A new channel melee for domestic mobile phones is coming: Who will fall behind first?

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As the three major operators have significantly reduced their marketing expenses and terminal subsidy policies, the domestic mobile phone industry is experiencing the biggest change since 2008.
Since the second quarter of this year, domestic mobile phone manufacturers have gradually learned that operators are preparing to reduce terminal subsidies, but they did not expect the market to change so quickly. In July this year, China Mobile's senior management first made it clear to the public that "3G subsidies will be cancelled", which immediately triggered a large number of TD-SCDMA terminals sold by domestic and foreign mobile phone companies including Samsung.
Then in September, China Mobile Chairman Xi Guohua publicly stated that "operators will mainly sell bare phones in the future." China Unicom Chairman Chang Xiaobing also said in an exclusive interview with "One Observation" that "terminal cash subsidies will be gradually cancelled." Relevant personnel from China Telecom's marketing department also told "One Observation" that given that the industrial chain for upgrading CDMA to FDD/TDD standard terminals is still imperfect, telecommunications terminal subsidies will continue, but the total amount of subsidies will also be reduced in accordance with the requirements of the State-owned Assets Supervision and Administration Commission. The
total amount of terminal subsidies for the three major operators in 2013 exceeded 50 billion yuan. The demise of terminal subsidies means that the era in which mobile phone manufacturers relied on operator subsidies to gain market share and channels relied on contract machine rebates to make profits is coming to an end. The era dominated by Apple, Samsung, China Cool Alliance and Xiaomi in the domestic mobile phone market is about to be overturned, and the era of reshuffle of the industrial chain has begun ahead of schedule.
"One Observation" recently visited a number of senior industry chain professionals such as mobile phone manufacturers, operators, channel enterprises, etc. to discuss the changes in the market structure and countermeasures. The following is the main information:
"China Cool Alliance" enters the painful era
From 2008 to 2013, relying on the operators' thousand-yuan customized phones + high subsidies in the 3G era, domestic brands represented by ZTE, Huawei, Coolpad, and Lenovo quickly gained nearly 50% of the domestic smartphone market share. However, excessive dependence on operators has also led to the concentration of their product prices in the mid-to-low-end field, too low profits, and a lack of active response measures to changes in operators' terminal policies.
In the first year of 4G, when most domestic mobile phone companies invested heavily in planning to "overtake on the curve", the State-owned Assets Supervision and Administration Commission required operators to reduce marketing expenses and terminal subsidies, forcing mobile phone manufacturers to collectively enter the "painful era".
ZTE: Wu Hai, CEO of ZTE Terminal China, told "One Observation" that ZTE mobile phones are in a period of change and "pain" in the Chinese market. In terms of products, ZTE plans to launch the next generation of the Tianji and Xingxing series in October, and the annual flagship model in early 2015. In terms of brand, ZTE will plan and promote according to the rhythm of new product launches and channel distribution, highlighting the marketing of Internet platforms, social media and new media to users. In terms of channels, ZTE mobile phone sales in China are expected to account for 50-60% of operator channels, 30-35% of open channels, and 10-15% of e-commerce channels by the end of 2014. The target for 2015 is that the three major channels will account for about 30%, 50% and 20%, and the public channel sales will account for more than half.
Huawei: Zhu Ping, President of Huawei's Consumer Business in China, told "Yi Guancha": Huawei has been making early arrangements since 2012, and this change has been clearly seen from products to channels, such as P6, P7 and Mate 7. In terms of public channels, Huawei mainly relies on the methods and strength of partners, selects long-term partners to invest together, and currently will not consider the model of joint equity participation with channel dealers. As of the first half of 2014, Huawei Terminal China has more than 5,000 mobile phone sales stores and counters across the country. The fourth quarter will accelerate and it is expected to reach 10,000 by the end of the year, including flagship stores, brand stores, and special counters.
Coolpad: In an exclusive interview with Yiguancha, Cao Jingsheng, vice president of Coolpad, said that Coolpad is in the third key change and transformation period in history. The Coolpad brand plans to be divided into three parts in the future. The social public channels will continue the Coolpad brand and mainly promote mid-to-high-end products; operators plan to use the Yulong brand and mainly promote mid-to-low-end products; and the Dashen brand will mainly be sold to e-commerce. Coolpad expects that in the future, the domestic structure will be that operators, public channels, and e-commerce will account for 40%, 40%, and 20% respectively. Coolpad's current public channels have limited coverage in 4-6 tier cities, so it recently announced an investment of hundreds of millions of yuan to cooperate with high-quality channels and form a community of interests through shares, "letting the most professional people do what they are best at" to accelerate the transformation of social public channels.
Lenovo: Lenovo Group Vice President and MBG China Mobile Business General Manager Zhang Hui believes that public channels will become the focus of Lenovo's mobile phone market adjustment this year. The country is divided into 100 sales grids to promote channel sinking. In terms of cooperation with operators, Lenovo is working hard to reactivate the mobile phone product sales capabilities of PC channels and stores. On the one hand, Lenovo's tens of thousands of stores and counters will be connected to the operator's ESS/CBSS system and start directly operating the operator's mobile broadband business; on the other hand, the operator's own business hall will also be fully open to Lenovo, and even sell Lenovo Pad, PC or smart TV products.
[Interpretation]: In general, as a representative of traditional domestic brand mobile phone manufacturers, China Cool Alliance has the following common points in 2014:
1. Both have made personnel adjustments to the senior management of the terminal business in the Chinese market, and the new team has encountered new market changes;
2. Both are prepared to invest heavily in public channels;
3. Both are prepared to significantly reduce operator customized models and reduce the proportion of shipments;
4. Both are accelerating the transformation to high-end mobile phones and high-end brands
The difference is that Lenovo hopes to cooperate with operators in the traditional PC channel market to increase the sales of public channel mobile phone categories. Coolpad hopes to quickly increase the enthusiasm and share of public channel sales by strengthening its equity participation in channels. Huawei and ZTE hope to increase their sales share by strengthening cooperation with traditional high-quality public channels.
From the current perspective, Coolpad's channel transformation strategy is the most radical, Lenovo hopes to leverage traditional PC channels, while Huawei and ZTE tend to be conservative. It is still difficult to evaluate which layout is more effective, but the different transformation paths of China Cool Alliance towards public channels will inevitably have a profound impact on the changes in the domestic mobile phone industry.
vivo, OPPO, and Gionee enter the best era
At the end of 2013, when China Mobile President Li Yue and other operator executives all stated that they would increase 4G terminal shipments and increase the total amount of terminal subsidies in the 4G era, industry analysts believed that mobile phone companies such as China Cool Alliance that have a high degree of fit with operators will benefit more, while mobile phone companies such as vivo, OPPO, and Gionee that rely on traditional self-owned public channels for sales will face greater risks.
After half a year, the form of operator subsidies has taken a 180-degree turn. With subsidies declining rapidly, traditional public channels have become the focus of competition among various brand mobile phone manufacturers, and mobile phone companies such as vivo, OPPO, and Gionee, which have been deploying in this field for many years, will also usher in the best development opportunities.
However, some mobile phone manufacturers’ senior executives told "Yi Guancha" that the domestic mobile phone market has developed to this day, and it is completely impossible to predict the market changes in half a year. The channel difference dispute between China Cool Union and vivo OPPO is still unpredictable before and in the future.
The era of mobile phone channel melee is coming
. As operators reduce their subsidies for terminals and channels, mobile phone manufacturers have invested heavily in public channels. The retreat and advance will have a profound impact on the domestic mobile phone market structure:
1. Operators have weakened their control over channels. In the past, operators relied on huge terminal subsidies of 50 billion yuan per year (2013 data) to quickly occupy more than 50% of domestic channel sales from 2008 to 2013. Many large national agents and regional mobile phone chains even rely on operator contract machine sales subsidies to make money. As operator terminal subsidies, channel subsidies, advertising, and additional physical deliveries are reduced or even cancelled, operators' strong control over channels will inevitably weaken, and terminal companies with their own terminals will shift from channel operation to market strategy formulation.
2. National distributors are accelerating their decline. Under the pressure of the three major operators' independent terminal companies and the rise of e-commerce channels, the four traditional national distributors (Tianyin, Zhongyou Putai, Putian Taili, and Coolman Communications) have shown signs of fatigue. In the 4G era, major mobile phone manufacturers will directly strengthen cooperation with regional channels + independent e-commerce strategies, and the four national distributors will accelerate their decline, and the subversion of their business models will become inevitable.
3. The channel chain pattern is reorganized. With heavy investment from all parties, the reshuffle of mobile phone public channels has been greatly accelerated, and regional advantageous mobile phone channels will become the focus of competition and investment. For example, Coolpad plans to invest 1 billion yuan to establish a joint venture with the channel party, and Sanbao Group, the parent company of the well-known electronics store Hongtu Sanbao, is preparing to acquire Leyu Communication for tens of billions of yuan. The mobile phone chain channel pattern will undergo major changes in the next two years.
4. The O2O model has become a new channel model. With the rise of public channels, companies such as Suning, Gome, and D.Phone, which have strong offline channels and a certain share of online sales, will increase their share of mobile phone sales. One of JD.com's five new strategies in 2014 is to expand its channels to lower-tier cities. On the one hand, it promotes advertising to third-tier and fourth-tier cities and below, such as "painting walls", and on the other hand, it actively expands small and medium-sized channels. The traditional mobile phone chain channel accelerates the transformation to the Internet, and the e-commerce channel accelerates the offline layout, which will become a major highlight of channel changes in the next two years.

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