In the first two months of this year, mobile phone shipments in the Chinese market were 47.886 million units, an overall year-on-year decline of 22.6%, and 5G mobile phone shipments rarely declined, down 11% year-on-year.
Text | Liu Shuqi
Edit | Xie Lirong
The malaise of China's mobile phone market has continued for five years, but the decline in the beginning of 2022 is still amazing.
Tianfeng Securities analyst Guo Mingji recently said on social media that China's major Android mobile phone brands have cut orders by about 170 million units this year, accounting for 20% of the original 2022 shipment plan, and orders may be further reduced in the coming months.
A number of chip, camera, panel and other mobile phone supply chain people confirmed the news of cutting orders to "Finance Eleven". The new cold winter has almost swept the entire upstream and downstream industry chain of mobile phones.
"Ray was buried very early." A marketing director of a mobile phone chip company told Caijing Eleven that the oversupply situation at the supply chain end has been a sign since the second half of last year, but it was covered up by chip shortages at that time.
The most direct reason is the downturn in the mobile phone market. "The impact of the epidemic, the economic downturn, the frequency of changing mobile phones is directly affected." The marketing director said. This judgment coincides with the findings of Counterpoint, a third-party research institute: The latest research data is that the average replacement cycle of Chinese users has been extended from 25 months to 31 months.
According to the China Academy of Information and Communications Technology, mobile phone shipments in the Chinese market in February were only 14.864 million units, down 31.7% year-on-year, the lowest value in more than a year. In the first two months of this year, the Chinese market mobile phone shipments were 47.886 million units, an overall year-on-year decline of 22.6%, and 5G mobile phone shipments also rarely declined, down 11% year-on-year.
Among them, OPPO suffered the heaviest losses. According to data from CINNO Research, a third-party market research institute, OPPO (excluding realme) sales in February this year were only 4 million units, down 45.7% year-on-year, close to waist cut. Vivo (excluding iQOO) and Xiaomi also fell by 38.6% and 20% year-on-year, respectively, and Apple fell less, only 4%. Among the top five mobile phone manufacturers, only the same period last year has not fully returned to the glory of the market, achieving substantial year-on-year growth.
A combination of multiple factors can basically determine that the depression in China's mobile phone market this year will be more prominent than in previous years. After this judgment is transmitted to the upstream industrial chain, it has formed a "single tide" that affects the whole body.
Structural problems beneath the surface are emerging: how to bridge the gap between the aggressive high-end strategy of mobile phone manufacturers and the insensible consumers? Is an over-shrinking market worth investing more? Can overseas expansion solve the growth challenge? Chinese mobile phone giants are solving the above problems, and at the current stage, the product portfolio, supply chain and market strategy must be flexibly adjusted, which tests their ability to grasp weight, schedule resources and coordinate limbs during the winter period.
Nervous or excessive?
According to the "Finance Eleven" understanding, the proportion of high-end product lines cut by mobile phone manufacturers this time is larger, because the high-end strategy of domestic mobile phone manufacturers is relatively aggressive, and enterprises generally hoard more high-end products, but the market response is flat.
Data provided by counterpoint, a third-party analyst agency, shows that from the first quarter to the fourth quarter of 2021, Apple's market share in China's high-end mobile phone (wholesale price of more than $400) increased from 40% to 59%, while the common share of OPPO, vivo, millet and glory fell from 29% to 26%.
Considering that the market share of high-end mobile phones in the overall mobile phone market is increasing, domestic mobile phone manufacturers have not achieved nothing in impacting the high-end, but compared with Apple's momentum, domestic mobile phones have obviously not yet achieved a qualitative leap.
"Mobile phone and chip manufacturers are ready, but due to the impact of the epidemic and the sluggish consumer market, the market's response is less than expected and relatively cold." Ivan Lam, a senior analyst at Counterpoint, told Finance Eleven. Previously, mobile phone manufacturers have tilted their resources and energy to high-end chips, but the actual market response has not met expectations.
In addition, the urban closure caused by the epidemic, the downward pressure of the economy, and the bottleneck of mobile phone innovation have made it particularly difficult to impact the high-end at this stage. In times of low consumption, the demand for low-end mobile phones is often relatively stable, while the high-end needs to stimulate additional purchasing power, so the fluctuation of sales will be greater.
In the process of Huawei's fading out of the market last year, domestic mobile phone manufacturers wanted to take the supply chain share that Huawei gave up. A supply chain industry analyst told "Finance Eleven", taking Xiaomi as an example, in the first half of last year, Xiaomi proposed to package the entire flexible screen production line of Huaxing Optoelectronics, with a production capacity of about 40 million pieces, but since then the demand for millet has been declining, and by the end of last year, Huaxing Optoelectronics could not ensure that it could provide Xiaomi with a production capacity of 30 million pieces in 2022.
"The number of orders quoted by the head mobile phone brand to the supplier is only their expectation, does not represent the real demand, and is likely to be a strategic goal proposed for the purpose of seizing production capacity and price negotiations." The analyst said.
For example, Huawei's mobile phone panel originally had a production of 250 million pieces, of which about 220 million pieces were to be divided by other head domestic manufacturers, and the average should increase by about 50 million pieces per hand. However, in order to get lower offers or seek support from suppliers, companies are likely to report an increase of 80 million to 100 million pieces, indicating their confidence in grabbing Huawei's share.
The final result is that Huawei lost the high-end market, Apple ate the most, and other manufacturers only drank soup. Industry analysts expect actual shipments this year to fall by 15%-20% from the target demand initially reported by mobile phone manufacturers.
MediaTek is the mobile phone supplier with the greatest impact on this round of cutting orders. Guo Mingxi said on social media that about 70% of the order cuts used MediaTek chips. MediaTek is the largest mobile phone chip manufacturer in the Chinese market, and previously mainly sold low-end mobile phone chips, so there is a view that the cutting order is mainly aimed at low-end products.
Ivan Lam stressed that MediaTek's order cuts are actually mainly high-end chips. In 2021, MediaTek released the Tianji 9000, intending to return to the list of high-end mobile phone chips. However, due to the fact that the research and development cycle of this new product is slightly later than Qualcomm's chip Snapdragon 8 in the same period, mobile phone manufacturers do not have enough time to cooperate, so demand is more seriously suppressed during the market downturn. "Snapdragon 8 has already been on the (city) first, and it will not invest in big resources if it is not on the follow-up."
According to CINNO Research data, MediaTek SoC (main chip) sales fell by 25% month-on-month and 10.2% year-on-year in February this year, second only to Huawei HiSilicon, which is sanctioned by the United States.
On the other hand, the supply of low-end products is still tight. While mobile phone manufacturers are cutting orders, the shadow of lack of cores and out-of-stocks that have plagued them since last year has not completely dissipated. The marketing director of the aforementioned chip company said that chips for mature processes such as 28nm, 40nm and 55nm are out of stock, including small materials such as MIC chips (power management), TDDI chips (touch and display driver integration) and charging chips.
Many respondents' judgment on the "chip shortage" is basically the same, and the lack of cores in the second quarter of this year will continue and is expected to ease in the second half of the year. This also means that the seemingly contradictory phenomenon of cutting a single core while lacking cores will continue for a period of time in the upstream industrial chain of mobile phones.
A Xiaomi mobile phone business market person told Caijing Eleven that the market's coldness was covered up by the lack of cores last year, and the real challenge has just begun after the chip supply is sufficient.
Honor CEO Zhao Ming has recently weighed the relationship between supply chain shortage and excess every day. He told Caijing Eleven that at this stage, many brands are facing similar problems, oscillating between the two, and the lack of core naturally occurs when supply exceeds demand, but if the actual sales are less than expected, it will lead to excess.
The speed of mobile phone replacement is very fast, the best selling period of a mobile phone is generally 3-6 months, and once it is over the season, it is often discounted and sold. "Sometimes even if you feel like you don't have much [inventory], there's actually too much." He said.
Shrink or keep betting?
An electrical appliance dealer in Shandong told Caijing Eleven that the decline in mobile phone sales has affected large provincial agents, and even they have begun to lose money. Sales agents of more than 300 people in a second-tier city only sold about 5,000 mobile phones in the whole month of February, and when the market was booming, the monthly sales of new machines in only one communication street in one city could reach tens of thousands.
Another mobile phone dealer in Henan also felt the pressure: "Invest 2 million yuan, work hard, and earn less than 500,000 yuan a year." "That means it will take at least four years for him to get his money back if the status quo is maintained."
A developer of a head mobile phone manufacturer told "Finance Eleven" that Xiaomi often said that the profit margin of comprehensive hardware will not exceed 5%, in fact, the profit margin of OPPO, vivo, and glory will not be higher than 5%. Not only mobile phones, but also the profit margin of smart hardware products in the IoT category is also extremely low.
Dealers interviewed said that selling mobile phones is not their main source of profit, and selling accessories, mobile phone repairs, doing operator business, and even selling second-hand mobile phones are all ways to make a living.
Second-hand phones have absorbed more and more demand for purchases, and the market for new machines has further shrunk. "Finance Eleven" learned from the channel providers that many merchants who were previously mainly engaged in new machines began to sell second-hand machines this year, and the sales price of second-hand phones was generally higher than in previous years. Especially used iPhones. At present, the vast majority of the market circulation is second-hand mobile phones, whether it is a specialty store or a wholesale market second-hand mobile phones account for most of the share, offline communication city This proportion is usually more than 80%.
Mobile phone manufacturers began to reduce food and clothing, storing grain for the winter. According to the "Finance Eleven", there are head mobile phone companies that have begun to reduce the level, reduce the city management personnel, and remove the second-level agent, from the first-level agent directly to the terminal store. In a fourth-tier city in Henan, OPPO originally had four agents, but in the second half of last year, it has been reduced to two.
The pressure is also transmitted to the individual. Some talent has left the industry, which is in a sharp decline, and several former mobile phone industry insiders told Caijing Eleven that they have turned to the hotter smart automotive industry. Some people in the mobile phone industry who did not want to be named said that the way out is not wide enough to turn around in the form of mobile phones, and smart car companies may be able to provide him with better salaries and career prospects.
"It's a challenge and an opportunity. Only in difficult circumstances can a company be tested out of its capabilities. Zhao Ming said. From the perspective of manufacturers, the most important question to think about now is whether the new product gives consumers a strong enough reason to change the machine.
Zhao Ming believes that at this time, mobile phone manufacturers are easy to fall into a vicious circle - the market declines, reduce investment, and product development is more cautious. This may seem logical, but it will make consumers' desire to buy mobile phones even lower. He said there is a need to be wary of such a state.
The decline of the mobile phone market in 2022 is almost conclusive, but the specific decline still depends to a large extent on the control of the follow-up epidemic and whether there can be a new explosive machine on the market.
Ivan Lam's judgment is that in order to cope with the current ebb and flow period, mobile phone manufacturers may re-emphasize the low-end market from the second half of this year, adjust the stocking strategy, reduce the hoarding of goods in the price range of more than 3,000 yuan, and after the two traditional peak seasons in the third and fourth quarters, the market still has the opportunity to pick up.
Is overseas a new channel?
One path that is widely considered to fill the current domestic market is to expand the overseas market. The core logic is that the Chinese market has been overdeveloped, manufacturers are seriously involved, and there are always overseas market segments that have not been fully tapped, which also means that there is still growth and profits overseas.
In recent years, the head of domestic mobile phone manufacturers have invariably increased investment in research and development, and the annual investment has reached the level of tens of billions, but at the same time, the Chinese market is still shrinking, and it is foreseeable that the future space will be narrower. "Research and development is a five-year, ten-year unit, which requires continuous investment, so where the money comes from, or it depends on overseas." The Shandong dealer said.
Judging from Xiaomi's 2021 financial report, overseas business has been on a par with China. Last year, Xiaomi achieved revenue of 163.6 billion yuan overseas, accounting for 49.85% of the total revenue, and the revenue growth rate for three consecutive years was more than 30%. According to "Finance Eleven", OPPO and Vivo's overseas revenue account for about half.
A person from Xiaomi's international department told "Finance Eleven" that the international department is one of the few profitable departments of Xiaomi, even when entering an emerging country market such as Turkey and Russia, Xiaomi will emphasize profits and will not exchange losses for growth.
The aforementioned Shandong dealer said that the reason why overseas profitability is stronger than that in China is because of different playing styles. Apple and Samsung rely on product power and brand power to drive sales, while domestic mobile phones rely on channel capabilities, "let you go out and turn left to buy my mobile phone." "This strategy has been used to the extreme in China, and there is still room for it to be played overseas."
Among the top four domestic mobile phone manufacturers, Xiaomi has a faster layout in overseas markets, but it has not yet opened a significant gap with OPPO and vivo. According to IDC data, Xiaomi's global shipments in 2021 will be 181 million units, with a market share of about 14%, ranking third, second only to Samsung and Apple. Oppo and Vivo's shares were 9.9% and 9.4%, respectively, ranking fourth and fifth.
At the 2021 financial report, Wang Xiang, partner and president of Xiaomi Group, stressed that Xiaomi's most promising growth direction is overseas operator channels. Taking Europe as an example, operators and open market channels account for half of each, and at present, Xiaomi occupies 20% of the open market in major European countries, while the operator channel accounts for only 12%, that is to say, Xiaomi still has a lot of room for improvement in the operator channel.
Honor has made slightly slower progress in overseas layout, but it has also put internationalization on the agenda. Zhao Ming revealed that Honor will speed up the global market this year, and has now laid out local teams of varying sizes in Europe, the Middle East, Africa, Asia Pacific and Latin America. From March onwards, Honor will successively release a number of products around the world, and the rhythm of new products will even be released to the unit of "month".
Overseas markets may be opportunities, but they also mean risks: First, the global economic environment is cold, mobile phone shipments are shrinking, and overseas is likely to quickly become the next "inner volume" of China; second, Huawei's previous lessons have increased the risk of majeure when domestic mobile phone manufacturers are deployed overseas. Taking India as an example, since the end of last year, a large-scale tax search has been launched on Huawei, Xiaomi, OPPO and OnePlus; third, domestic mobile phone brands are mostly low-end products sold overseas, which has limited help for the brand level to enter the high-end.
A number of industry insiders interviewed by the "Finance" reporter believe that there is no sign of market recovery, and the entire upstream and downstream industrial chain of mobile phones can only adjust the survival strategy in the gap for the time being and survive the cold winter.
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