalled, "Everyone was desperately trying to add configurations and functions. At that time, it seemed that whoever could launch the product the fastest would win."

However, as the smartphone market continues to become saturated, there are more and more signs that mobile phone manufacturers understand the significance of high-quality products, and the method of relying on operator channels and adopting the strategy of flooding the market with devices has failed.

He Gang, president of Huawei's consumer business mobile phone product line, told Tencent Technology that Huawei plans to reduce the number of mid- and low-end models and shift the resources invested in them to the development of flagship and boutique models.

Regarding Huawei's reduction plan, OnePlus CEO Pete Lau said that the success of P6 and P7 last year gave great inspiration to Huawei's top management. "They know the benefits of making good products. On the contrary, products with high cost performance do not make money."

Cao Jingsheng told Tencent Technology that Coolpad will also reduce its phone models by 20% this year.

Reducing the number of models can also reduce the cost of mobile phone manufacturers. This has become the consensus of some Chinese mobile phone manufacturers.

Cao Jingsheng said that focusing on high-quality products can save costs in R&D, supply chain and sales, and also help improve the competitiveness of products.

A person related to ZTE said that after entering 4G, ZTE adopted a more complete solution, providing one machine to solve the problem of network switching between different telecom operators, which can also reduce the cost of R&D investment. In turn, it changed the 3G era, when it had to launch three machines supporting different standards.

But it is worth noting that as the number of models decreases, the risks faced by mobile phone manufacturers are becoming increasingly prominent.

Focus shifts to social channels

With the policy adjustment, telecom operators have become one of the channel distributors. Wang Yang, research director of IHS iSuppli China, said that for mobile phone manufacturers, this will directly benefit public channels and e-commerce channels, that is, social channels.

Since April, ZTE has released a number of mobile phone products, including Grand SII, Xingxing 1, Qingyang and Red Bull, but due to the constraints of traditional channels, it is unable to respond to trial production in a timely manner. However, this situation has improved since the release of Qingyang 2 (4G version), which will focus on offline channel expansion.

According to ZTE's plan, the social channels, which currently account for 20% of its market share, will increase year by year to reach 50% by 2015. Similar plans are also on the table of senior executives of mobile phone manufacturers such as Huawei and Coolpad. In the view of analysts, this will help them catch up with mobile phone manufacturers such as OPPO and Vivo, which previously focused on social channels.

In fact, it is not easy for Huawei to develop social channels. It is reported that Ren Zhengfei is very strict with channel policies because he does not like internal corruption. When Huawei Mall was not successful in its initial trial, Zhu Bo, then head of Huawei's Internet business, lamented, "I have deeply experienced the internal and external challenges Huawei faces in the Internet and consumer fields."

However, in July, Huawei's e-commerce sales accounted for 50% of its total sales. Such a performance makes it difficult for the outside world not to be optimistic about social channels.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.