What is missing for domestic mobile phones to challenge Samsung?

After the release of Samsung S6, the Samsung brand showed signs of recovery. According to the Korea Times, Samsung Galaxy S6 and S6 edge have received huge orders from wireless operators, totaling 20 million units, and said that their sales will exceed 70 million units this year, setting a record high in Samsung's history. It is revealed that in less than a week from the first sale in China to now, Galaxy S6 and S6 edge are the fastest-selling phones in all S series and Note series phones, and have become popular models in the Chinese market. From the current mobile phone market structure, domestic mobile phones have been in a trend of increasing sales and reputation, but the brand premium cannot be raised. Among Android manufacturers, only Samsung can compete with Apple. What is missing for domestic mobile phones to challenge Samsung?

Sales Confusion

Some industry insiders habitually like to use the cost-effectiveness, market share, sales, software and hardware ecosystem layout and channel growth of domestic mobile phones to prove the rise of domestic mobile phones and the decline of Samsung. However, from the current perspective, domestic mobile phones are showing signs of fatigue. Lenovo's shipments fell by 14.3% in the fourth quarter of 2014, Xiaomi's growth rate in the fourth quarter was also lower than the full year, and Huawei's growth rate was less than 1%. Trendforce research reports pointed out that China's overall economy is slowing down, and the subsidy policies of telecom operators have not been effective, resulting in the weakening of domestic market demand. Lenovo's shipments in the first quarter were 17.5 million units, a quarterly decline of more than 20%.

Therefore, it is very confusing to evaluate the strength of mobile phone manufacturers by comparing sales volume. After all, sales volume is affected by channels, demographic dividend and marketing factors, but all of these factors do not constitute core competitiveness. Both channels and marketing strategies and methods are easy to be imitated. Once the demographic dividend is gone, sales volume will begin to decline, not to mention profits.

It is undeniable that the innovation and foresight of Samsung S6 in hardware and process design have impressed the industry. The bold design of the S6 Edge's double-sided curved screen and relatively excellent hardware specifications have already attracted attention before they were launched. For Samsung, there have been two times when it led the trend of hardware innovation and design. The first time was when Samsung released the Note's large-screen design, which triggered a large-screen market trend. This time, the Samsung Galaxy S6 Edge's double-sided curved screen successfully attracted the attention of consumers. It can be predicted that once the double-sided curved screen becomes the direction of hardware design development, domestic manufacturers may launch similar technology and design in a year, but it will definitely be a cheaper version.

Assembly and control

The reason why it is called a cheaper version is that following the route has suppressed the brand premium, and secondly, the development of domestic mobile phones still relies on the entire industrial chain, the supply of raw materials and assembly by foundries. For example, the core hardware chooses Qualcomm chips, the software platform chooses Android system, the screen and camera are from suppliers such as Samsung or Sony, and the assembly is from foundries in Dongguan, Shenzhen or Zhuhai, Guangdong. Domestic mobile phones are happy to continue to follow this low-cost assembly model, getting various parts from dozens or even hundreds of manufacturers in the supply chain, and handing over mobile phone products to solution manufacturers and optimization manufacturers, while they work on appearance design, Android customized system optimization, and marketing.

Due to the high degree of integration of the entire mobile phone industry chain and the increasingly mature technology and processes of domestic OEM companies, anyone can make mobile phones as long as they have resources and a team, so domestic manufacturers have turned the technology competition of mobile phones into a bargain. But on the other hand, the technical links behind the mobile phone industry are all dependent on various large manufacturers, software and hardware giants, and suppliers. The core capabilities of the industry chain of domestic manufacturers themselves are not in their own hands.

The disadvantage of the domestic mobile phone manufacturer model is that it is only suitable for a short period of time to eat up the demographic dividend in the development of smart phones, and is not suitable for long-term competition, because the future risk lies in the changes in the supply chain. Once a certain link in the supply chain changes, supply shortages will occur from time to time, resulting in delays in the release and shipment of new phones, and the entire brand will be damaged. In fact, Xiaomi, Lenovo, and Huawei have precedents. For example, when Huawei released the world's thinnest mobile phone P1S, it was aborted because Samsung refused to supply the screen, forcing Huawei to invest in the development of HiSilicon K3 and Kirin series chips.

Another hidden danger of this model is that it cannot cope with the qualitative change of smartphone technology at a certain turning point. Similar to the transition from feature phones to smartphones, Nokia's control over the supply chain and technological advantages accumulated in the feature phone era are basically useless, and the system solutions for mobile phone design that rely on the original supply chain are outdated or the gameplay is different. At that time, most of the domestic manufacturers or copycat manufacturers basically died.

Samsung plays differently. Domestic manufacturers are keen on assembly, but Samsung is in control. Samsung has the design and manufacturing capabilities of core electronic components for mobile terminals, such as processor chips, memory chips, and LCD screens. It also controls the upstream supply chain links such as CPU, NAND flash memory, DRAM memory, display screens, AMOLED panels, and cameras. These core capabilities are not available to the outside world. Having these core capabilities can help Samsung respond quickly to market demands and changes in the shortest time, and thereby push up expectations in the capital market. As mentioned earlier, Samsung can also suppress its opponents through strategies such as supply chain links, procurement, and pricing.

The author believes that there is a strategic flaw in the current domestic mobile phone manufacturers - advocating the route of ecological layout integration and constantly improving hardware configuration. However, hardware configuration refers to the popularized technology and component specifications, and cannot represent forward-looking technology. In the high-end market, high configuration has never been a winning card.

Samsung can make hardware innovations according to its own ideas and control the pace. We can see that in the field of smartphones, it is still the forward-looking technologies such as Apple's introduction of fingerprint recognition and Samsung Note Edge's release of curved side screen that are leading the trend. In addition, the new patents obtained by Apple this year, including the patent authorization for "sharing location information across devices" and in terms of iPhone cameras: "three-color splitting camera module", are all related to hardware technology innovation. This year, Samsung S6 has come up with dual-curved screen technology. In addition, the Super AMOLED dazzling screen in the S6 has improved the display effect, which can surpass the response speed of TFT-LCD panels without the ghosting effect. Domestic manufacturers can only purchase from outside and follow the pace.

Since domestic mobile phones do not have control over the hardware supply chain and core technologies, the negative effect is that they lose the brand premium and initiative brought by the forward-looking technology of smartphones. They can only launch similar versions after the technology becomes popular, and are prone to falling into homogeneous competition. At the same time, their brands are suppressed. This is the source of the brand fragility of domestic mobile phones.

What can we use to cope with the new wave of technological trends?

Some domestic manufacturers are keen on building an ecosystem, but in fact, no one will accept a mediocre hardware product because of the ecosystem you preach. Hardware innovation itself contains a huge brand premium. The author's previous article " Sony's Revelation: Why Did the Ecosystem Fail? " pointed out that Sony's software and hardware integration ultimately failed because it neglected the value of the hardware products themselves during its transformation to entertainment, resulting in the failure to make high-quality products on both the hardware and software sides. Sony's top of the wave is also due to the fact that it had previously developed high-quality products such as Walkman and Trinitron TVs, which have unique technology and design advantages. Last year, Samsung suffered a strong impact from the large screen of the iPhone 6 and the entire Samsung channel system was in a state of clearing inventory in 2014. In addition, the lack of hardware innovation of the Samsung S5 and the lack of highlights in the confrontation with the iPhone 6 led to a decline in Samsung's sales, but these factors are minimal to the impact of the low-end of domestic manufacturers.

In general, domestic manufacturers have benefited from the development of smartphones. As hardware specifications become increasingly similar, supply chain hardware integration has become extremely convenient. This has also led to domestic manufacturers being extremely dependent on the demographic dividend factor. However, once the saturation dividend of the mid- and low-end markets disappears and they fall into a deadlock of slowing growth, they must enter India and Southeast Asia to tap into the demographic dividend of emerging regions. However, this approach is short-sighted.

One revelation is that domestic mobile phones lack the two cornerstones of ecosystem building: control over the vertically integrated hardware supply chain and operating systems. With the overall situation of external open source operating systems already determined, hardware research and development and innovation have become the inevitable direction for domestic mobile phones to break through the cost-effective route, increase brand premium, and narrow the gap with Samsung.

We can turn the clock back to the era of feature phones to look at Bird. Around 2003, Bird, a star brand among feature phones, used the strategy of "surrounding the city with the countryside" to break the traditional distribution pattern of mobile phones with its price and channel advantages. At that time, its domestic shipments reached the first place, and even ranked among the top ten in the world. However, due to the constraints of price and channels, international mobile phone giants such as Motorola and Nokia have made slow progress in the Chinese market. However, due to the fact that Bird's technical shortcomings have not been made up for, and the insignificant R&D investment has not been effective, the product upgrade is unfavorable and continues to be low-end. When channel dealers such as D.Phone, Gome, and Suning intervened in the mobile phone distribution system, and international first-line brand channels such as Nokia imitated and penetrated into the domestic rural market, Bird, which was burdened with a cheap brand image, quickly stepped down from the top of the wave. And well-known mobile phone brands in the era of feature phones, such as Kejian, Panda, and TCL, almost fell collectively under the impact of the tide of technological innovation.

It is undeniable that today's domestic manufacturers have made great progress in both software and hardware technology. For example, Huawei is shouldering the heavy responsibility of the rise of national brands. However, we can still vaguely see the shadow of the failure of previous generations of domestic manufacturers from the strategies and concepts of today's domestic manufacturers. Avoiding shortcomings can easily become a knot in the heart. The cruelty of competition has led to the mobile phone industry having its own survival rules, that is, it is best not to be the one swimming naked in the tide.

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.