In this challenging year for the smartphone industry, technology companies need to calm down, look at the road, take the right path of innovation, and adhere to long-termism
Hu Baishan, Executive Vice President and Chief Operating Officer of Vivo, delivered a speech at the Boao Forum for Asia Annual Conference
Wen | Shiran
Affected by geopolitical conflicts and the epidemic, the global economy is facing unprecedented challenges. According to a report released by the International Monetary Fund (IMF) in April this year, global economic growth will fall from 6.1% in 2022 and 2023 to 3.6%, down 0.8% and 0.2% respectively from the estimates released in January. Specific to Asia, the Boao Forum for Asia Annual Meeting 2022 report said that the economic growth rate in the Asian region may be 5.2% lower than the IMF forecast, which is expected to be 4.8%.
The downward pressure on the economy is transmitted to thousands of industries. The end of each economic cycle is accompanied by the survival of the fittest, the pattern of reshuffling, and the industries and companies that can cross the cycle must undergo self-reinvention, innovation and upgrading.
"The real root cause of the recession is the lack of a new technological revolution, which is the 'golden key' to the next round of economic prosperity." Hu Baishan, executive vice president and chief operating officer of Vivo, said at the Boao Forum for Asia Annual Conference 2022.
The electrical revolution of the mid-19th century occurred after the economic crisis, the information revolution of the 1970s occurred after the oil crisis, and the booming mobile Internet of the 21st century occurred after the economic crisis of 2008. In an uncertain economic environment, firms are more motivated to pursue certainty, which makes it often possible to breed opportunities in crises.
Despite the grim economic situation, it has become a key point in the breakthrough of global scientific and technological innovation, and global scientific and technological innovation has entered an unprecedented period of intensive activity. According to a report jointly released by European data agency Dealroom and the London Development Agency, total financing of the global technology industry reached an unprecedented $675 billion in 2021, doubling from 2020. Among them, the United States attracted nearly half of the investment, followed by Asia with China as the core and Europe with the United Kingdom as the core.
"In today's world economic environment, a technology company needs to bury its head in the car, but also need to look up at the road." Hu Baishan said. On April 22, he was interviewed by the media on the topic of scientific and technological innovation.
New scientific and technological revolutions and industrial transformations need to be opened urgently, and challenges are coming one after another. As a technology company established for more than 20 years, vivo has gone through several historical cycles, going through the evolution of the era from telephones to feature phones to smart phones. But in the face of crisis and opportunity, the previous generation of enterprises that have achieved success have returned to a fair starting point. In fact, the challenges faced by these businesses will be even more daunting.
Chen Jin, a professor at the School of Economics and Management of Tsinghua University, mentioned in the book "Corporate Evolution" that the essence of innovation is to cross the "Sea of Darwin", but enterprises from basic research and development to the initial establishment of innovative enterprises, and then to large-scale industrialization, only completed the initial innovation process of Schumpeter. A single innovation is not enough to survive, enterprises need to continue to innovate in the subsequent business process, in the transformation and evolution of time and again, to achieve long-term development.
Hu Baishan is not pessimistic about the external environment, he believes that even in the downturn there is still a market that can be tapped, "the market is not discovered, the market is created."
On the contrary, the more the economy declines, the more it tests the internal strength, tenacity and determination of the enterprise. At this point, the dependent path can no longer replicate the prosperity of the past, and the next path needs to be explored, practiced, and trial and error. How to swing the rudder, how to balance, the speed and slowness of the rhythm, the lightness and weight of the force, each action is particularly sensitive, and the effect will be multiplied.
Keep calm
Christensen, a professor at Harvard Business School, proposed the concept of "pioneering innovation" in his book The Paradox of Prosperity. "Pioneering innovation" refers to the opening up of an untapped potential market through innovation, which is called the "unconstructed market" in the book, so that enterprises and industries can obtain more room for growth.
Christensen argues that pioneering innovation is more important than "continuous innovation" to improve existing programs and "efficiency innovation" that does more with less, creating more jobs and driving socio-economic prosperity.
The current smart phone industry has come to an inflection point that has to "open up innovation", and the micro-innovation that is patched on the original basis can no longer reverse the decline of the mobile phone industry.
Smartphone shipments have been declining year after year since 2017, and weak consumption in 2022 has made the already sluggish mobile phone market even more deserted. Data from Counterpoint, a third-party research institute, shows that the average replacement cycle for Chinese users has increased from 25 months to 31 months.
Consumers' willingness to change machines is sluggish, which directly leads to a continuous decline in mobile phone shipments. According to IDC and Canalys data, The Chinese smartphone market shipped 75 million units in the first quarter of 2022, down 13.7% year-on-year, and global smartphone shipments also fell by 11% year-on-year. IDC previously predicted that China's smartphone shipments for the whole year were about 310 million units, down 5.5% year-on-year, and recently IDC said it would lower its expectations, but did not disclose the specific extent.
During the industry recession, mobile phone manufacturers can easily fall into a vicious circle - the market declines, reduce investment, and product development is more deliberate. This may seem logical, but it will make consumers' desire to buy mobile phones even lower. If you continue to increase investment, it may lead to a decline in profits, which may not be able to return to market growth.
Hu Baishan has stressed many times within the company that the most important question that mobile phone companies need to think about now is whether the new product gives consumers a strong enough reason to change the machine. "If the reason is not good, then this product is destined to be mediocre. In layman's terms, the product must have a super long board, and it is very much liked and concerned by users. ”
"The vast majority of market competition is competition on the old road and competition in the stock market." He commented.
However, innovation has a dual attribute in essence, one is uncertainty, the ratio of investment and return is difficult to estimate; the other is difference, innovation is not "seeking the same" but "seeking difference". This puts forward a double requirement for enterprises, not only to calm down, dare to invest, but also to find the direction and play a differentiation.
Since 2019, vivo has gradually formed a set of research and development systems called "Iron Triangle", which are divided into product planning, technical planning and technical pre-research. Hu Baishan described the relationship between the three as "thinking clearly about what to want" and technical planning as "how to meet user needs", the two shook hands to form a list of technologies after three years, for some immature technologies, they will be ripened by vivo through investment or self-research, and finally output.
In the downturn of the industry, the positive cycle that mobile phone companies are currently trying to achieve is: by increasing investment in science and technology, producing more attractive products, and increasing the power to change machines, so as to restore the vitality of the industry.
Taking vivo as an example, in the past, the main resources of vivo were bet on the current products, but in 2021, vivo established the Academia Sinica, with Hu Baishan as the dean, focusing on more cutting-edge technologies for more than three years. At present, vivo will divide R&D into three stages according to the time when the product is launched, within one year, one to three years and more than three years. "Make sure you have the resources and team at every stage to work on something new, and don't lose your foresight at key points."
In addition, vivo has also established branches in specific research areas such as user innovation laboratory, chip laboratory, analog network laboratory and Thousand Mirrors Security Laboratory.
At present, in the vivo R & D team, the project personnel are full within one year, and the number will be strictly controlled; the recruitment of personnel in one to three years can be discussed, but there needs to be a clear direction; researchers for more than three years are still in continuous recruitment, and there is a relatively independent organization to ensure the independent operation of cutting-edge research and development.
More than three years of technological research and development are often accompanied by higher uncertainty. It is uncertain whether the high investment can have results, whether the results can be transformed into products, and whether the products can be mass-produced, and the entire chain of scientific and technological innovation is accompanied by higher risks.
But Hu Baishan believes that mobile phones are a good industry worth investing in, it is the consumer electronics products that communicate most closely with users, and there is still room for development in the next ten or twenty years, but the product form may change. Based on this judgment, Vivo's investment in the frontier will be resolute and continuous.
"If a person is always busy doing short-term things and ignoring long-term important things, it will be easy to have problems, and it will inevitably not go long." Shen Wei, founder and CEO of Vivo, once commented, "Only by adhering to long-term doctrine and not being disturbed by short-term pressure and temptation is it more likely to do the right thing and do things correctly." ”
Look at the road
In the context of the decline of the industry, enterprises should increase investment, but they must find the right direction. In 2021, vivo wrote "design-driven" into the values, and the deep meaning behind it is "not willing to be mediocre, unwilling to blindly follow, and to do something different". The lack of innovation in the smartphone industry has forced the head companies to take the initiative to think about how to design differentiated products.
Vivo has had many original inventions in the past, such as the screen fingerprint technology launched in 2018 and the "micro-gimbal" that puts the physical stabilizer into the mobile phone camera in 2019, which are important innovations in mobile phone parts.
But a tech company's goal shouldn't stop there. In 2020, vivo established four long tracks of design, imagery, system and performance, and the design mainly includes appearance and interaction; imagery includes shooting and video; the system includes the underlying system and AI technology; and performance mainly supports application scenarios such as games. These four long tracks will be aimed at the cutting-edge technology of 5-10 years, matching users, products and usage scenarios.
A key product at the intersection of these four long tracks is the folding screen mobile phone, which is the mainstream innovation route of the mobile phone industry in terms of form, and it is also one of the main products developed by vivo at this stage. More critically, it is a must for mobile phone manufacturers to seize the high-end position. Counterpoint expects folding screen phones to account for 40%-50% of the high-end market by 2025.
Because of this, many mobile phone companies regard folding screen mobile phones as the next important growth market after the straight board, and intensively launched new folding screen mobile phones last year, including Huawei Mate X2, P50 Pocket, Xiaomi MIX FOLD, OPPO Find N and honor Magic V released in January this year.
With the help of mobile phone manufacturers, the data of this segment last year looks good. According to data from Counterpoint, a third-party market research agency, the shipment volume of folding screen mobile phones in the world will reach 9 million in 2021, an increase of 200% year-on-year, and the growth rate is much higher than that of the smartphone market. Another third-party board research institute, DSCC, predicts that the shipment of folding screen mobile phones will exceed the 10 million mark this year, reaching 17.5 million units.
"The straight plate machine is already a stock market that will be replaced when it cannot meet the needs of users, and the folding machine is a brand new market that will allow users to take the initiative to buy." Hu Baishan said that he believes that folding screen mobile phones will have a 10-fold increase in the next few years.
On April 11, Vivo released the first folding screen mobile phone X Fold, in the head mobile phone manufacturers, vivo's rhythm is relatively late. However, Hu Baishan explained that in fact, the prototype was made very early, but it was not launched due to the immature technology and poor experience at that time. For example, the early machine screen material was plastic, which was far inferior to the current UTG super tough glass.
It also needs to be importantly considered that the price of folding screen mobile phones is not cheap, mainly for high-end customers, and the lowest price of new machines in the industry is also about 8,000 yuan. This part of the user has higher requirements for quality, and once the experience is not good, it is likely to affect the brand image. "[They] don't lower the quality requirements just because they're folding screen phones." Hu Baishan said.
In order to optimize the use experience of folding screen mobile phones, vivo has worked the hinge. Hinge is the core technology of folding screen mobile phones, Hu Baishan revealed that on vivo X Fold folding screen mobile phones, there are 174 parts of the hinge alone, accounting for 40% of the total number of mobile phone parts, and the cost of hinges is as high as 1200 yuan, accounting for about 13% of the price.
However, on immature folding screen products, hinges imply two major user pain points, creases and drops are vulnerable. To this end, the floating wing hinge developed by Vivo has added a floating middle plate, and its principle is that after the screen is opened, the middle plate rises, holds up the screen, and reduces the crease; after the screen is folded, the middle plate can provide greater bending space and protect the screen. Vivo said that the thickness of such hinges can be reduced to 10 mm, and the number of folds is as high as 300,000 times. At the strength of 80 folds per day, the hinge also has a lifespan of about ten years.
Another vivo focuses on the direction of power is the chip. In the past, domestic mobile phone manufacturers were criticized as "assembly factories" due to the lack of core technology, and after the industry fell into a bottleneck period, going deep into the underlying technology and enhancing independent research and development strength became the common choice of head mobile phone manufacturers.
In 2021, vivo released the V1 image chip, which supports the camera and video scenes with algorithms. Recently, vivo has upgraded the V1 chip, superimposed the display performance function on the basis of the image, including interpolation, super-resolution and other optimized video display algorithms, named V1+, and increased the full-platform compatibility, mounted on vivo's newly released X80 flagship series.
At present, vivo mainly defines its self-developed chips on the two long tracks of imagery and performance. Hu Baishan explained that images and game scenes need a lot of algorithm blessing, but this is because smart phones often face the contradiction between effect and heat, because the effect improvement will be accompanied by the superposition of a large number of algorithms, if only rely on software algorithms to call CPU and GPU resources, it will lead to heat generation, energy consumption ratio is low. If the algorithm is "hardened" to the main chip, the energy consumption ratio can be optimized to a certain extent.
Not only vivo, but also the self-developed chips of other mobile phone manufacturers have also begun to expand from a single image field to multiple scenes. The expansion of the battlefield reveals two pieces of information: First, the final game of the mobile phone manufacturer's self-developed chip is not a single chip, but the most difficult and powerful SoC main chip; second, the self-developed chip strength of mobile phone manufacturers is growing rapidly, but it is still a long way to have the research and development capabilities of core chips.
In addition to self-developed chips, vivo has made frequent movements in the field of imaging in recent years. On the one hand, vivo is reserving its own image research and development team, and has established seven image research and development centers around the world, with a team size of more than 1,000 people. On the other hand, vivo has established a cooperative relationship with zeiss, a traditional optical head company, since the end of 2020, taking its strengths.
A real and perceptible example is that many mobile phones are prone to "ghosting" when shooting under strong light, and after ZEISS's experience was borrowed from the mobile phone, Vivo used innovative lens coating to eliminate "ghosting".
"It's not just brand cooperation, but cooperation with in-depth research and development." Hu Baishan stressed. In addition to using ZEISS optical lenses on mobile phones, vivo has also established a joint laboratory with ZEISS to learn to imitate ZEISS's imaging style by relying on the computing power of mobile phones, and learning 280,000 photos, so as to achieve approximate imaging effects.
How to get through the technology cycle
Vivo X Fold and X Note became the official designated mobile phones of the Boao Forum for Asia
According to the latest data from IDC, a third-party market research agency, vivo won 21.5% of the Chinese market with 71 million shipments in 2021, ranking first. In the global market, Vivo ranks fifth with a market share of 9.5%. By the end of 2021, vivo has more than 400 million users worldwide, covering more than 60 countries and regions.
For more than 20 years, from telephones to feature phones to smart phones, this mobile phone company from the grassy era has been at the forefront of China and even the global market.
Although vivo has occupied a certain advantage in the order of magnitude of products and users, it is far from enough. The data reflects that Vivo's first 20 years are basically on the right path, but how to keep the company looking new, through the technology and business cycle, is the next stage of Vivo must answer the question.
Looking at the global mobile phone market, Chinese mobile phone manufacturers are already a force that cannot be underestimated, and three of the top five mobile phone companies in the global market share are from China, and seven of the top ten are from China.
On the back of the soaring, the territory of high-end mobile phones is still firmly guarded by Apple and Samsung, which together occupy 77% of the high-end mobile phone market share. After Huawei's decline, no domestic mobile phone manufacturers can re-carry the high-end banner, and the stereotypes of "low-end" and "assembly plant" are difficult to get rid of in a short time. This is the most difficult issue facing all Chinese mobile phone companies.
Vivo has realized that this thrilling leap must be completed. At the vivo developer conference, Shi Yujian, senior vice president of vivo, described that 2021 is the first year of vivo's qualitative change, the past 26 years are the era of flywheel 1.0, and the future will open flywheel 2.0, that is, from "making high-quality products" to "creating great products through design-driven and technological innovation".
The two seem to be similar, which actually means that the company has adjusted and evolved from top to bottom.
In the past, the most distinctive logo of vivo was entertainment and youth, and there were a large number of variety show titles and star endorsements in marketing activities. "You'll find that there was a lot less branding in the past." Hu Baishan said that in the past two years, vivo wants to highlight the tone of business and technological innovation, including becoming a strategic partner of the Boao Forum for Asia, and X Fold and X Note becoming the official designated mobile phones of Boao. Through products that are more in line with business needs, Vivo is gradually infiltrating into high-end people and trying to reshape its brand image.
In March this year, Vivo revoked its flagship nex original positioning exploration of black technology, and the team merged into the X series. In April, vivo released the X Fold folding screen mobile phone and the X Note large-screen mobile phone, forming an X series matrix with the original X digital series, bringing together high-end resources.
After the re-division, the common positioning of the X series within vivo is to subdivide the high-end, and all maintain the update frequency of the annual generation, but each has its own advantages. Fold has folding features, Note emphasizes large screens, and digital series focus on images.
The objective reality of the current market is that Android mobile phones are still difficult to compete with Apple in the high-end field, so mobile phone manufacturers need to overtake in the segmentation field. Hu Baishan analogy, "the more high-end the car, the more subdivision, the more high-end users, the more the requirements for the extreme." ”
The basic logic of vivo to do high-end is that the first step is that the product must have characteristics and breakthrough points in order to arouse the interest of high-end users and promote attempts; the second step is to have the comprehensive quality that flagship products should have, and leave the early adopters through a good use experience to form a positive recommendation.
Today's vivo has made a small success in the high-end market. In the third quarter of last year, Vivo's market share of China's high-end mobile phones above 4,000 yuan has ranked among the top three. Counterpoint data shows that specific to the range of $500 to $599, vivo's market share has risen to 20% in 2021, compared with 10% in the same period last year. This shows that vivo has won the entry-level high-end admission ticket and is climbing towards a higher price range.
"Burying one's head and planting causes" is the four words that Shen Wei most often hangs on his lips, and he believes that everything has a cause and effect, and the change in the amount of savings will eventually bring about qualitative changes. In his 2022 New Year's address, he said vivo had taken another step in the right direction, "but, it's not enough."
2022 is the most challenging year for the smartphone industry, but whether it is adversity or good times, patience plants the cause of technological innovation, and it is possible to wait for the deep-rooted fruit.