Are bad days coming for mobile phone manufacturers? The dividends are disappearing faster than expected

Will the mobile phone market undergo another drastic change in 2017? At the end of the year, Sina Technology interviewed a number of people in the mobile phone industry on this issue . The general consensus was that "there will not be any particularly big changes in the short term, but the reshuffle is not over. For mobile phone manufacturers, 2017 may be even more difficult, and safety and survival will be placed in a more important position."

But the changes are happening faster than expected. At the Mobile World Congress (MWC) to be held at the end of this month, many mobile phone manufacturers have chosen to shrink their business, and some even told Sina Technology that they will not focus their marketing efforts on the domestic market this year.

From expansion to contraction, from domestic to international, profitability is more important than scale and other changes. Behind this is the fact that the domestic mobile phone market will completely change from an expansion war to a relative stalemate war. The factors supporting the continued rapid growth of domestic mobile phones in 2016 have been almost exhausted. The population and innovation dividends are coming to an end, but new dividends and changes are also brewing.

reduce

Regarding the survival status of domestic mobile phone manufacturers in 2016, the most commonly heard phrase is "Except Huawei and OV, other manufacturers are having a hard time."

Even Huawei, which is growing rapidly, is facing the situation of increasing volume and price, but significantly shrinking profit margins. Since the end of 2016, Huawei has publicly announced many times that it will shift to refined operations and cut costs.

According to Huawei's performance forecast, Huawei's consumer business unit's annual turnover in 2016 was US$26 billion, a year-on-year increase of 42%. The Information quoted an insider as saying that Huawei's consumer business unit's operating profit in 2016 was US$2 billion, down from US$2.2 billion in 2015. The operating profit margin dropped from 11.5% in 2015 to 7.7%.

In his 2017 New Year's speech, Huawei Terminal CEO Yu Chengdong said that 2017 will be a year of transformation for Huawei's refined operations, and everything will be centered on profits. Huawei's profitability will face unprecedented challenges in the new year.

In his speech, Yu Chengdong said that Huawei should reduce the number of models and refine operations in the supply chain, channels, R&D, services and other fields. At CES, he even claimed that he would comprehensively reduce marketing, market, channel and other costs.

Although other mobile phone manufacturers did not publicize this matter as loudly as Huawei, they did similar things. Lenovo, Gionee and TCL all shrunk, and the signs were already evident at MWC.

A senior executive of a mobile phone manufacturer who wishes to remain anonymous told Sina Technology that in the past few years, mobile phone manufacturers spent too much money and overdrawn their accounts. This year, the growth of both online and offline channels in the domestic mobile phone market will face problems, so they are now cutting back on spending. If they don't do this, they will not be able to resist the pressure of rising component prices, and everyone is under great pressure to make profits this year.

Another view is that the domestic mobile phone manufacturers have achieved initial results in the domestic brand war, and the expenditure in the consolidation stage is definitely lower than that in the expansion stage. In addition, after the crazy spending of domestic mobile phone manufacturers on offline, online and popular program advertising in 2016, they do need to re-examine under the new situation.

Price increase

From 2016 to 2017, domestic mobile phone manufacturers faced two sources of pressure: one was the problem of rising costs caused by exchange rate fluctuations; the other was the rising prices and shortages of components, which put pressure on costs and output.

A person in charge of a terminal manufacturer once told Sina Technology that LCD (liquid crystal display) has been out of stock since the first half of 2016, and the price of manufacturers has increased by 3 times. Since the second half of 2016, memory chips have increased by 20%. The biggest problem is the shortage of lens modules. Dual cameras and high pixels are being promoted on a large scale, but the entire production capacity of lens modules is lacking.

This price increase and shortage situation will continue in 2017, and exchange rate fluctuations will also continue. For mobile phone manufacturers, price increases have become one of the ways to offset costs. If the price increase in 2016 was just an expectation, it has quickly become a reality in 2017.

On January 3, Meizu fired the first shot of price increase, and the price of Meizu Blue Note 5 mobile phone with 3GB memory increased by 100 yuan. Soon after, Xiaomi also announced to increase the price of Redmi 4 series mobile phones, and the price increase was also 100 yuan. In addition to these mobile phone manufacturers that officially announced price increases, 360 mobile phones, Huawei Honor, and LeTV's third-party channels also quietly increased prices. Luo Yonghao, CEO of Smartisan Technology, announced that he would cut off the thousand-yuan mobile phones in the future.

The upcoming models, such as Huawei P10 and Honor V9, are expected to increase their prices, with the price increase reported online reaching 200-300 yuan. News about the price increase of iPhone 8 has also been circulating in the market.

Some other manufacturers are also planning to raise prices. For example, OnePlus CEO Liu Zuohu said on Weibo that "the main theme of the mobile phone industry in 2017 is price increase", which was suspected to be a leak of price increase. OPPO also announced to the media that it has not considered raising prices for its models that have been launched, and that the prices of models that have not been launched will be determined based on the product competitiveness and cost situation at the time of launch.

internationality

According to Canalys data, the year-on-year growth rate of China's mobile phone market reached 17% in 2016, and the growth rate is expected to be 1% in 2017, and will continue to grow at 1%-2% in the next three years. The size of China's mobile phone market has peaked.

Mobile phone manufacturers who have enjoyed the dividends of emerging markets in the Chinese market are all looking for the next emerging market. Competition in emerging markets such as Southeast Asia, India, Africa, Russia and Brazil will be the main driving force for the growth of domestic mobile phone manufacturers in the next two years, while developed markets in Europe and the United States are the key to brand and profit.

According to CMR data, India is expected to ship 116 million smartphones in 2016, while China shipped 522 million smartphones in 2016. The growth potential is enough to make any manufacturer who has tasted the sweetness of the Chinese market jealous.

Apple 's move in India reminds people of its attentiveness to the Chinese market. It is reported that Apple will build a factory in India by the end of April 2017, and Apple is also working hard to obtain approval to sell second-hand iPhones in India. However, at present, Apple has not made any substantial progress in India, but it has an absolute advantage in the high-end market.

Chinese mobile phone manufacturers are more aggressive in India. Xiaomi announced that it has the third largest market share in India and plans to reach the first place in the next 3-5 years. Huawei launched the "Make in India" campaign in October last year and announced that it would seize 10% of the market share in India next year.

Gionee, OPPO, and vivo have already or are about to build factories in India, replicating their offline models in India. On the issue of the focus of overseas markets next year, the three manufacturers have told Sina Technology that India will be the focus of their future concentrated firepower breakthroughs.

According to Counterpoint data, the share of Chinese brands in the Indian smartphone market has increased from 14% in 2015 to 46% in 2016, accounting for half of the Indian market. Looking at specific brands, in the fourth quarter of 2016, vivo, Xiaomi, Lenovo, and OPPO all entered the top 5.

OPPO and vivo have made good progress in Southeast Asia, Transsion in Africa, Huawei in Europe and Latin America, and ZTE in Russia.

However, apart from Apple and Samsung, there is no third global strong brand in the international market. Huawei has the biggest goal, which is to become the third global mobile phone brand. Its two-front battle in emerging markets and European and American markets makes Huawei's challenges far greater than those of other domestic brands.

Battle

Learning from each other and attacking each other's positions is also the main theme of domestic mobile phones this year. With the domestic market growth reaching its peak, the increase in the market share of manufacturers is almost always at the expense of the decrease in the market share of other mobile phone brands.

In 2016, Huawei, OPPO, vivo, Gionee and other manufacturers divided up the users that flowed out of Xiaomi and Samsung. This year, the situation is even more complicated.

Gionee launched the Gionee M2017 at the end of 2016 to compete for the 8848 mobile phone market. Gionee M6 and other products learned from OV, using celebrity endorsements + 3D advertising + differentiated advantages + offline channels to compete for the market share of OPPO and vivo.

OPPO and vivo's outstanding performance in 2016 has made these two manufacturers replace Xiaomi and become the key companies to be learned from. The OV market is also the market that other manufacturers most want to divide up.

Huawei is no exception. The Thousand County Plan and Huawei Nova series are both aimed at competing for the OV market. Yu Chengdong once said that Huawei is expected to cover nearly 2,000 counties in China in 2017. This year's channel construction is mainly aimed at mature cities below the T3 level.

Huawei's Mate series and P series face Samsung's market share, while Samsung and Apple are also coming on strong this year.

Huawei's sub-brand Honor, Xiaomi, LeTV, 360 Mobile and other Internet mobile phone brands are still competing mainly in the Internet channel and below 2,000 yuan. Xiaomi is also impacting the market of Huawei and OV.

In general, the situation faced by mobile phone manufacturers in 2017 is much more complex and difficult than in previous years, and the speed of transformation of manufacturers is also beyond expectations. New dividends are also brewing. The commercial use of 5G in 2020 will inevitably bring a new round of mobile phone replacement. Breakthroughs in the Internet of Things and artificial intelligence may continue to expand the boundaries of mobile phones and bring innovation dividends.

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.