Domestic mobile phones recovered in the downturn: offline recovery, star models to break Apple's "dominance"

Affected by multiple factors such as the epidemic, the slowdown in mobile phone growth, and the increase in consumer replacement cycles, the Chinese smartphone market has experienced a significant correction in the first quarter of 2022.

Recently, data released by IDC showed that the overall shipment of China's smartphone market in the first quarter was about 74.2 million units, a sharp decline, down 14.1% year-on-year.

The report attributed the decline in shipments to the impact of the ongoing rebound on consumer budgets and the small upgrade of new products, which led to a sustained sluggish market demand. The more uncertain overseas market prospects have made many mobile phone manufacturers begin to adopt a more stable and conservative operating strategy, and the market will usher in great challenges throughout the year.

We have noticed that after the overall decline of the market in the first quarter, during the May Day holiday that has just passed, mobile phone offline stores in some cities are quietly picking up. With the preferential subsidies and epidemic prevention policies in some cities, the sluggish mobile phone consumer market has gradually recovered and ushered in vitality. At the same time, the competition pattern of high-end mobile phone market is more clear, Apple is no longer a "dominant", and some domestic mobile phones with strong innovation and high popularity have become the key layout brands of merchants.

Recovering in the downturn Mobile phone offline stores in the regional market continue to pick up

In Shenzhen, where the epidemic prevention situation is stable and the issuance of "coupons" stimulates consumption, mobile phone offline stores are continuing to pick up, and the feedback market of channel providers is also more active.

According to Shenzhen Business Daily, during the May Day holiday, consumer electronic products such as mobile phones became the highlights of this year's "May Day" consumption, and a number of domestic brands such as Glory achieved a significant increase in sales year-on-year.

According to the statistics of Shenzhen relevant associations, from April 30 to May 3, the sales of Shenzhen's consumer electronics and home appliance industries increased by 32% year-on-year, and the overall passenger flow of major retail stores increased by 41% year-on-year.

Lu Ming, deputy general manager of digital dealer Shenzhen Century Huateng Information Technology Co., Ltd., said in an interview with the media a few days ago that the company's overall sales of 60 stores in Shenzhen increased by 130% over the same period last year, and the strong sales of Chinese brand mobile phones became the highlight of "May Day".

"On the one hand, the epidemic prevention and control effect in Shenzhen is good, the offline retail on May Day is relatively hot, on the other hand, the government's consumption subsidies have a better effect on offline consumption stimulation." Lu Ming said.

He is also optimistic about the forecast for the second quarter of this year, "the second quarter can recover the decline in sales in the first quarter and achieve the overall sales target."

Honor CMO Jiang Hairong previously revealed on Weibo that the offline market is continuing to pick up. He said that the newly opened Glory LIFE store (Shenzhen Coast City), sales far exceeded expectations, especially the Glory Magic V and Honor Magic4 series flagship models accounted for a very high proportion of sales.

"Judging from the feedback data from various regions, the May Day holiday glory has a very strong performance in the national market, and products such as the honor magic4 series, the honor 60 series, and the honor X30 series have been recognized by consumers and continue to lead in the corresponding gears." Jiang Hairong said.

According to the data released by Canalys, although most of the head manufacturers suspended the pace of new product releases in the first quarter of 2022, Honor still successfully achieved a 6% sequential growth in the first quarter. The Honor 60 Series and X30 Series continue to expand their offline channels, contributing to the brand's solid performance.

In fact, from striving for the online market to opening a store, in the past two years, the head mobile phone manufacturers have been vigorously competing for the offline market, and the competitive pattern of China's mobile phone market is changing. Behind this is the huge growth space of the offline market.

It is understood that as of now, only 30% of the overall sales volume of China's mobile phone market is contributed by online sales, and as many as 70% is composed of offline retail channels. The recovery of the offline mobile phone market in some regions is good news for the Chinese mobile phone market shrouded in haze in the first quarter.

The growth trend of domestic star models is obvious: breaking apple's "monopoly"

According to the data report released by Counterpoint Research, a market research agency, in the fourth quarter of 2021, Apple accounted for 23% of the Chinese market, ranking first. At the same time, Apple has also returned to the first place in the global mobile phone market.

Driven by the iPhone 13 series, Apple's sales rose 46% month-on-month, ranking highest among all major manufacturers.

Speaking about growth in the Chinese market, Tarun Pathak, research director at Counterpoint Research, said that this is mainly driven by the iPhone 13. At the same time, with a strong brand appeal, Apple is reaping the most benefits from the gap left by Huawei's high-end market.

Nowadays, the situation of Apple's dominance in the high-end market is changing, and the high-end mobile phone sales of domestic brands have become a consumption highlight of the May Day holiday.

Although the mobile phone market in the first quarter is still dominated by Apple mobile phones, after the launch of new products by domestic Android brands this year, they have broken apple's "dominant" situation in the high-end mobile phone market.

"From the sales of May Day, the growth trend of domestic mobile phones is obvious, taking the glory mobile phone as an example, the full line of products increased by more than 300%, and magic4 sales accounted for up to 60% of high-end machines." Lu Ming said in an interview with Shenzhen Business Daily. Among them, honor magic4, Huawei P50, honor 60 and Huawei nova series are the most popular models during the May Day period.

Lu Ming frankly said that Glory accounted for 60% of high-end machines, which is a rare phenomenon. "In the past, Huawei's peak period has appeared, but due to external reasons, Huawei's high-end models now account for only 30% of this level."

"Honor is a bit like Huawei around 2017, the momentum is very strong, and there are more profits for channels than other brands, if we follow Honor closely, we will enjoy some improved dividends." Sun Chaozheng, who operates 31 mobile phone retail stores in Linyi, Shandong Province, said in an interview with the Daily Economic News.

High-end into the main position of contention: innovative, product line brand is sought after

Canalys' latest report shows that in the first quarter of 2022, the Chinese mainland smartphone market shipped 75.6 million units, down 18% year-on-year and 13% month-on-month. Honor topped the list for the first time with 15 million units shipped and a 205% growth rate.

OPPO, which includes OnePlus, continues to drive brand transformation, maintaining second place with shipments of 13.9 million units. Apple retained its top three position after a strong performance in the fourth quarter of last year. Vivo and Xiaomi ranked among the top five, with shipments of 12.2 million units and 10.6 million units, respectively.

Canalys analyst Toby Zhu believes that the impact of the epidemic on the low-end smart phone market is particularly obvious. This year, domestic manufacturers have no choice but to continue to increase investment in the mid-to-high-end market to hedge the risk of slowing mobile phone sales in the mass market.

For dealers, brands with better profits, more willing to innovate, and more complete product lines are often more favored. Since the beginning of this year, the average sales price of mobile phones has declined compared with the same period last year, and merchants have generally begun to tap the potential of high-end machines.

Xu Jiayou, who has 51 stores in Yangzhou, said in an interview with the Daily Economic News that he is interested in letting shopping guides recommend more new products of Glory. Since the first quarter of this year, Honor has improved the gross profit margin of products to channel providers, and has now become the brand with the highest gross profit margin among the TOP5 brands, followed by Huawei. Among several major mainstream brands, Apple still maintains its best-selling, but its profits are relatively small compared to other domestic brands.

Liang Zhibin, general manager of Foshan Nanhai District Guangjun Telecom Co., Ltd., said in an interview with Shenzhen Business Daily that since the beginning of this year, the demand for high-end mobile phones in Guangdong has increased, and the company's mobile phone sales in Foshan stores during the "May Day" period were about 1,000 units, down 30% compared with the same period last year, but the glory mobile phone increased by 300% year-on-year.

Lu Ming said that in the fierce competition environment of the domestic mobile phone market, there are not many high-end mobile phones in the Android camp, and the brands with innovative power and full product lines are "better sold". As a digital merchant, this year will continue to improve around the sales of high-end mobile phones, strong innovation, more well-known domestic mobile phones will be the key layout of the brand.

2022 may be a year of breaking: product attractiveness, supply channels and loyalty are the keys to success

Under the influence of various unfavorable factors such as epidemic uncertainty, product homogenization, incremental stock change, allocation of inner volumes, semiconductor shortage, and fierce competition, today's Chinese mobile phone market seems to have reached a bottleneck period. However, the more this time, the more important it is for manufacturers to create comprehensive competitiveness in terms of external strength, internal strength and cultivation.

Canalys analyst Toby Zhu said that under the current business uncertainty of the mobile phone industry and the continuous interference of various external factors, manufacturers can take advantage of this opportunity to shift their focus to improving product attractiveness, improving channel layout and improving customer loyalty.

Take a peek and see the whole leopard. Taking the glory of double first place in the first quarter of 2022 year-on-year growth as an example, a series of comprehensive advantages such as channel, supply chain, product creativity, and brand recognition have become the key to its growth against the trend under the downturn of the market.

In terms of channels, Honor's shareholders include major electronic product distributors in the Chinese market. This ensures that Honor's products can be distributed to offline channels and enter China's largest market segment.

In addition, the glory of independence focuses on solving the problem of supply chain. In the context of a generally tight supply of parts, the ability of the supply chain is also crucial to the recovery of Honor's market share. In order to ensure supply to support global production capacity, Honor has adopted a combination of self-built factories and OEM foundries. In September last year, Honor's Honor Intelligent Manufacturing Industrial Park in Pingshan District, Shenzhen, began to be put into use, which is also the first self-owned high-end intelligent manufacturing center after Glory became independent.

In terms of product strength, the initial positioning of Honor after independence is the high-end market. Compared with the way of stacking materials, Honor is more obsessed with the consumer experience. In Honor's view, stacking the best SoC chips, the strongest cameras, and the most beautiful screens together is not the right way to make a flagship machine.

In Zhao Ming's view, the real flagship machine must be a balance of various designs, starting from the perspective of consumer value and demand, to carry out the design of the system and system. In this regard, Honor has rich experience and ability, and is the most competitive in the same file of consumer experience value. "Even if we all use soC solutions in the industry, the glorious Magic series is the best in the whole chip tuning and harnessing." Honor CEO Zhao Ming once confidently said.

In addition, Honor's current performance can be largely attributed to its long-term accumulation of brand potential and research and development strength. After independence, the Honor brand is still popular among Chinese consumers. Zhao Ming also said that Glory has "the best quality assets", that is, research and development capabilities. More than 50% of Honor's employees are R&D personnel, which has also helped Honor consolidate its "technically competent" brand image and attract huawei loyal users who were previously known for their self-research capabilities. Although other manufacturers have been trying to seize Huawei's "lost" market share, there are still a large number of Huawei users who have not turned to other manufacturers and chose Glory.

Has the mobile phone market really entered a bottleneck period? "The global market is big enough for Glory, there are 1.3 billion smart phones in the world, China has a high probability of less than 300 million this year, and overseas markets have 1 billion, so there is no bottleneck period for Glory in the next five years." Zhao Ming said.

In the author's view, 2022 or will become a year of breaking the situation in China's mobile phone market, the overall competitive landscape in the second half of the year will be shuffled again, the gap between head brands will be further widened, and the share of the high-end market will be more differentiated. Who wins in the end is worth further observation.