As a Smartphone OEM Manufacturers, How to Improve the Competitiveness?

Tuesday, November 03, 2015

The Failures of Smartphone OEM Manufactuers Happen in the Business

Over the past half year, news that a lot of Chinese mobile phone OEM manufacturers closed down spread out. At the end of 2014 on December 5, Massgood and Liansheng Technology, Taiwan Wintek’s two subsidiaries that are separately located in Dongguan Dongcheng and Songsan Lake stopped production; several days later, on December 9, another Wintek’s subsidiary company, Suzhou Lianjian Technology shut down. Almost 30,000 workers from these three subsidiaries lost their jobs. At the end of December, the boss of Aosirui Deshipu Electron Technology Co., LTD from Dongguan ran away, with a debt of 13.5 million.

 Smartphone OEM Factory

In early 2015, news about Dongguan Zhaoxin Telecommunication closed down and was contained by components suppliers propagated, and it was said that the president of Zhaoxin Telecommunication suicide. Two months ago, on September 8, Shenzhen Hongkaixing posted a less than 50-word announcement, declared bankruptcy. Hongkaixing has squared with the staff’s salaries, but left a debt about 35 million Yuan for 214 suppliers without any solution yet. Last month, after China’s National Day, Shenzhen Fu Chang Electronic Technology Co., Ltd was reported to be out of business. Founded in 1997, Fu Change Electronic Technology Co., Ltd was a star enterprise and mainly manufactured shell cover, back cover, frame and other mobile phone accessories for ZTE, Huawei, TCL and many other smartphone manufacturers.

All these OEM manufacturers are upstream companies in the mobile phone business chain. So, many analysts predicted that the wave of mobile phone upstream OEM suppliers’ failures would have a big impact on the downstream smartphone manufacturers and the hardware OEM industry are experiencing a cold winter period. However, more and more enterprises joined the smartphone business and started to sell smartphones with their own brand, such as the well-known Xiaomi which is based on Internet, Superphone from LeTV, ZUK from traditional smarpthone brand Lenovo. Last month, there are about 20 smartphone presentations happened, and just on October 27, four smartphone companies and one chipset enterprise released their new products. Motorola released two new smartphones: Droid Turbo 2 and Droid Maxx 2. LeTV announced the second generation of Superphone. Asus published ZenFone 3 and Huawei launched Honor 5X.

Current Status of Chinese Smartphone OEMs

If the capital winter is coming, why so many companies spend so much energy and money to enter the smartphone business? But how to explain why so many upstream mobile phone OEM suppliers close down? Here are some causes predicted.

1. The entire smartphone market environment causes this problem. After smartphone business skyrocketed for the past years, most smartphone manufacturers have increased inventories but the sales is not as good as expected, and it becomes more and more difficult to sell smartphones manufactured by the production lines. This causes less orders and further a slower development for upstream mobile phone OEM suppliers. The fast smartphone development also made shanzhai mobile phone manufacturers appear, and these shanzhai manufacturers have moved to new markets like Southeast Asia countries when the competition becomes fiercer between smartphone manufacturers in China mainland. But now, most Chinese top smartphone manufacturers also turn to countries like India and Vietnam after the China’s market matures. The entry of China brand manufacturers to Southeast Asia market would squeeze the shanzai manufacturers’ market space and survival capacity, and more, the mobile phone OEM suppliers who have cooperated with these shanzhai manufacturers would be experiencing a tougher time.

2. Competition from other IDH companies. As China has become the base of global smartphone manufacturing, the large demand of smartphones over the globe in the past years has drove the development of upstream IDH design companies that are not satisfied with the current business and want to expand to other related smartphone fields. Another reason for the expansion is the Internet smartphone manufacturers, which sell smartphone with Internet asset-light thinking and used to outsource the smartphone design, supply chain management and manufacturing to IDH companies, such as Wingtech for Redmi from Xiaomi, M2 from MeZu and Lemo from Lenovo, Huaqin for Huawei Honor series, Zowee for Gree smartphone, Sim for Smartisan. The smartphone industry has changed a lot from orderly cooperation to disordered competition.

3. Simple product structure and smartphone manufacturing technology. As more and more smartphone manufacturers show off the manufacturing technique and craft of their smartphones, it must be more challenged for mobile phone OEM suppliers, who will be replaced when they only have simple product structure. Fu Change is an example. It mainly produce plastic mold, so it can’t get any OEM order when most smarpthone manufacturers use the metal frame for their phones in a large scale, but Fu Change doesn’t have a production line for metal frame. Moreover, most smartphone OEM manufacturers now still hire people for the production line, and this certainly causes another problem accordingly– the low production efficiency and capacity which will weaken the OEM manufacturers’ competitiveness in this competitive smartphone business.

 

As the mobile phone OEM business is still attractive for capital, but just with a fiercer competition, how the smartphone OEMs stand out and survive? No matter how the market needs change, the first thing is to improve their competitiveness and transform the business along with the smartphone manufacturers.

As a Smartphone OEM manufacturer, how to Improve the Competitiveness?

 OEM/ODM Smartphone Manufacturer

The mobile phone OEM suppliers could integrate their business resources and extend their services to meet the smartphone manufacturers’ requirements, for example, they can provide additional smartphone product definition, ROM optimization and Cloud service, not just the smartphone accessories manufacturing. Most China Internet smartphone manufacturers like Xiaomi, Huawei, Lenovo and Meizu would prefer the services like smartphone definition, design and manufacturing, and moreover, software developing.

Another way to improve competition is to increase production efficiency and capacity. Automatic techniques like Robots are more and more used in manufacturing. Using automatic technology, not only reduce the smartphone OEM suppliers’ labor and time expense, but also is the rate of good product better as well.

The mobile phone OEM manufacturers who have not been replace for upgrading the production line have more opportunities, as the new manufacturing techniques used and the control of smartphone quality improved. The smartphone OEM manufacturers who have a higher rate of good smartphones will win and those who lose the competition would be washed out in the smartphone OEM business.

OEM industry , Smartphone OEM , Chinese OEMs