Text/Wang Xinxi
Domestic science and technology products, a law that everyone agrees on is that as long as there is a breakthrough in domestic science and technology, the higher the localization, the cheaper the price, and many foreign technologies, once they are localized, the price will drop sharply is an inevitable phenomenon. But Huawei Pura70 may be a mobile phone with the highest localization rate, Japanese media dismantled and found that its localization rate exceeded 90%, panel, chassis, battery, lens, heat dissipation, acoustic components and other components, almost fully localized. However, despite such a high localization rate, the price has not been lowered, even so, the PURA70 series is hard to find on major platforms.
Even many users who buy the PURA70 series put this phone at a price increase of 1,000 yuan and sell it on a third-party platform to earn the difference. What exactly is the reason?
Huawei's premium premium for high-end mobile phone brands has support points
Many people complain that Huawei mobile phones are expensive, but in fact, Huawei has low-end mobile phones, and Huawei Pura is positioned as a high-end flagship, and high-end machines are for high premiums and more profits. So the Kirin chip behind this mobile phone + independent Hongmeng operating system + a series of independent domestic supply chain technologies is the cornerstone that supports its high price.
From the perspective of BOM cost, the value of the Huawei Pura 70 Pro version is about 400 US dollars (about 3000 yuan). In terms of the cost of each component, the main chip accounts for the largest proportion, about 90-100 US dollars, followed by the camera module, which is worth 80 US dollars, the screen and the housing are 60 US dollars and 50 US dollars, the storage part is between 60-80 US dollars, and the RF part is about 206 US dollars.
Huawei's positioning is benchmarked against Apple, referring to Apple's past pricing, the pricing of the iPhone is about 2~3 times the BOM cost. In the past, people calculated the BOM cost of iPhone11, and the material cost of a mobile phone priced at more than 10,000 yuan was only 2,726 yuan. The iPhone15 series has risen, for example, the BOM cost of the iPhone15 is 3062 yuan. It's probably less than half the price of the whole machine.
If you include R&D costs and marketing costs, the BOM cost of the Huawei Pura 70 Pro version is about 3000 yuan, and the price from 6499 is not high. The high premium of the product is determined by its product competitiveness, scarcity and supply and demand.
The input-output ratio is in a positive cycle with R&D, and chip investment is too expensive
Huawei is an enterprise that focuses on a positive R&D cycle, that is, the input-output ratio should form a positive cash flow. If R&D investment is high, but the income is not high, it means that R&D is higher than profit, this R&D model can not be continued, only when the input-output ratio is positive, and R&D investment is converted into product profits, the income can be flattened or the profit exceeds R&D, in order to form a positive cycle of R&D.
For Huawei, self-developed chips are very money-burning, and to ensure that chips are not left behind, they must keep burning money, and a large part of the money earned on mobile phones will be eaten by chips. What's more, Huawei's multiple product lines require R&D investment.
Some time ago, Meng Wanzhou revealed at the summit that Huawei's R&D investment of nearly one trillion yuan in 10 years, and Huawei's R&D investment reached 164.7 billion yuan last year, accounting for 23.4% of the annual revenue, which is at a historical high.
Since Samsung and Apple are global shipments, while Huawei is mainly for the domestic market, the size of industrial product shipments is very critical for cost control and investment to maintain R&D investment. Therefore, since there is only a domestic market, for Huawei, the shipment volume must not only be large, but also have a high single profit to support its R&D positive cycle.
Therefore, as a business, it is our job to make profits. Then use the profits for R&D and develop new products, new products have good profits, and can promote R&D iteration and upgrading, forming a positive cycle. Especially to ensure that chips are not left behind, we must keep burning money. If Huawei's revenue and profits plummet, it is likely to lead to the collapse of Huawei's entire incentive system, and R&D investment will be greatly weakened or even interrupted.
With enough profits, there will be greater motivation and more R&D investment to create better products.
The supply chain retains sufficient profits and upgrades production lines and processes, which is related to the overall competition of the supply chain between China and India
Huawei's localization,Behind it,Is the development and upgrading of the domestic supply chain,Earlier,OFILM、Goertek and other supply chain manufacturers were kicked out of the fruit chain,These supply chain companies are actually facing a crisis,Last yearMate60After the series came out,OFILM、Goertek、Xinwangda and other entire domestic mobile phone industry chain from the previous plunge to expand production and recruitment,Full blood resurrection。
This time, Huawei Pura70 has gone one step further this year, benefiting more and more domestic supply chain manufacturers such as lens manufacturers, spin-coated filters, micro-prisms, motors, CIS, and memory chip manufacturers.
Some of these supply chain manufacturers are original fruit chain manufacturers, and later the fruit chain was eliminated, but the production process and production line have been retained, in the fruit chain, in fact, most of the profits are Apple's, and there is not enough R&D investment in production line upgrading and R&D.
Many manufacturers pull back from the line of life and death, the essence is to rely on profits for survival and development, supply chain manufacturers have no profits, it is more difficult to upgrade the process and product line, now with the transfer of production capacity from Apple to India, in fact, the competitor of the domestic mobile phone supply chain is India, we can not despise India, after all, China has come this way in the past, so upgrading the supply chain process and technology has become the biggest weight to compete with Indian supply chain manufacturers.
China's supply chain and India's supply chain will eventually have a battle, only so that the supply chain has enough profits, better development, more funds to invest in research and development, technology, production line upgrades, in order to better compete with the Indian supply chain. The development of the mobile phone industry to this day has long bid farewell to the assembly of the low-end industrial chain, but to upgrade to the high-end technology.
Therefore, Huawei PURA is right to take the high-end path, and eventually it will drive the entire domestic supply chain to upgrade to the mid-to-high-end, forming a comprehensive competitive advantage in the Indian mobile phone supply chain.
This is also why the localization rate of Huawei Pura is so high, and the price has not been lowered, on the one hand, Huawei needs to have profits, and on the other hand, the domestic supply chain also needs to have enough profits to upgrade production lines and technical processes.
Today's mobile phone supply chain competition has long bid farewell to low-end competition, if we have been taking the road of small profits and quick turnover, hovering in the low-end manufacturing industry, our supply chain competitiveness will not come up. If domestic production is always equal to low prices, then manufacturing workers can only pay 3,000 per month and can only make screws on the assembly line.
To sum up, from the aspects of Huawei's brand premium support point, input-output ratio and R&D positive cycle, as well as the need for the supply chain to retain sufficient profits and upgrade processes and technologies in order to maintain its competitive advantage with the Indian supply chain, we may be able to find the answer to why the localization rate of the Huawei Pura70 series is so high, but the price has not fallen.
Author: Wang Xinxi, Senior Reviewer of TMT This article is not reproduced without permission