High-end domestic mobile phones break through, are consumers willing to pay?

　　Sino-Singapore Jingwei, September 24th (Chang Tao) For a long time in the past, high-endization was the "heart disease" of domestic mobile phones.

　　This "anxiety" has become more apparent in the past two years.

For example, the hardware, functions, and design of mobile phones are becoming more and more "introverted". Manufacturers try to use this to show their innovation and establish high-end signs, but inevitably fall into the trap of "stacking".

　　Users are also very confused. Why do domestic mobile phones sell more and more expensive, but the differentiation is becoming less and less obvious?

Should we pay for high-end domestic mobile phones?

Profit temptation

　　At different stages, the definition of high-end mobile phones is also different.

Industry insiders believe that at this stage, a high-end mobile phone should have four characteristics: powerful hardware configuration, excellent software experience, unique core technology and brand influence.

If it is measured by price, it is generally considered that the price of more than 5,000 yuan is a high-end mobile phone.

　　From the era of feature phones to the era of smartphones, for a long time, the high-end mobile phone market has been firmly dominated by foreign brands, which is also the "heart disease" of many domestic brands.

However, in recent years, as domestic mobile phones have gradually led the trend of the mobile phone market in terms of function and design, domestic brands have gradually increased in the high-end mobile phone market.

　　According to a reporter from China-Singapore Jingwei, there are two notable time points for domestic mobile phones to develop into the high-end market.

　　The first time point is 2018.

At that time, domestic mobile phone manufacturers began to avoid the "cost-effective" market and launched high-end flagship phones of around 4,000 yuan and above. For example, Huawei Mate20 Pro was released with a price of 5,399 yuan, vivoNEX was released with a price of 3,898 yuan, and OPPO FindX was released for sale. The price starts from 4,999 yuan, and the Honor Magic 2 is priced from 3,799 yuan.

　　At that time, even Xiaomi, a firm adherent of the "cost-effectiveness" strategy, tried to develop the high-end machine market and released the Xiaomi MIX 2S with a starting price of 3,299 yuan.

However, compared to competitors such as Huawei, OPPO, and vivo, Xiaomi's high-end development started a little late, and its style of play is relatively aggressive, and it is still on the road of high-end development today.

　　The financial report shows that the average shipment price of Xiaomi smartphones in the first quarter of 2022 is 1,189 yuan. Although it has increased from 1,098 yuan in 2021, it can also be seen that Xiaomi’s comfort zone is still in the thousand-yuan range.

　　Another time point for domestic mobile phones to develop into the high-end market is around 2021.

In 2020, Huawei mobile phones suffered an "earthquake".

In 2021, Huawei's domestic market shipments fell out of the first camp due to problems such as chip inventory exhaustion.

Huawei released a certain market share of high-end mobile phones after "falling", which allowed other domestic brands to see the opportunity and strengthened their determination to hit the high-end market.

This wave of high-end strategies continues to this day.

　　According to incomplete statistics, in the first half of 2022, major manufacturers including Huawei, OPPO, vivo, Xiaomi, etc. released a total of 51 new products, and the starting price of many flagship stores exceeded 4,000 yuan.

　　Why do domestic mobile phones insist on high-end?

Profit is the first temptation.

　　In the mobile phone industry, the profit of high-end phones is much higher than that of low-end phones.

Take Apple as an example, the new products it launches every year have good sales all over the world, and more importantly, these new products harvest most of the industry profits of the mobile phone industry.

　　According to the Canalys report, global smartphone shipments will reach 1.35 billion units in 2021, of which 44% of the global mobile phone market revenue will be taken by Apple with 17% of shipments.

　　In an interview with a reporter from Sino-Singapore Jingwei, Fu Liang, an independent telecommunications analyst, said that when a mobile phone company's product shipments are large enough, it will not be limited to the low-end market, but will go to the high-end market. The usual method is to directly Improve the performance and price of the product, or add some concepts, and then increase the price to get more profit.

　　A person in the market of domestic mobile phone brands who did not want to be named said that in the past few years, domestic mobile phones have been very popular, but they have actually suffered a lot of pressure from profit. If you want to make more money, the best way is to make high-priced mobile phones.

　　Taking a listed mobile phone manufacturer as an example, Essence Securities analyzed that the proportion of its high-end smartphone shipments will increase from 7% in 2020 to 13% in 2021, driving the gross profit margin of the smartphone business to increase by 3.2 percentage points to 11.9%, The proportion of smartphone revenue increased by 1.7 percentage points to 63.6%, driving the group's overall revenue to increase by 33.5% year-on-year.

　　Under the epidemic, it has stronger practical significance for domestic mobile phones to develop high-end products - sales of high-end mobile phones are less affected.

　　For example, according to Counterpoint, a third-party research organization, in the second quarter of 2022, while smartphone sales in the Chinese market fell by 14% year-on-year, high-end smartphone sales fell by only 10%.

For another example, the latest report from the market research agency Strategy Analytics shows that online smartphone sales during the 618 period in 2022 will be 14 million units, a year-on-year decrease of 25%.

However, on an e-commerce platform, the shipments of mobile phones in the high-priced segment of 5,000 yuan and above did not drop but rose year-on-year.

Unspeakably optimistic

　　In fact, at a time when the smartphone market is in decline, high-end phones are indeed one of the few bright spots.

　　According to a report released by Counterpoint, in the second quarter of 2022, the proportion of high-end (wholesale price of $400 and above) smartphone sales in China increased from 31% in the same period last year to 33%.

In this quarter, the top brand in China's high-end smartphone market share was Apple, accounting for 46%;

　　Does this mean that high-end domestic mobile phones have been successful?

Are consumers willing to pay for it?

　　According to Liu Yushi, a senior analyst at CINNO Research, it is difficult to draw an optimistic conclusion that consumers will pay for domestic high-end machines, and the high-end domestic brands are still struggling.

　　"If the line is 5,000 yuan, according to CINNO Research data, from the perspective of shipments, Apple's shipments at prices above 5,000 yuan in the second quarter of 2021 will be 9.28 million units, and will increase to 9.72 million units in the second quarter of 2022. From 2.4 million units in the second quarter of 2021 to 1.21 million units in the second quarter of 2022, while other brands dropped from 1.78 million units to 1.33 million units in the same period. Looking at the proportion of sales, in the second quarter of 2022, domestic sales are more than 5,000 yuan Apple accounted for 79.2% of the price, compared with 69.0% in the second quarter of 2021." Liu Yushi said in an interview with a reporter from China-Singapore Jingwei.

　　According to data from CINNO Research, in the first seven months of 2022 in China's domestic market, sales of models priced above 5,000 yuan accounted for 19.9%.

　　In the high-end machine track, what are the challenges and shortcomings faced by domestic brands?

　　Liu Yushi believes that among the four key conditions for high-end machines, the unique core technology is the biggest shortcoming for domestic brands to break through high-end.

　　"Apple has gained a competitive advantage by relying on the A-series processors and iOS systems with exclusive process advantages. Huawei has also achieved good results by relying on HiSilicon Kirin chips, and has gained brand reputation. Other brands have made little achievements in this regard. Configuration is subject to the supplier's product strategy, and software development is limited by hardware configuration, making it difficult to build a high-end brand." Liu Yushi said.

The road to breakout

　　In fact, in recent years, on the road to high-end breakthrough, domestic mobile phones have also made a lot of efforts, among which chips have to be mentioned.

Self-developed chips are regarded as one of the necessary paths for high-end mobile phone manufacturers.

　　At present, mobile phone manufacturers mainly use the following "core" strategies: 1. All models use self-developed SoC (system-on-chip), represented by Apple; 2. Some models use self-developed SoC, and some models use Qualcomm GM Chips, represented by Samsung and Huawei; 3. Self-developed dedicated chips for specific functions, but SoCs rely on Qualcomm, represented by vivo, Xiaomi, and OPPO; 4. Fully use chips from Qualcomm, MediaTek and other companies.

　　At present, the high-end players in the mobile phone industry recognized by the industry all have self-developed chips and even self-developed SoCs.

SoC is currently the most difficult chip to develop, and generally includes multiple processors such as CPU, GPU, ISP, and DSP.

　　Why is self-developed chips so important?

According to the analysis of operators, the most obvious advantage of self-developed chips is that they can realize the integration of software and hardware. The chips can be designed and developed on demand. effect, bringing an excellent user experience.

Based on this, self-developed chips are a necessary condition for domestic brands to participate in high-end competition.

　　At present, in addition to Huawei, domestic mobile phone manufacturers, vivo, OPPO, Xiaomi, and Honor do not have the ability to develop SoCs by themselves, so they choose to develop dedicated chips for specific functions.

In 2021, Xiaomi, OPPO, and vivo have all released self-developed chips, which are closely related to imaging, which can be regarded as making up for some shortcomings.

　　However, self-developed chips, especially SoCs, are by no means easy. Not only is it difficult to develop and invest a lot of money, but the research and development process often encounters bottlenecks, making it difficult to advance the project and "finally embarking on a road of no return."

　　Liu Yushi said that self-developed chips are an important breakthrough for mobile phone manufacturers to obtain core technologies, but they are extremely difficult and should be chosen carefully.

　　Liu Yushi said, "The Huawei incident shows that the key supply chain is controlled by others and will face great risks, so domestic mobile phone manufacturers choose to start with some small chips, but these self-developed functional chips have not been available for a short time, and it is difficult to accumulate enough market recognition. The high-end domestic mobile phone still depends on the establishment and improvement of the domestic high-end supply chain in the future.”

　　However, it has been proved that self-developed special chips for specific functions have limited effect on establishing a high-end brand image and opening up the high-end market, and self-developed chips are by no means the only condition for high-end development.

　　In December 2021, OPPO released its first self-developed chip, Mariana MariSilicon X, which is used in the imaging field and adds to the premiumization.

According to Counterpoint Research's analysis,