Chinese low-cost smartphones are sweeping the globe. The global market share of China's six large mobile phone companies from April to June 2014 has expanded to about 30%, and has begun to squeeze the performance of Samsung Electronics, the world's largest company. Just like PCs and flat-panel TVs, the trend of “small profits but quick turnover†will also expand rapidly in the smartphone market. Japanese related companies will also face a severe situation.
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The overall market share of Chinese mobile phone companies is approaching Samsung
According to statistics released by Taiwan's survey company Trend Force recently from April to June, the market share of Beijing Xiaomi Technology increased by 0.4 percentage points from January to March, reaching 4.5%, increasing to sixth place. For the first time, it surpassed Sony ranked seventh (4.4%). Xiaomi's hot-selling model "red rice" is cheap, with a minimum of 699 yuan per unit.
Including Lenovo, which ranks third, and Huawei, which ranks fifth, among the top 10 companies in terms of market share, Chinese companies account for six. The total share reached approximately 28%, a rapid increase from approximately 16% for the full year of 2012 and is approaching Samsung's 31.4%. Affected by price competition from Chinese companies, Samsung's consolidated results in April-June for the first time in nine years fell into both business revenue and profit.
Mainland Chinese companies still have gaps with Japanese, American and Korean companies in terms of R&D capabilities of IT terminals, but why can they expand their market share so quickly? Behind it is the existence of Taiwanese companies.
These include MediaTek, which manufactures system LSI (Large Scale Integrated Circuit), a core component of smartphones. The company has significantly reduced costs by actively utilizing patents from other companies and working with Taiwan's largest semiconductor foundry, Taiwan Semiconductor Manufacturing Company (TSMC), to provide products that are comparable to the industry's largest company, Qualcomm. 30% to 50% lower.
In addition, MediaTek also provides design drawings to make smartphone manufacturing easier. In China, there is a saying that making shoes can also become a smartphone company. As described, other industry companies that do not have the technology are also beginning to enter the smartphone market with ease.
In terms of assembly, Hon Hai, the world's largest electronics foundry service (EMS) company, has a leading edge. In addition, other Taiwanese electronics foundries have also entered the field of smart phone OEM production. The world's largest companies in the field of smart phones and lens manufacturers such as Dali Optoelectronics are also growing.
"Chaiwan" mode subverts game rules
This division of labor, known as "Chaiwan (China + Taiwan)", has created a large number of low-cost smartphones. The smartphone industry should have been a high-yield business established by Apple and Samsung in the United States, but this division of labor completely overturned the rules of the game. The trend of division of labor with Taiwan is also expanding to countries such as India. According to the US survey company NPD DisplaySearch, with the popularity of low-cost smartphones, the average price of smartphones in 2014 is expected to fall by 14% from 2013 to 259 dollars.
Chinese companies' low-cost smartphones are entering the emerging economies such as Southeast Asia and South America, and the growth momentum is showing no signs of diminishing. According to NPD DisplaySearch, the supply of low-cost smartphones under $200 in 2014 is expected to increase by 43% from the previous year, soaring to about 440 million units, and the market share will reach 37%. Affected by this, the supply of smartphones that are considered to be at a high price of more than $400 will be reduced by 6% to 394 million units, which will be reduced for the first time.
Due to the rise of low-cost smartphones, the situation facing Japanese companies is becoming increasingly severe. Sony, Japan's largest smartphone company, just lowered its sales target for fiscal year 2014 (as of March 2015) from the previous 50 million units to 43 million units at the end of July. The operating profit and loss will also shift from a profit of 26 billion yen to a balance of payments. At present, it has turned to the policy of “not pursuing scale and pursuing revenue†(Sony Chief Financial Officer Yoshida Kenichiro).
On the other hand, large domestic electronic component companies have found business opportunities in the field of low-cost smartphones. In addition to selling products to low-cost smartphones, it also strives to provide design drawings to Chinese companies like MediaTek. Companies are competing to compete with Lianfa Technology.
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