Xiaomi's "silence" folding screen: can't win the high-end, let alone win the iPhone

In the absence of the iPhone, the folding screen is becoming one of the marketing focuses of the domestic mobile phone manufacturers' conference.

In the past, Huawei Yu Chengdong shouted out "folding screen, Huawei's opponent is only himself", and then there was OPPO Liu Zuohu at the Find X6 series new product launch conference, the OPPO folding screen product line "noisy" publicity.

However, when answering how to face the competition of new products in the industry, at the Xiaomi fourth-quarter earnings call on the evening of March 24, Lu Weibing, the new president of Xiaomi, who attended for the first time, did not mention the folding screen plan, believing that "in the short term, we may face some pressure." But in the long run, we're not too worried about competition. ”

Xiaomi's conservativeness in the field of folding screens can also be glimpsed from the speed of product iteration. As the second domestic mobile phone manufacturer to mass-produce and market folding screen mobile phone MIX FOLD after Huawei, Xiaomi was instead dominated by OPPO, and after it iterated MIX FOLD to the second generation, OPPO has developed a vertically folded small screen model.

Xiaomi folding screen mobile phone MIX FOLD

The reasons for Xiaomi's hesitation are manifold. The folding screen product experience is difficult to compare, and the straight plate machine is one of them. For example, in terms of weight, although Yu Chengdong claims that Huawei's new generation of folding screen Mate X3 is lighter than the straight board machine, but this light measurement object is currently only iPhone 14 Pro Max model, and only 1g lighter than the latter (Mate X3 weighs 239g, iPhone 14 Pro Max weighs 240g).

Moreover, the folding screen, which was originally regarded as improving the premium ability, is getting closer and closer to the domestic mainstream flagship model. CINNO Research statistics show that in January this year, the sales volume of 5000-9999 yuan in the price range of China's folding mobile phone market increased by 31% year-on-year, accounting for 81%. Xiaomi, OPPO and other manufacturers have successively lowered the price to about 6,000 yuan.

The more important reason is that folding screens are difficult to bear the burden of sales. IDC data shows that the market penetration rate of China's folding screen mobile phones in 2022 is only 1.2%. Among them, Huawei, which holds the first title in China, will only sell 1.44 million folding screens in 2022, and it is also the only domestic folding screen manufacturer with sales exceeding one million, and Xiaomi's sales in the same period are only about 190,000 units.

Judging from the entry threshold of 10 million units shipped annually in the consumer electronics industry, a number of domestic mobile phone manufacturers are still in the early stage of supply-side leading rather than market demand-led early product development. The folding screen is just a fig leaf that domestic mobile phone manufacturers use to impact the high-end.

A

Since the restart of the high-end strategy in 2020, the ASP (average sales unit price) of Xiaomi mobile phones has been in a state of slow improvement, and the ASP has gradually risen from about 1,000 yuan to 1,100 yuan in three years.

Xiaomi CFO Lin Shiwei said that in 2022, Xiaomi's smartphone business revenue decreased by 19.9% from 208.9 billion yuan in the same period last year to 167.2 billion yuan, global smartphone shipments decreased by 20.9% from 190 million units in the same period last year to 150 million units, and smartphone ASP increased by 1.3% to 1111 yuan from 1097.5 yuan in the same period last year, a record high.

For the follow-up ASP improvement problem, Lu Weibing responded that with the help of high-end, Xiaomi is "very confident" in the improvement of ASP.

In the face of the decline in smartphone gross margin to 9.0% from 11.9% in the same period last year, Lu Weibing explained that it was mainly due to Xiaomi's efforts to clean up inventory during the year, "The smartphone industry has experienced a rapid reversal of supply and demand, and chip inventory has shifted from shortage to oversupply, resulting in excess inventory in the entire industry and intensified market competition." ”

With the increase in ASP, Lu Weibing believes that the gross profit margin will increase in 2023, and if external factors such as exchange rates remain stable, Xiaomi may achieve a gross profit margin of more than 10%, "but it is difficult to say how much comes from cost reduction and how much comes from premiums." "Compared with other mobile phone manufacturers' radical measures in folding screens, Xiaomi does not regard folding screens as an important means to increase premiums and improve gross margins."

Lei Jun and Lu Weibing (right)

Compared with the development of folding screen products, visiting overseas markets is something that Lu Weibing is more concerned about. On the earnings call, Lu Weibing said: "I still believe that there is huge potential (in overseas markets). I've also arranged quite a few business trips for myself this year and tried to see all these different overseas markets. ”

In response to the current hot AI large model, Lu Weibing mentioned that Xiaomi uses a multi-technical route to explore the landing of AI large models in parallel, "The success of ChatGPT has given Xiaomi a lot of confidence to verify the correctness of this direction." "One of the typical landing scenarios is Xiaomi voice assistant Xiaoai. In the future, Xiaoai will support the intelligent integration of mobile phones, speakers, cars and other scenarios.

B

Facts have proved that in order to achieve Lei Jun's goal of "comprehensively benchmarking the iPhone", the folding screen is not a powerful weapon. The folding screen, which once pinned on domestic mobile phones to fight Apple's high hopes for the iPhone, did not form a powerful blow to the iPhone.

According to the survey report released by DSCC, global shipments of folding screen mobile phones in the fourth quarter of 2022 fell by 26% from the same period last year to 3.1 million units, a month-on-month decline of 48%, becoming the first quarter to have an "annual decline" since the advent of folding screen mobile phones, one of the main reasons is precisely due to the shrinking demand caused by the launch of Apple's iPhone 14 series models.

While a number of domestic mobile phone manufacturers are busy hitting the high-end, Apple's market share and operating profits are rising. Counterpoint data shows that in 2022, Apple's operating profit will reach a new high, with a market share of less than 20%, accounting for 85% of the profits of the global mobile phone market.

According to monthly domestic mobile phone sales monitoring data released by CINNO Research, smartphone sales in the Chinese market in January 2023 were about 27.66 million units, down 10.4% year-on-year.

Specific to each brand, in addition to the year-on-year decline in Xiaomi's sales in the Android camp is smaller than the overall decline in smart phones, OPPO/Honor/vivo decreased by 13.5%, 19.2 and 23.5% respectively. The iPhone performance is far better than the Android camp, with a year-on-year decline of 4.2%, and with sales of about 4.9 million units, it once again won the first place in the domestic market, of which the iPhone 14 Pro Max became the best-selling model of the month with 1.31 million units.

After Huawei's mobile phone business was pressed the growth pause button, competitors such as Xiaomi, OPPO, vivo, and Honor have released a series of high-end strategies, in addition to competing for Huawei's vacated market share, more importantly, they also imagine the iPhone, with the help of the high-end market, to obtain more generous premium space, so as to earn more profits for enterprises.

Folding screen, once became the consensus of domestic mobile phone manufacturers to achieve the above strategy. However, after nearly five years of development, the only Android manufacturer running out of the global folding screen market is Samsung. According to Canalys data, among the 14.2 million folding screen sales worldwide in 2022, Samsung ranked first with about 11.5 million units shipped, dominating more than eighty percent of the global market share. Huawei, which ranks first in China, although ranked second only to Samsung, its sales volume is only about one-seventh of Samsung's, and its shipments are about 1.7 million units, and Xiaomi, OPPO, vivo, honor, etc. combined, global shipments are less than one million units.

And in the increasingly fierce product premium competition, only Huawei and Samsung can rely on the accumulation of word of mouth in the high-end market of straight plate machines, define the folding screen market of more than 10,000 yuan, the average price of folding screens of other domestic mobile phone manufacturers is difficult to exceed 10,000 yuan, and gradually pull down its price to about 6,000 yuan, folding screens can bring Xiaomi The premium expectation has become smaller and smaller.

C

In the context of the decline of the global smartphone market for five consecutive years, domestic mobile phone manufacturers have tried to rush higher, in order to compete for share, they have to invest more resources in the cost-effective battle.

In the past 2022, the global smartphone market fell by 12% year-on-year, and total shipments fell below 1.2 billion units, a record low. The domestic smartphone market fell 14% year-on-year to less than 300 million, a record low in the past decade.

This decline continues. In January and February this year, the entire smartphone market fell by about 4% year-on-year, and in March it was basically flat, and Lu Weibing predicted that the first quarter of 2023 will still be a year-on-year decline. "We think it's too early to say that the market has recovered and hope of recovery could be in the second half of the year."

OPPO, which has experienced the largest year-on-year decline in sales in the past year, obviously does not want to wait until the second half of the year. OnePlus, an Internet mobile phone brand founded in 2013 with Honor, began to embark on a small and beautiful route of high-end flagships when Honor was benchmarking Xiaomi's price-performance ratio. But after the acquisition of OPPO, OnePlus became the fuse for the price war in the mobile phone circle in 2023, and the firepower was directly aimed at Redmi.

Yu Chengdong mentioned when sharing how Honor surpasses Xiaomi's advice, "High R&D investment will lead to high-quality products, and Honor products will definitely greatly surpass Xiaomi in the future." By 2017, Sino data showed that the annual shipments of honor mobile phones began to surpass Xiaomi and become the first brand of Internet mobile phones.

Yu Chengdong's successful experience is being learned by Liu Zuohu. OPPO unveiled a product research and development plan to invest 10 billion yuan in OnePlus in 3 years, hoping to build the latter into the No. 1 online market share above the price of 2,000 yuan.

As the new president of Xiaomi, Lu Weibing has to face a new round of fierce competition from the middle and low end head-on in addition to leading Xiaomi to hit the high-end.

In addition, Xiaomi cars, which are speeding up mass production, are bound to distract Xiaomi's resource thickness to focus on high-end mobile phone research and development.

According to the 2022 financial report, Xiaomi's R&D expenditure increased by 21.7% to 16 billion yuan from 13.2 billion yuan in the same period last year, mainly due to the increase in innovative business expenses such as smart electric vehicles, which reached 3.1 billion yuan in annual R&D expenditure.

In order to ensure that Xiaomi cars are mass-produced as scheduled in the first half of 2024, the car manufacturing team has become the core project of Xiaomi's internal growth against the trend. In the fourth quarter of 2022, Xiaomi laid off 2,798 employees. In contrast, the number of car teams increased from 1,800 in the third quarter to about 2,300.

According to the next five-year R&D plan disclosed by Lu Weibing, from 2022 to 2026, Xiaomi's total R&D investment will exceed 100 billion yuan, which will be dispersed in smartphones, smart cars, robots and other fields.

Whether it is a car or a robot, at the moment, it is a more expensive investment project than a mobile phone, which is a test of Xiaomi's ability to balance it. Perhaps based on this, Xiaomi changed its scale-first business strategy and set "equal emphasis on scale and profit" as the group's new policy in 2023 for the first time.

Under the guidance of the above policies, folding screens, which are still like chicken ribs, may be more difficult to become the focus of Xiaomi's product planning.