Now, it’s time to go high-end! The road to another breakthrough for domestic mobile phones

Just after the Spring Festival, Xiaomi mentioned in the "Notice on the Price Adjustment of Redmi 4/4A" on February 4: "Due to the increase in component procurement costs and exchange rate fluctuations, the costs of Redmi 4 and 4A have increased dramatically, and the previously set retail prices are seriously lower than the product costs. In order to ensure normal supply, we decided to increase the prices of the Redmi 4 series by 100 yuan." Meizu said: "Due to the continuous increase in product component prices and the impact of exchange rate factors, the BOM cost of Meizu Blue Note5 has exceeded the scope of the original product definition... Considering the comprehensive cost pressure and easing market premium, we decided to adjust the product price." At the same time, Liu Zuohu, CEO of OnePlus, also said on his personal Weibo: "The main theme of the mobile phone industry in 2017 is 'price increase'. Behind the appearance, is it just that a few mobile phone manufacturers choose to increase prices because of rising costs? Perhaps how to take the high-end route is the problem that the entire domestic mobile phone industry has to face now.

Breaking through itself, the road to low prices for domestic mobile phones is getting narrower and narrower

In the past two years, the "new thousand-yuan phones" that rely on operator subsidies have taken "rushing to buy", "second-sale" and "price increase" to the extreme. Among them, Xiaomi, as the most representative manufacturer, has achieved rapid expansion and scale effect in a short period of time as a new brand. According to data from market research company Canalys, in the second quarter of 2014, Xiaomi's mobile phone shipments surpassed Samsung for the first time, and its shipments accounted for 14% of the Chinese market, ranking first. Meizu has also quickly grown from a "small and beautiful" niche manufacturer to a mainstream brand in the market through the operation of the Meizu Blue brand. Not to mention the "brilliant achievements" of Honor and LeTV, which are also new brands in the mobile phone industry, creating one sales myth after another in the mobile phone market! However, in just a moment, the once seemingly prosperous road may be coming to an end.

In this regard, in the past 2016, taking Xiaomi mobile phone as an example, despite vigorously developing offline channel penetration and actively introducing spokesperson strategies, signing spokespersons such as Wu Xiubo, Liu Haoran, Liu Shishi, Tony Leung, etc. for its Redmi and Xiaomi brands to achieve full coverage of spokespersons from national idols to film and television kings, and further increasing the amount of traditional terrestrial advertising, it still failed to prevent the decline in the overall market performance of Xiaomi mobile phones.

The reason is not hard to understand. The reason why the previous "low price" strategy was effective was that the touch-screen smartphones were replaced from scratch, from basically usable to basically easy to use. However, as the penetration rate increases year by year, the market becomes saturated and the hardware upgrade of touch-screen smartphones has gradually matured. "Consumption upgrade" will inevitably follow. During the process of smartphone upgrades, a user may choose a "thousand-yuan phone" for the first and second time, but it is difficult to have sufficient reasons to choose a "thousand-yuan phone" with little or no significant improvement in function and configuration for the third time.

To surpass competitors, big brands can no longer rely solely on shipments

According to data provided by Counterpoint, as of December 2016 (in the fourth quarter), Apple's share of global high-end smartphone sales has risen to 70%, while Samsung's share has fallen to 17%, which means that in high-end products that contribute the vast majority of profits, the two companies account for almost 90% of the profit source. Considering that this is still the case when Samsung's share has dropped sharply due to the "explosion gate", the "leftovers" left for other manufacturers are only about 10%. If a significant improvement in "profit" is required, how to achieve a breakthrough in the mid-to-high-end market at this stage is probably more urgent and effective than simply relying on shipments.

Coincidentally, Huawei Terminal CEO Yu Chengdong has also said that 2017 will be the decisive year for Huawei Terminal. In addition to increasing the market size, profitability must also be improved. Improving profits is naturally inseparable from the contribution of the high-end market. As one of the few domestic manufacturers driven by technological innovation, Huawei's achievements in the high-end market are exemplary. From its plan for this year, which is still locked in the high-end market, it can be foreseen that the future of domestic mobile phones will definitely be in the high-end market. On this road, many international brands have tried before. Motorola, Nokia, HTC and other former giants have determined their leading position in the industry at that time because they were able to give convincing performance in the mid-to-high-end field. But in the blink of an eye, with Apple's subversive performance in the smartphone industry, only Samsung is left. Therefore, even though Huawei and the blue and green factories have made great strides and achieved extraordinary results in the past year, no one can predict which giant will fall next. It is indeed critical to prepare for a rainy day.

Breaking through the future, the road to high-end domestic machines is still a long way to go

However, when we focus on the "high-end", we will find that it is not easy for domestic mobile phones to seek breakthroughs. First of all, in terms of price, according to Counterpoint, the pricing standard of truly high-end phones is above US$400. According to the current exchange rate, US$400 is roughly equivalent to between RMB 2,700 and RMB 2,800, which is basically the "ceiling" for domestic smartphones under the premise of being able to sell in large quantities. If we further compare the prices of Apple and Samsung flagship products, we will find that the market prices of the two are far higher than US$400. For example, when the iPhone 7 was released in the US market, the lowest price for the 32GB version was US$649, but in fact the official price in the Chinese market is even higher than the price in the US market.

In other words, Counterpoint's high-end machine standard threshold is far lower than the price of Apple and Samsung's high-end mainstream new products. This can be easily seen through a set of data. In the summer of 2016, Samsung's share of the high-end smartphone market was 25%, and in the fourth quarter of 2016 it became 17.2%, which was obviously affected by the Galaxy Note 7 explosion gate; in the summer of 2016, Apple's share of the high-end machine market was 53.4%, and in the fourth quarter of 2016 it jumped to 70.1%. This means that almost all of Samsung's lost high-end market share has flowed into Apple's pocket. Due to the long-term cost-effectiveness and low-price strategy, domestic manufacturers currently do not have a brand or model series that can quickly support the price of 3,500 yuan or even 4,000 yuan or more. In this regard, Xiaomi is quite representative. Since its Redmi brand has contributed huge sales to Xiaomi by relying on a low-price strategy, it has even affected the price image of the Xiaomi brand to some extent, making it difficult for Xiaomi mobile phones to break through the price anchor of 1,999 yuan in the minds of users. The most direct reflection is that the market voice and sales of a series of Xiaomi brand models including Xiaomi 5, Xiaomi 5S, Xiaomi 5S plus and Xiaomi Note 2 are difficult to match the average selling price of more than 2,500 yuan for products from OV, not to mention competing with Apple and Samsung.

However, referring to the price of Apple's iPhone series, taking the iPhone 6S, which is currently the cheapest on sale, as an example (iPhone SE is not considered due to its low sales volume) - the starting price is 4,588 yuan, it can be found that there is an obvious price gap in the price range of 3,500 yuan to 4,500 yuan. If we can make some progress in this range first, it will be a more practical breakthrough goal to achieve the high-end road. At present, Huawei Mate 9, which starts at 3,899 yuan, has the best hope of breaking through first due to the accumulation of reputation and sales of the two generations of models Mate 7 and Mate 8. However, considering that "selling expensive" products is not as effective as "low price" in adjusting prices, it tests the comprehensive skills of products, brands, marketing, services and other aspects. Who can establish an advantage in this change? In the next six months, let us wait and see.

Not the end

We don’t need an ending for this review, because given what has been said before, we all need to wait and see what happens this year.

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.