Mobile phone manufacturers "involution": consumers get 512GB of memory freedom, mainly relying on upstream tightening of their belts

Consumers are reluctant to change their phones.

Data shows that in 2022, consumers' mobile phone replacement cycle will be as long as 43 months, reaching the highest level in history; At the same time, China's smartphone market shipped about 286 million units for the year, down 13.2% year-on-year, the largest decline in history.

After consumers' demand for replacement plummeted, mobile phone manufacturers began to "roll in" in memory.

Since the beginning of this year, mobile phone manufacturers have successively launched mid-range mobile phones with 512GB or even 1TB memory configurations, and have put out slogans such as "memory freedom", but the pricing has become lower and lower in each other's price wars, directly hitting the range of 2,000 yuan to 3,000 yuan.

The investigation by Red Star Capital Bureau found that mobile phone manufacturers dare to fight price wars on memory is not untargeted, but all rely on the middle and upstream memory wafer original factories and memory manufacturers to tighten their belts.

Mobile phone manufacturers are fighting price wars

The price of the 512GB configuration mobile phone is reduced to less than 3,000 yuan

The two mobile phone manufacturers are on the head-on.

In early February this year, OnePlus released a new mobile phone, OnePlus Ace 2, claiming to "fully popularize 16GB". Among them, the pricing of the 16GB+512GB configuration is 3499 yuan, the pricing of 16GB+256GB is 3099 yuan, and the pricing of 12GB+256GB is directly reduced to 2799 yuan.

On February 13, on the day of the official release of the OnePlus Ace 2, Xiaomi Group (01810. HK) brand Redmi also took action.

Lu Weibing, who is certified as "Xiaomi Group partner, president, president of the international department, and general manager of the Redmi brand" on Weibo, announced on Weibo that from 10 o'clock on February 13, the Redmi K60 will fully open the "512GB popularization storm" (referring to the reduction of the price of the 512GB configuration).

Red Star Capital noted that the Redmi K60 has a price reduction of 300 yuan for all 512GB versions. Among them, the 16GB+512GB configuration dropped to 3299 yuan, while the 12GB+512GB configuration exceeded the 3000 yuan mark and dropped to 2999 yuan.

On the same day, the heads of the two major brands also choked each other on Weibo.

Lu Weibing said, "A colleague reminded me that recently, some friends have been fighting a high-profile price war, and the K60 opening 512GB popularity storm may be said to be 'forced to reduce prices', will it be a little embarrassing?" I said, how can this be embarrassing. If a friend has been following up since, it means that we have been doing something that everyone thinks is right but difficult. Welcome more friends to enter! ”

↑ Screenshot from Weibo

Li Jie, president of OnePlus China, also said on Weibo, "As I said, 'OnePlus Ace 2 will force friends to reduce prices', and at the same time, I also said that 'it is useless if the product is not good to reduce prices'." We welcome everyone to follow up, and sincerely follow up, to fully popularize the flagship experience for all users! ”

↑ Screenshot from Weibo

After choking each other, the two mobile phone manufacturers continued to compete on large-memory mobile phones, and the price became lower and lower.

On March 7, OnePlus released a new mobile phone OnePlus Ace 2V, featuring "large memory and large storage dual popularization", and the pricing of 16GB+512GB configuration is 2799 yuan.

On March 28, Redmi released a new mobile phone Note12 Turbo, featuring "memory freedom", with a pricing of 2599 yuan for 16GB+1TB configuration.

Wu Yiwen, deputy director of research at TechInsights, told Red Star Capital, "At present, the extension of consumer replacement cycles is a challenge for mobile phone manufacturers. "According to research data, it is expected that the replacement cycle of consumers in 2022 will be as long as 43 months.

Wu Yiwen believes that in the face of the challenge of extending the replacement cycle of consumers, insufficient memory capacity is often an important reason for consumer replacement, so mobile phone manufacturers have increased investment in this regard.

Who gave mobile phone manufacturers confidence?

512GB of RAM may become standard in mid-range phones in the future

In fact, mobile phone manufacturers dare to fight price wars in the memory field, which is supported by upstream.

Red Star Capital Bureau learned that NAND Flash and DRAM are the two most widely used storage products and are also used in mobile phones. The former is a data-based flash memory chip, and the latter is a dynamic random access memory.

CFM flash market data shows that in early 2022, the market composite price index of NAND Flash and DRAM both exceeded 1,000 points. Stretching to the full year of 2022, NAND Flash's market composite price index fell by 41%, and DRAM fell by 35%.

↑Screenshot from CFM flash market

As of April 4 this year, the price index of NAND Flash was 488.80 points, and the price index of DRAM was 570.39 points.

Taking the eMMC (128GB-5.1) class storage product (belonging to NAND Flash) as an example, CFM flash data shows that on October 11, 2022, its quotation was $8.50; by April 4 this year, the quotation of the product dropped to $5.3.

Li Ling (pseudonym), the person in charge of a company that produces and sells storage products, told Red Star Capital that this round of price reduction of storage products starts from the upstream source, and in the case of oversupply in the market, the price of raw materials falls, and terminal products also need to be destocked, so there is a situation of price reduction.

Wang Feng's (pseudonym) company supplies storage products to mobile phone manufacturers such as vivo and OPPO, and he also told Red Star Capital that since last year, their company has lowered the price of storage products because market demand is declining, and the decline is very large.

Wu Yiwen told Red Star Capital that the price reduction of storage products has accelerated the penetration of 512GB of memory into the mainstream price segment.

"I think other domestic Android brands will follow suit (OnePlus and Redmi). With the intensification of competition, the reduction of component costs, and the further increase in users' demand for large memory, 512GB is likely to become the mainstream (configuration) of 2000-3000 yuan mobile phones in the future. Wu Yiwen said to Red Star Capital Bureau.

Red Star Capital Bureau noted that after OnePlus and Redmi, realme's new GT Neo5 SE will officially go on sale on April 10. Among them, the price of the 16GB+1TB configuration is 2599 yuan, which is known as "the full level of memory to the end!" ”

"The industry is in a downcycle"

Upstream storage original factories have announced production cuts or layoffs

Market changes in the storage industry can be glimpsed in the earnings reports of listed companies.

Longsys (301308. SZ) was also affected. In 2022, Longsys' revenue decreased by 14.55% year-on-year to 8.330 billion yuan, and its net profit decreased by 92.81% year-on-year to 72.8 million yuan.

Longsys once explained that affected by macro adverse factors, the economic growth of major countries in the world is weak, the demand for consumer electronics represented by smartphones and PCs has declined, and the volume and price of the consumer storage market have fallen.

Among them, due to the significant decrease in the unit price of memory, Longsys made a provision of RMB162 million for inventory with signs of impairment, confirming a significant increase in asset impairment loss compared with the same period in 2021.

Continue to trace back to the upstream of the industrial chain, and the upstream of storage products is the storage wafer original factory.

According to data compiled by Guojin Securities Research Institute, in the third quarter of 2022, the number of months of global storage original inventory was 5.1 months, up from 3 months in the same period of 2021, and it was five consecutive quarters of rise.

Li Ling's company needs to buy raw materials from head storage wafer original factories, in her opinion, these storage wafer original inventory is relatively large, and after the supply and demand relationship in the market changes (oversupply), the entire industry is in a downward cycle.

Red Star Capital Bureau noticed that in such a market environment, some storage wafer foundries have taken measures such as production cuts and layoffs.

For example, SKHynix announced in 2022 that it will cut capital expenditures by more than 50% in 2023, reduce the production of low-margin products, and normalize the supply-demand balance in the market by maintaining the trend of investment and production reduction for a certain period of time.

In addition, Micron also said in 2022 that it would cut DRAM and NAND wafer production by about 20%, and also expanded the layoff plan in February this year, from the original expected 10% to 15%.

↑Screenshot from Longsys financial report, the content comes from the CFM flash memory market

This year may usher in an inflection point in the industry

The localized storage industry chain has also ushered in a layout moment

Wang Feng told Red Star Capital that from the current market situation, the backlog of inventory in major storage wafer fabs is relatively large, and it is expected that the entire industry will be in the "destocking" stage in the first half of this year.

As for when a large amount of inventory can be consumed, Wang Feng believes that this depends on the recovery of demand in the terminal market this year.

Guolian Securities said in the research report that memory chips have a strong periodicity, usually 3-4 years as a cycle. At present, the current downward cycle is close to two years, and DRAM spot and contract prices are close to the bottom of the previous cycle, "As major storage plants cut capital expenditures, we expect the storage sector to usher in an inflection point in the second half of 2023." ”

Wang Feng told Red Star Capital that the price of memory products fluctuated. If the demand of consumers grows in the later stage, the market is in short supply, and the price of the product may rise.

Red Star Capital Bureau noted that at present, almost all of the head storage wafer original factories are overseas enterprises, but domestic enterprises such as Changjiang Storage Technology Co., Ltd. and Changxin Storage Technology Co., Ltd. (hereinafter referred to as "Changjiang Storage" and "Changxin Storage") are catching up.

According to the statistics of market consulting agency Omdia (IHS Markit), in 2021, Samsung Electronics, Kioxia, Western Digital, SK Hynix, Micron, and Solidigm have a total market share of about 96.76% in global NAND Flash, and Samsung Electronics, SK Hynix, and Micron have a market share of about 94.35% in global DRAM.

Li Ling told Red Star Capital that Changjiang Storage and Changxin Storage are also suppliers of their company, and the specific procurement of raw materials from which one is generally based on customer needs, "Some customers require that everything be 'localized', then we will purchase domestic, from raw materials to production are carried out in China." ”

Guosheng Securities said in the research report that the localized storage industry chain has ushered in a layout moment, and it is expected to complete the rapid upgrade of the product structure in 2023.

Red Star News reporter Yang Peiwen

Edited by Yu Dongmei