Zero profit on hardware: Customized mobile phones enter a new era

Whether operators say "free phone purchase" or Internet companies talk about "free hardware", the essence is the same: both subsidize users and reduce the cost of purchasing phones; both make profits through software or services during the subsequent use of consumers. We can make a preliminary conclusion: we have entered the era of customized mobile phones.

There are three demands in promoting the development of the era of customized mobile phones. The first is the demand from operators, Internet companies, etc. to promote software and services. Of course, it can also be promoted through application distribution channels, but in comparison, business customization in mobile phones is more durable for user acquisition and bundling. It can be seen from the large-scale subsidies for mobile phones by operators, and the enthusiasm of Internet companies for pre-installing applications (shallow customization) and actively making mobile phones (deep customization) that customized mobile phones are an effective way to implement software and applications. The second is the demand from consumers for good quality and low price. Most ordinary consumers are still price-sensitive when buying mobile phones. If they can get good quality and low price and get a bargain, they will naturally be more willing to choose. In recent years, the subsidies for mobile phones from the three operators alone have amounted to tens of billions. On average, they share the cost of several hundred yuan for each mobile phone. Depending on the mobile phone, the subsidy rate ranges from 30% to 80%. The mobile phone market share of operator contract channels is nearly half of the country, which is enough to show the appeal of customized mobile phones to consumers. The third is the demand of mobile phone manufacturers for sales. Under this demand, it is necessary to cater to the demands of consumers, and Internet companies and operators are also required to share the costs.

From the perspective of mobile phone manufacturers, there are three customization modes. The first is customization for operators. The hardware configuration depends on the package. The package you match determines the configuration and how much profit you can get. The second is customization for Internet companies and virtual operators. The hardware configuration depends on the business. Video phones, camera phones, work phones, and health phones are definitely different in various parameters. Of course, there is also customization for consumers, and it is up to consumers to decide which hardware configuration to choose.

The author believes that as operator subsidies decline, mobile phone manufacturers actively or passively choose to sell through social channels, and the customization pattern has changed.

1. The number of customized phones for operators will decrease, but there will still be a certain share. In order to avoid becoming a pipeline, the three operators have reached a consensus on actively developing Internet business. Compared with Internet business, the competitiveness of operator business is still insufficient. In this case, customized phones are an important starting point for the implementation of operator business. In addition, user experience testing will be carried out during the customization process of operators to ensure that their own business can bring a better experience to users.

2. Internet companies are fully entering the mobile phone customization. In addition to software pre-installation, Internet companies have begun to rush into the mobile phone field for the second time. Baidu, Tencent, Alibaba, 360, LeTV, Tudou, etc. have all set foot in it. Unlike 2012, the second time is more inclined to customized cooperation. Internet companies use sub-businesses to cooperate with small manufacturers or sub-brands of large manufacturers. For example, Baidu iQiyi cooperates with Bajia Mobile and Huawei's sub-brand Honor to customize iQiyi-related businesses. When selling mobile phones, it gives consumers enough discounts, and then obtains profits through user use, forming cross-subsidies.

3. Virtual operators explore ways to promote their own businesses through customized mobile phones. If virtual operators want to "subvert" operators, the easiest way is to provide free hardware and make money through their own businesses. For example, JD launched the JD Phone plan and cooperated with multiple mobile phone brands for customization. D.Phone cooperated with Coolpad for customized mobile phones. Share Communications will launch customized green mobile phones with a Shenzhen manufacturer.

Compared with the customization for operators, the customization for Internet enterprises and virtual operators is more specialized and field-oriented. At the same time, the particularity of the second customization model in terms of cooperation form and quality management will cause some new changes in the industry. The following are some of the following points:

1. The pace of hardware zero profit will accelerate. Instead of relying on hardware to make money, profits will be made through software or services. If the mobile phone manufacturers have their own ecological strategic layout, they will gradually exert their strength, such as Xiaomi. If they have not made their own layout or the pace is slow, cooperation and self-development will coexist. For example, Huawei's mall influence is increasing, and it is also actively deploying cloud services, but the strength is still insufficient. At the same time, it cooperates with Baidu and iQiyi through Honor.

2. Changes in the manufacturer landscape. Foreign brands such as Samsung, Apple, and HTC will face a decline in market share if there is no investment of resources in other areas when the subsidies from operators are reduced. Domestic manufacturers that rely on social channels, such as OPPO, VIVO, and Gionee, will increase their market share in the short term, but if they do not follow the development trend of customized phones, it will be difficult to guarantee continued large-scale sales even with a solid channel force and a team of promoters. At present, these three companies are getting closer and closer to operators. Manufacturers such as China Cool Union have launched independent sub-brands and may cooperate with Internet companies.

3. The rise of the mobile phone testing industry. Although the Ministry of Industry and Information Technology has network access testing, operators often conduct another test in the process of customizing mobile phones. There are tests such as wireless communication, business applications, field, software reliability, hardware reliability, etc. conducted by professional equipment, as well as user experience tests conducted by friendly users. Operator testing can ensure that the quality of customized phones is better than that of non-customized phones. For example, when an Internet mobile phone manufacturer conducted a customized test by an operator, the quality failed and it was refused cooperation. Under the new situation, professional testing institutions will still play a certain role.

4. Manufacturers will pay more attention to after-sales service. On the one hand, after-sales service is the best place to solve mobile phone quality problems and can leave a good reputation with customers. Users can quickly find after-sales service points through WeChat service accounts and other methods. The after-sales home service jointly launched by ZTE and JD.com can also leave a good impression on customers. On the other hand, after-sales service places will also become places for manufacturers to enhance user experience and sell related accessories and services. Xiaomi Home is positioned in this way.

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.