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On February 24, the Russo-Ukrainian war was on the verge of breaking out, and in addition to being stunned, a Weibo of the director of Xiaomi's international marketing department rushed to the hot search, and the content of the Weibo was "Originally planned to hold a local press conference of Redme Note 11 in Ukraine today." "People don't know whether to be distressed or ridiculed...
However, this has also allowed Chinese mobile phone brands to return to the public eye in an unexpected way. Previously, many people did not understand their presence abroad, especially in a country with low exposure such as Ukraine.
Nearly half of Xiaomi and Honor's revenue comes from overseas. The other side of the war, Russia, is an important market for the two major manufacturers. "Glory's main overseas market is Russia." An Honor sales manager revealed.
According to a study by Russian retailer M.Video-Eldorado Group, Chinese brands will account for 50% of the Russian market in smartphone sales in 2021, with the top five most popular brands including Xiaomi, Realme and Honor. MTS data shows that in June 2021, Xiaomi became the first mobile phone sales in Russia, accounting for 31.2% of the market.
With such eye-catching data, people can't help but wonder, what changes will the war bring to the entire market? Is it still possible to operate normally? This is especially true of the cliff-like decline in the ruble exchange rate and the continued escalation of Western economic sanctions.
To this end, Zhixiang Network contacted Wang Tianming (pseudonym), the head of a mobile phone brand in Russia, Daniel, a Chinese who has lived for 20 years, and Li Guogang, a former trade official of the Ministry of Commerce and an adviser to TaiheTai Law Firm, to try to understand the current market situation in Russia and the possible future impact.
In the short term, mobile phone retail stores are still operating normally. But the most direct impact is the large depreciation of the ruble, the brand side no longer trades new goods, dealers are selling inventory. "At the moment, there is no price increase. Maybe the mind is thinking, but no one moves first. Wang Tianming said, "After waiting for half a month or so, after everyone's inventory is sold out, there may be a series of more obvious changes." "Now everyone is waiting and seeing.
The biggest uncertainty comes from the U.S. policy of export controls. It is like a sword of Damocles, hanging over the heads of these mobile phone manufacturers, and once it falls, it is unbearable.
The current export controls are aimed at the Russian military sector, and "if the sanctions are extended to all high-tech and consumer electronics, mobile phones that use U.S. products and technology cannot be exported to Russia." Otherwise, criminal responsibility is imposed. Li Guogang said.
Watching
In Russia, international manufacturers and Chinese manufacturers are more popular than local manufacturers, with non-local manufacturers accounting for more than 80% of the market, mainly Samsung in South Korea, Apple in the United States, and Xiaomi, Honor and Realme in China.
On March 1, Apple issued a statement saying it would suspend sales of Apple products in Russia and restrict Apple Pay features. On that day, Apple's Official Website Russia was inaccessible.
Wang Tianming said that Apple's mobile phones account for 15% of the Russian market, and the proportion of revenue is as high as 35%. "Apple is still very popular in Russia."
Sui Qian, senior director of Strategy Analytics, said that Apple sells an average of 4 million iPhones in Russia each year, and it is expected that Apple's sales in Russia will decrease by 2-3 million in 2022. In addition, whether Samsung will follow up and take action remains to be seen.
"In the short term, Apple's suspension of sales is an opportunity for Chinese mobile phone brands." Wang Tianming said.
But the economic shocks that have affected the entire Russian market are also fraught with danger for them.
The first to bear the brunt was the sharp depreciation of the currency ruble. "If it is still settled according to the previous price, it is bound to lose money. But now there is a lot of uncertainty about the price increase, one is that I don't know how much to rise, and the other is that if only you have risen, then your goods are difficult to sell. Wang Tianming said.
According to Zhixiang Network, due to the consideration of the safety of international trade funds, most of the domestic mobile phone brands sold overseas are settled in Hong Kong in US dollars, and the local sales to distributors are also settled in US dollars. Therefore, the previous transaction was not affected by the depreciation of the ruble. However, after trading, multiple factors such as exchange rates and sanctions must be considered.
A number of Chinese manufacturers told Zhixiang that they had suspended shipments to Russia. Local retailers are selling inventory and are no longer buying new sources. "Our employees go out every day to see, and now the business is basically operating normally, and the price has not yet increased." Maybe the mind is thinking, but no one moves first. Wang Tianming said, "But after half a month or so, after everyone's inventory is sold out, there may be a series of more obvious changes." At the moment, everyone is waiting and seeing. "
"At present, the prices of food and daily use have increased by different margins, with an average increase of about 15%." Daniel, a Chinese who has lived in Russia for nearly two decades, said.
But the depreciation of the ruble is not the main problem, "the biggest concern is the export control measures of the United States, once the relevant products or technologies enter the export control list, our mobile phones can not be sold in Russia." "
According to the Observer Network, although the export volume of mobile phones, televisions and other electronic products produced in China to Russia is very large, it generally contains chips produced in the United States, or contains American technical components. Once the United States applies the "Foreign Direct Products Rule" to attack Russian companies, most of the chips and related electronic products produced in China will not be exported to Russia, and the sanctions situation in Russia may be similar to that of Iran in the future.
Li Guogang suggested that in the case of temporary uncertainty, we should not act rashly and sell if we can sell normally. "I think there is a high probability that the Russo-Ukrainian war will come to an end soon." Li Guogang said.
It's hard to give up
Russia has always been a must for Chinese mobile phone brands, Honor, Xiaomi, Realme has long been in the top five most popular brands, and Chinese smartphones occupy half of the Russian mobile phone market.
The biggest impact of the Russian-Ukrainian conflict is probably glory.
In 2019, Honor once topped the first smartphone sales in the Russian market, but in 2020, Huawei was suddenly sanctioned by the United States, Huawei and its affiliates will not be able to use the Software and Technology of the United States to design chips, and glory with missing cores has withdrawn from the competition in the Russian market, leaving the market space filled by Xiaomi.
In 2021, the glory of completing the divestiture with Huawei made a comeback, relying on strong operations and solid foundations to re-kill the top five. In 2022, Honor was going to focus on the Russian market.
An industry source told Zhixiang Network that Glory's current market share in Russia's sales is about 4%, and even if there is no war, it is not so easy to reach Glory's sales target in 2022.
This is the dilemma of China's mobile phones, but also after the Russo-Ukrainian War, after the United States led by the country launched sanctions against Russia, the encounter and situation of Chinese enterprises in Russia, they must follow the trend of the political situation, they have to adjust their choices, and for many Chinese manufacturers' employees, the ever-changing situation makes them feel that although they are not in Ukraine at the center of artillery, they are in the center of a silent trade war that is more real and related to their next work.
Economic silos
After Russia launched a "special military operation" against Ukraine, the Economic Sanctions imposed by the West on Russia have also increased layer by layer.
First, the U.S. Commerce Department announced export controls on a range of products to Russia, with a focus on Russia's defense, aerospace and maritime sectors, to "restrict Russia's access to the technology and other items needed to maintain its military capabilities." "
This package of export control measures is introduced by the U.S. Department of Commerce through its subordinate Bureau of Industry and Security (BIS), and in addition to products produced in the United States and technologies developed in the United States, other countries' enterprises using U.S. technology, drawings, software, etc. to produce or develop technologies are also subject to the scope of this export control measure.
Li Guogang, a former trade official at China's Ministry of Commerce, said that once export controls are upgraded, involving high-tech products and technologies related to mobile phones, then "all mobile phones that use US products and technologies cannot be exported to Russia." "
According to reports, U.S. law enforcement and regulatory authorities are planning to implement a series of new export control regulations and plans to cooperate with the U.S. government in response to the situation in Russia and Ukraine.
Then the United States and Western countries excluded some Russian banks from SWIFT (Global Interbank Financial Communication Association System). SWIFT's main business is the transmission of settlement information between global banking systems, which assumes some important functions of the international payment and clearing system. The sanctions are imposed on 10 of Russia's largest financial institutions, whose assets account for nearly 80 percent of the total assets of Russia's banking sector. This sanction has even been called a "financial nuclear bomb".
Although being kicked out of the SWIFT system does not mean that there is absolutely no way to carry out cross-border economic exchanges, after the news was announced, the Russian capital market was in a state of flux, and the ruble exchange rate fell sharply.
On February 28, the ruble traded against the dollar at one point close to the 120 rubles against the $1 mark, plunging more than 30%. After the Russian central bank raised interest rates by 1,050 basis points, the ruble rebounded to 109, but it is still at an all-time low.
Wang Tianming told Zhixiang Network that this sanction has indeed caused a certain impact, but if the Russian bank bound to Apple Pay is not on the sanctions list, it can still be used. For Chinese enterprises, they can still exchange exchange rates and currencies with The Country through the Industrial and Commercial Bank of China, but the instability of the ruble exchange rate is a big problem.
In the past two days, major brands in Western countries have announced their withdrawal from the Russian market or suspended services. Including the US Apple phone, Nike shoes, Sweden's Volvo Cars, the British Jaguar Land Rover and the German Daimler truck... The list is long and growing.