It is just wishful thinking that domestic mobile phones can compete with Apple and Samsung

In the past 2014, in the smartphone industry, there were constant voices about Apple's lack of innovation and Samsung's decline, followed by the rise of Chinese smartphone manufacturers and their bold statements of dethroning Apple and Samsung. Frankly speaking, amid the noise of domestic smartphone manufacturers, we also mistakenly believed at some point that domestic smartphone manufacturers had the strength to compete with Apple and Samsung. However, with the recent statistics of global smartphone shipments in 2014 released by relevant institutions and the release of Apple's latest quarterly financial report, the reality is so different from our perception (including that of our related smartphone manufacturers).

According to the latest statistics from IDC, in 2014, Samsung shipped 318 million smartphones, up 0.6% year-on-year, with a market share of 24.5%, which was beyond our expectations. Last year, we saw a decline in Samsung's smartphone shipments every quarter, but we didn't expect that it would still grow in the whole year. Here we look at the shipments and market shares of Huawei and Lenovo, two of the top five Chinese mobile phone manufacturers in the world, which were 73.6 million (5.7%) and 70 million (5.4%) respectively. If we add the shipments of Motorola phones after the merger, Lenovo's mobile phone shipments were 96.5 million, with a market share of 7.4%. It should be noted that the above shipments and market shares of Huawei and Lenovo were achieved on the premise that their year-on-year growth rates exceeded 50%. Even so, Huawei's shipments are only about 23% of Samsung's, Lenovo (including Motorola phones) is only 30% of Samsung's, if Motorola phones are not included, its shipments are about the same as Huawei and Samsung, only about 22%. It can be said that Chinese mobile phone manufacturers are clamoring to challenge Samsung, but the facts prove that we are not only not in the same order of magnitude (in billions) as them.

It is a well-known fact that the growth of the global and Chinese smartphone markets will slow down this year compared to last year, which will inevitably affect the growth rates of Huawei and Lenovo. In fact, judging from Huawei's recent announcement that it will ship 100 million smartphones this year, its growth rate has slowed down to about 35% compared to last year's 50.4%, and Lenovo is basically the same. It can be expected that with the fierce competition in the Chinese smartphone market, especially the similarity or convergence of products, brands, and competition methods among Chinese manufacturers, it is believed that the bottleneck period of growth supported by shipments of Chinese manufacturers will soon come. In addition, with Samsung's change in mobile phone strategy this year (focusing on the mid- and low-end markets), the so-called goal of Chinese manufacturers challenging Samsung (should be referring to shipments) will become more unrealistic, or quite far away.

If we compare domestic manufacturers to Samsung in terms of quantity, then we compare them to Apple in terms of revenue and profit. According to Apple's latest financial report, Apple's revenue in Greater China alone, including the Chinese market, reached $16.144 billion last quarter. In comparison, Huawei's consumer business, including its mobile phone business, had sales revenue of $12.2 billion in 2014, which is only about 2/3 of Apple's revenue. However, it should be noted that Apple's revenue in one quarter is compared with Huawei's annual revenue in mobile phone business.

As for Lenovo, if we calculate based on its mobile business revenue of $2.98 billion in the first half of last year, its full-year mobile business revenue is only about $6 billion (optimistically estimated), which is less than 40% of Apple's revenue in one quarter in the Chinese market. As for profits, since neither Huawei nor Lenovo has announced their profits, we have no way to compare them, but from Merrill Lynch's statistics and forecasts on smartphone gross margins, Apple's gross margin is 40%, Huawei's is in the high single digits, and Lenovo's is in the low single digits. Huawei's gross margin is at best 1/4 of Apple's, and Lenovo's is only 1/40-1/20 of Apple's. It can be seen that the gap between our domestic manufacturers and Apple's revenue and profits is greater than the gap between them and Samsung's mobile phone shipments. What makes us feel even more surprised about domestic mobile phone manufacturers and industry insiders is that Apple, which was once thought to have been defeated in the Chinese market and would not turn around (based on shipments), actually won the title of the first shipment in the Chinese smartphone market last quarter. This cannot but make us question whether the foundation for the so-called improvement of the competitiveness of Chinese mobile phone manufacturers (at least in terms of shipments) has been laid.

Some people may question whether the decline in Samsung's profits is not due to the Chinese mobile phone manufacturers? Doesn't it prove the competitiveness of Chinese mobile phone manufacturers? We do not deny the role of Chinese mobile phone manufacturers, but this is limited to the mid-to-low-end market, and is achieved on the basis of the so-called cost-effective strategy of selling high-end phones in the middle (high-end configuration, mid-end price) and selling medium-end phones at low prices (mid-end configuration, low-end price). The main force that really caused Samsung's profit to decline sharply should be Apple. According to relevant surveys, the release of Apple's large-screen iPhone 6 has at least snatched away 1/3 of the high-end users who originally belonged to Samsung or should have belonged to Samsung. In fact, from the price comparison of Samsung's high-end mobile phones and the so-called high-end mobile phones of Chinese mobile phone manufacturers, it is not difficult to see that Samsung's original and potential high-end users are the users of Apple's large-screen mobile phones. After all, the price difference between Samsung's high-end mobile phones and Apple's mobile phones is much smaller than the gap between Chinese mobile phone manufacturers' high-end mobile phones and Apple's mobile phones.

Based on the above market facts, we believe that Chinese mobile phone companies have always claimed to be benchmarking against Apple and Samsung, but there is a huge gap between them and the two in terms of shipment volume, revenue and profit. Moreover, with the development of the smartphone market and changes in competition methods, the possibility of narrowing this gap will become smaller and smaller, or it will become more and more difficult. In this case, it is indeed a bit wishful thinking to still talk about benchmarking against Apple and Samsung.

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.