China's mobile phones have changed dramatically in 7 years, and the annual export volume is 500 million units less than the peak
Mobile phone exports may not reach the peak again.
According to data disclosed by the General Administration of Customs on November 18, China's mobile phone exports in the first ten months were 642 million units, a year-on-year decline of 6.4%.
China's mobile phone exports increased by 2.4% year-on-year to 1.343 billion units in 2015. 2015 was the peak year for China's mobile phone exports, and then declined year after year, falling to 822 million units in 2022. In other words, exports in 2022 are 521 million units lower than in 2015.
How did the export volume of 521 million mobile phones shrink?
The global market is shrinking
According to data from the General Administration of Customs, mobile phone exports in October this year were 81.11 million units, a year-on-year increase of about 10%. However, the total number of exports in the first ten months still fell year-on-year.
China is the largest base for mobile phone manufacturing and exports, and an important reason for the continuous decline in mobile phone exports in recent years is the sluggish global mobile phone consumption.
Global smartphone shipments peaked in 2017. According to data from market research firm Counterpoint, the global smartphone market shipments increased by 2% year-on-year to 1.55 billion units in 2017, with the first decline in 2018, followed by a year-on-year decline in 2019 and 2020, and shipments of 1.2 billion units in 2022.
The innovation of smart phones has reached a bottleneck period, Gao Shiwang, director and spokesman of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, told the first financial reporter that this has partly affected the purchase enthusiasm of consumers, and consumers have extended the time to change their phones, resulting in the demand for smartphones peaking in the world.
This is reflected in the world's most important mobile phone consumer markets.
China's domestic smartphone market peaked earlier. In 2016, China's smartphone shipments reached an all-time high of 465 million units, and then faced downward pressure. By 2022, China's domestic mobile phone shipments will be less than 280 million units, a ten-year low.
Several core overseas smartphone markets are still facing shrinking pressure this year.
According to Canalys and Counterpoint data, in the second quarter of this year, Southeast Asia shipped 20.9 million smartphones, down 15% year-on-year, has fallen for six consecutive quarters, the Indian market, which has grown for many years, has also seen a downturn, with shipments of 36.1 million units, down 1% year-on-year, down four consecutive quarters of year-on-year, shipments in Latin America fell 15.6% year-on-year, and shipments in the European market fell 12% year-on-year, hitting a new low in 11 years.
In the third quarter of this year, the global smartphone market fell by 1% year-on-year, marking the sixth consecutive quarter of year-on-year decline, with some regional markets recovering but overall demand remaining weak. Among them, U.S. shipments decreased by 5% year-on-year, Indian shipments decreased by 3% year-on-year, and Latin American markets increased by 11% year-on-year. In the third quarter, domestic mobile phone manufacturers' shipments in major overseas markets were also mixed. Among them, Xiaomi's shipments in Latin America and Africa increased year-on-year, but decreased year-on-year in Western Europe and India, OPPO recorded year-on-year growth in Africa, but decreased year-on-year in India, and vivo also recorded year-on-year declines in India.
Looking back over the past seven years, the global market share of China's local mobile phone brands has been strengthened.
According to data from market research institute IDC, among the top five smartphone manufacturers in global shipments in 2015, Huawei, Lenovo, and Xiaomi were listed, with a total of 251 million units, accounting for 17.5%, and in 2022, Xiaomi, OPPO, and vivo were listed, with a total of 355 million units, accounting for 29.5%. From 2015 to 2022, the top domestic brands have increased in both shipments and market share in the global market.
They just don't make that many phones domestically.
According to the reporter's calculation of mobile phone export volume and mobile phone production data, in 2015, China's mobile phone exports accounted for 73.85% of China's mobile phone production, and by 2022, the proportion will become 52.68%. In other words, domestically produced mobile phones have changed from export-oriented in 2015 to nearly half of them for domestic sales in 2022.
The actions of multinational companies have also had an impact on China's mobile phone exports.
Gao Shiwang told reporters that globally, domestic mobile phone brands, Samsung and Apple form three main forces. After 2014, Samsung gradually withdrew from the Chinese market, closed its factories in China, and turned to overseas places such as Vietnam, which had a relatively large impact on domestic mobile phone exports in the next few years after 2015. In the past, Samsung produced mid-to-high-end models in South Korea, and the rest of the production capacity was basically arranged in China, and more than 70% of Samsung's mobile phones were produced in China and most of them were exported. But at present, Samsung basically has no production capacity in China. In addition, Apple has also gradually transferred production capacity abroad in recent years.
Gao Shiwang said: "After the export volume peaked in 2015, we calculated that the annual export volume decreased by about 69 million units. The main reason is the change in the mode of going overseas, and the manufacturers have changed from exporting the whole machine to building factories overseas. ”
There is a big migration of manufacturing capacity
Around 2015, China's local mobile phone companies began to actively expand their overseas production bases.
The first stop for vivo and Xiaomi to go overseas is India. In 2015, Xiaomi opened its first factory in India, and in the same year, vivo rented a factory in India to achieve localized production, and in 2016, OPPO invested about 1.5 billion yuan to build a factory in India.
In 2015, Indonesia began to put forward local production demands, gradually banning the import of some models from overseas, and that year, an electronics factory acquired by OPPO in the local area was put into operation, which was OPPO's first overseas factory.
Indonesia and India have become the two major "bases" for domestic mobile phone manufacturers to build overseas production capacity, and manufacturers have continued to deploy in the following years.
In 2016, vivo already had a factory in Indonesia, and then the production scale has been continuously expanded, increasing the number of factories from one to four, and Xiaomi began to produce mobile phones in Indonesia in 2017. In 2020, OPPO invested 500 million yuan to build a production plant in Indonesia, with a designed annual production capacity of 28 million units. In India, Xiaomi announced in 2017 that it would build another mobile phone factory, in 2018 vivo invested nearly 4 billion yuan to start building a second factory near the existing factory, and in OPPO2019 it announced that it would invest about 3.3 billion yuan in five to 10 years to produce electronic products and accessories in India.
Outside of India and Indonesia, domestic mobile phone manufacturers are looking further ahead.
In 2019, vivo plans to build a mobile phone factory in Bangladesh, which is Vivo's third overseas factory at that time, and the factory will produce at least 1 million smartphones a year. In 2021, vivo set up an intelligent manufacturing center in Faisalabad, Pakistan, and this year it has 8 production lines with an annual design capacity of 6 million units. Also in 2021, vivo opened the Turkey Intelligent Manufacturing Center, with an annual design capacity of 5 million units.
According to the reporter's combing of public information, vivo factories in India, Turkey, Pakistan, and Bangladesh have an annual production capacity of about 72 million units, of which the annual production capacity of Indian factories reaches 60 million units. In addition to the factories in Indonesia and Egypt, vivo's overseas factories account for about 36% of its total global production capacity. The reporter learned from people close to OPPO that OPPO's current overseas production capacity accounts for more than 30%, which is similar to vivo. The reporter also called the securities affairs department of Transsion Holdings as an investor, and learned from the relevant person in charge that about seventy percent of Transsion's production capacity is in China, three percent of its production capacity is overseas, and overseas factories are mainly made of smart phones.
The overseas production plants of Chinese mobile phone companies basically meet the needs of the countries where they are located.
After setting up factories in India, many mobile phone brands have basically produced mobile phones sold locally. In 2018, 95% of mobile phones sold in India were locally manufactured. The reporter saw from a report released on the official website of vivo India that all mobile phones sold by vivo in India are made in India, and 100% of the motherboard manufacturing is completed in India, about 70% of chargers and headphones are purchased through local partners, and 95% of the batteries are purchased locally.
"The production capacity of our overseas factories is mainly to cover the local area, for example, the factory in India covers India, the factory in Ethiopia covers Ethiopia, and the overseas local factory can fully cover the local demand. The reason for setting up a factory in the local area is that there are certain preferential policies, which are more favorable than shipping from China. We will not cover the production capacity of one overseas factory to other places, because it is not as cost-effective as shipping (complete machines) from China. The relevant person in charge of Transsion Holdings said.
Zhang Pin (pseudonym), a major mobile phone manufacturer who has been responsible for overseas business for many years, also told reporters that the factories of domestic mobile phone manufacturers in Bangladesh, Turkey and Pakistan that he is familiar with are also mainly supplied to the local area.
Gao Shiwang said that in recent years, many domestic enterprises have set up factories overseas, and in addition to the local labor cost advantage, the overall cost does not account for obvious advantages, which is related to the imperfect local supply chain, and although the local labor price is low, the efficiency is not very high.
Zhang Pin also told reporters that the key to promoting overseas factories is not cost, including India, he is familiar with a number of popular areas for overseas factory construction have certain restrictions on the import of mobile phones, such as increasing import tax rates, and there is a certain amount of trade protection in the local area.
In the future, it cannot be ruled out that Chinese mobile phone companies will use factories in India and other places for global exports.
In its official report, vivo mentioned that in 2022, vivo exported its first smartphones made in India, with the first shipments to Thailand and Saudi Arabia, and is expected to export another 1 million phones in 2023.
Is the boom in overseas factories over?
In the past two years, Chinese mobile phone companies have faced a complex situation overseas.
In 2022, vivo was raided by the Enforcement Directorate of India. In the same year, Xiaomi's subsidiary was accused by Indian law enforcement of illegally sending money in the name of paying royalties, and Xiaomi's assets worth about 4.8 billion yuan in India were seized. In Europe, the German District Court of Mannheim ruled in favor of Nokia in the patent case against vivo, and then vivo products were removed from the German official website, and OPPO also reported the news of its withdrawal from Germany and the United Kingdom.
Some Chinese handset brands are already under pressure to lose market share in India. Canalys data shows that after 20 successful quarters, Xiaomi lost its leading position in the fourth quarter of 2022, falling to third place with 5.5 million units shipped. In the third quarter of this year, India's overall smartphone shipments fell by 3% year-on-year, while Xiaomi, realme, and OPPO shipments fell by 17%, 6%, and 16% year-on-year.
"It's a good choice for mobile phone manufacturers to maintain the status quo in India. In the past, it was more common to win users through price or other means in India, but there were no particularly good results in terms of profit acquisition, and now it is difficult to recoup the early investment. At the same time, the Indian market does have more potential. Domestic mobile phone manufacturers have a 'love and hate' for the Indian market. Gao Shiwang said that India is a relatively special market, and the local situation of enterprises is not representative.
Chen Wei (pseudonym), who is in charge of international related business at the head mobile phone manufacturer, told reporters that not only Germany, but also several major countries in Western Europe, mobile phone manufacturers in the French and British markets may be affected by Nokia's patent litigation in the future, and Italy and Spain have not been affected for the time being.
"The global market has changed a lot in recent years, and the layout and strategy of enterprises doing overseas markets have changed. The manufacturer's association does enterprise IT construction, import and export trade compliance-related sorting, enterprise structure construction, personnel training, etc., all based on (encountering) some events before gradually realizing how to do global layout, during which some tuition fees were paid. Chen Wei said.
After several years of going overseas and gradually realizing the particularity of overseas markets, Chinese mobile phone manufacturers are now rethinking the layout of overseas markets and production capacity.
Zhang Pin told reporters that the overseas market has changed greatly, even if it is a country with a layout of production capacity, in the case of excessive changes in the exchange rate, local factories have no profits, and there have been cases of shutdown, and some overseas factories were originally planned to carry out capacity radiation, but did not realize. Under the influence of factors such as inflation, changes in the international situation, and the slowdown or even decline in the growth of the global mobile phone market, the global layout plans of some mobile phone companies have been subverted or suspended. Enterprises are very cautious about continuing to acquire land and build factories overseas, such as Vietnam, West Asia, Latin America and other places in Southeast Asia, there are manufacturers to investigate, and in the end the factories have not been formed.
"I think it will be difficult to start a wave of 'vigorous' overseas factories in the near future, but in the long run, going out is inevitable. Zhang Pin said.
Chen Wei said that when deciding whether to build factories overseas, manufacturers will consider several dimensions, including local requirements on tariffs and localization, the cost and the size of the local market. In the case of smaller countries, manufacturers can even abandon this market or enter the local market through parallel imports. Whether or not to enter an overseas market will be considered from the perspective of whether the political situation is stable, whether the economic pillars are strong, and whether the government can manage it. At present, overseas emerging markets with more potential include the United Arab Emirates, Saudi Arabia and some North African countries in the Middle East and Africa, Vietnam, Thailand and the Philippines in Asia, and Brazil, Mexico and Colombia in the Americas.