Chinese Cell Phone Supply Chain Comes into Cold Winter, Why?

Friday, March 25, 2016

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Recently, the media exposes the rumors Hammer T2 contracted ZhongTianXin electronic collapse, causing the reflecting of industry to the cell phone supply chain of winter, but this is only a member of the cell phone supplier of failures. As early as in early 2015, Dong Guan phone contract Zhaoxin communication, chairman of the manuscript's suicide brings to the cell phone industry chain with cold. On October 8th, ZTE, Huawei's tier one of suppliers FuChang electronic technology co., LTD. - Shenzhen officially closed. In a net transfer list "died" cell phone industry, bankrupt cell phone brands and cell phone industry chain suppliers to exceed 20, collapsed in October last year up to six cell phone companies, including Shenzhen glory being electricity, Dong Guan Yilianxin electronics, Shenzhen led photoelectric letter, etc.

However, it is not alarmist, at the current industry development trends, cell phone chain steps into winter is probably unavoidable, erase the impetuous and indignation we thinking: cell phone manufacturer supply chain comes into winter whose fault is it anyway?

Is it because Internet Cell Phone Brands like Xiaomi?

With cell phone supply chain winter tone makes people more and more concerned, a lot of the industry people point to Xiaomi, in my opinion, this also is not wholly nonsense, Xiaomi in the process of cold supply chain forming has certain implications.

As is known to all, Xiaomi pioneered the Internet phone, after this Xiaomi uses Internet thoughts adopt "hunger marketing" makes Xiaomi in rapid rising hogging phone low-end market share in China. In the face of Xiaomi strong offensive, those play the traditional channels and cell phone manufacturers began to follow the same way, they lock Xiaomi Internet thoughts as their goals. Internet mode biggest characteristic is to lower the prices of cell phone as a whole, is famous for its "cost-effective", although with controversial "hunger marketing", but in the cell phone ring's achievements is obvious to all.

But then phone manufacturers began to distort Xiaomi’s Internet Mode during the learning process, each phone manufacturer began to compare configuration and price, big sea tactics, make machine price gradually evolved into a price war, cell phone prices even hitting $46 and $62, this led directly to some low-end brand was forced to withdraw from the market, also put the cell phone industry profits to be pulled to the bottom. When the lower end of the market become blood, people just understand "cost-effective" is toxic, but consumers have been guided by the ratio of right now, although many domestic cell phone takes high-end quality course, but used the "cost-effective" provides consumers seem hard to pay. When the domestic cell phones are busying with price war, but Apple, Samsung cell phone brands seem to be more understanding of the value of a brand premium. The developing mode of the high-end, high value benefit suppliers, on the whole industry chain to form the manufacturer is cycle of benefit.

Growth is slowing, competition in the market, as it were, tragic, falling profits, and many other negative factors under siege, the cell phone industry is undergoing a series of chain reaction, the cell phone industry reshuffle is probably unavoidable, behind which is a direct result, the cell phone supply chain comes into the winter.

Is the lack of core competitiveness of supply chain cause?

To some extent, the cell phone manufacturers supply chain is almost completely dependent on cell phone manufacturer, as cell phone manufacturers demand for their own production of beacon. This leads to the supply chain manufacturer depends on cell phone manufacturer to much, and they loss the control of their own production, unable to predict in advance to adjust its production chain industry development trend. As the collapse of FuChang example, the main production of plastic shell of cell and telephone. But with the cell phone industry since last year's large-scale use metal shell, this resulted in fewer and fewer FuChang electronic orders but have a business transformation and upgrading to the metal shell, as we noticed it is not so simple, in the end because of lack of order, shortage of funds and collapse.

Secondly, the current domestic cell phone industry chain enterprises still belong to the labor-intensive industries, on order for extensive production. This model is the biggest advantage of cheap labor and product, the disadvantage is the lack of core technology and innovation, but along with market competition, product iteration speed, the market has an obvious effect the supplier selection of the innovation. Now many suppliers manufacturer in order not to lose customers, lose money to accept the orders to maintain capital chain and adjust the plan again slowly. But high technical transformation and upgrade costs and with slow speed, there are many uncontrollable risks. The most obvious point is that cell phone is still the main technical core components supply from Japan or Europe and America, the traditional hardware makers not only in technology is difficult to load, and there is no pricing power, facing the uncontrollable risk is too big.

Instead, let talk about the supplier services the cell phone industry. Cell phone industry with constant innovation and advanced production technology to promote industrial upgrading, peripheral products iteration is full of vigor and vitality of the industry, suppliers, however, a single business model relies on a single customer, and can't keep up with the trend of the times, is bound to be abandoned by the great age of the rapid development. When there is crisis emerging among cell phone industry chain, everyone on the industry chain should feel a sense of crisis and throw away the original survival mode and fixed thinking, grasp the core technology and creativity, which together with enterprise needs the test of the market.

The wrong caused by Domestic cell phone impact high-end trapped?

Everyone knows such a truth: like Apple, Samsung, pay attention to the development model to improve brand high-end, high value premium ability, under the industry high profits to form a positive cycle of the whole industry chain benefit to all parties. Although domestic handset between dark war between playing lively, but more like losing money to sell them. According to a report published research in the third quarter of 2015 from Canaccord Genuity investment Banks, Apple's share of the profits in the global smartphone industry increased to 94%, from 85% during the same period last year growth of 9%, while Apple and Samsung combined with a third of the global smartphone market share, although domestic handset pursued in sales, but the profit of the gap is still widening.

Facing poor industry profits and a vicious cycle of industry chain, cell phone manufacturers began to their strength in the high-end market. In addition to Huawei, like OPPO and ViVo’s value is also pay attention to cell phones and adhere to the high-end manufacturers harvest. According to related statistics, in the Chinese market, in 310 ~ 385USD, OPPO share is 32.1%; From $385 to $465, Vivo share up to 28.4%. But in addition to Huawei, OPPO and Vivo, most other handset makers failed to make a breakthrough in the high-end market, and such a difficult situation it speeds up the possibility of small and medium-sized brand big reshuffle.

In addition, the domestic cell phone brand is too centralized, according to the domestic cell phone market brand remain at around 290, and reached 75% share of the top 10 brands, brand centralization has been very serious, coupled with the cell phone market falling profits, most of the upstream suppliers can give up the cooperation with small brands, have instead focus on the strength of the big brands the offensive, the technical strength of those funds with poor small suppliers almost no survival and development space.

Perhaps this is the commercial development law, an industry adjustment upgrade drama between supply chain factory is started. Die in this round of closures manufacturers if there are a lot of the influence of the external cause, actually from nature, or the lack of technical core competitiveness, the industrial chain business single rely too much on cell phone manufacturer. It can be asserted that after a wave of competition, a group of real core competence in independent innovation and technology of cell phone hardware vendors will stand out.


Smartphone industry , Chinese smartphone indsutry , Chinese OEMs , Mobile phone chain

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