Making mobile phones? Why doesn't Dong Mingzhu admit defeat?

On December 7, Gree's "Dasong 5G Mobile Phone" was quietly put on the shelves of Gree Dong Mingzhu Store. However, the official website data showed that only 75 units of the new phone were sold in two days after its release. The dismal sales performance once again aroused market doubts and inquiries - why does Gree insist on making mobile phones?

Dong Mingzhu's persistence

If making mobile phones is a dream of Gree, this dream is indeed too long. Many people link Gree's insistence on making mobile phones with Dong Mingzhu's "1 billion bet" with Lei Jun in 2013. From Dong Mingzhu's personal experience, this speculation is not completely unreasonable.

Dong Mingzhu almost drowned when she was learning to swim at the age of 12. Many people said that Dong Mingzhu might never swim again, but she finally mastered this sport with great determination. At the age of 36, Dong Mingzhu showed "rebellion" against the traditional concept of gender inequality. She went south to work hard despite her parents' opposition. She fought with the defaulters for 40 days to get back the debt. She persisted all the way to create Gree's sales myth and became the helmsman of this old Chinese air-conditioning factory. Gree eventually rose from a small assembly plant "Haili" to a global industrial group. In Dong Mingzhu's bones, the spirit of struggle runs through it all the time.

Although being competitive is not a bad thing, Gree has undoubtedly been trying and failing in the field of mobile phones. It makes people wonder what Dong Mingzhu is insisting on.

Dong Mingzhu emphasized at the "I am the Founder" 2017 ceremony that Gree chose mobile phones because it took into account the future of smart homes. Mobile phones can allow users to use electrical appliances more conveniently, healthier and safer.

The key to your smart home

In 2014, Gree's operating income reached the target of 140 billion yuan. However, as the company developed rapidly, the Internet also emerged and challenged traditional manufacturers. The intelligent upgrade of home appliances was unstoppable. The following year, Gree released its first generation of mobile phones. So far, Gree has been in the mobile phone business for 5 years and has released three generations of mobile phones.

What is intriguing is, is the mobile phone the key to smart home?

In this regard, IEEE member Dong Qi told Jiwei.com that in a short period of time, mobile phones as the terminal interface for human interaction will be difficult to replace, because there are too many apps on mobile phones, resulting in high stickiness of mobile phone users. Therefore, if you want to use other entry human-machine interfaces to replace mobile phones in the field of smart homes, it will be very difficult.

In other words, in the field of smart home, mobile phones do have a necessity to exist.

AIoT trends and challenges

It is worth noting that, given that the mobile phone business has not yet been put on the right track, why is Gree so eager to get on board with 5G?

At present, the prices of 5G mobile phones launched by brands such as Redmi and Realme have plummeted, and the market price is even lower than RMB 1,500. However, Gree's Dasong 5G mobile phone still adheres to the principle of "high price and low configuration". Its configuration lags behind that of competitors but its price is higher than the market, which inevitably leads to its very poor sales.

At the same time, in the mature and oligopolistic mobile phone market, Gree, which does not have a technological advantage, has difficulty gaining a space for survival. However, from another perspective, this seems to confirm what Dong Mingzhu said - Gree's purpose of making mobile phones is smart home, not selling goods. Getting on 5G is nothing more than seeing the development opportunities of AIoT applications in home appliances.

Today, "AI+IoT" is no longer just a concept. In Dong Qi's view, 5G has been commercially available for more than a year, and AIoT technology is gradually maturing and being implemented in the market.

There is no doubt that "5G+AIoT" will further help the home furnishing industry upgrade and promote the construction of smart homes. However, traditional home appliance manufacturers still face severe challenges in the AIoT trend - difficulties in upgrading themselves.

Dong Qi pointed out that traditional white appliances such as washing machines and refrigerators have very simple application functions. When IoT sensors and communication interfaces are added to these products and connected to mobile phones, the data collected is completely meaningless to the users. This is because the data collected by AIoT innovation must be reduced through algorithms to reduce the user's operation intensity or be monetized. Only then will this application be meaningful to users and innovators.

In this regard, Dong Qi believes that home appliance manufacturers can conduct some in-depth cross-border cooperation with real estate developers, such as designing some embedded double-door refrigerators and apartment-type matching, with doors for the outdoors and for the indoors, so that couriers or property management can directly deliver fresh food to the owner's refrigerator. Applications like this are meaningful AIoT applications, otherwise a single home appliance AIoT application will hardly solve the "last mile" usage problem.

It is understood that in addition to Haier's cooperation with Evergrande and TCL's cooperation with Wanda, Gree has also launched a strategic cooperation with Wanda. At the same time, home appliance companies have also begun cross-border cooperation with Internet companies and AIoT platform providers in order to jointly solve technical problems in the smart era and seize the smart home market.

New machines emerge under performance pressure

In addition, there may be another reason why Gree released its third-generation mobile phone after a lapse of 3 years - performance pressure.

According to Gree Electric's 2019 annual report, the company achieved operating income of 198.153 billion yuan, an increase of 0.02% over the previous year, and a net profit of 24.697 billion yuan, a year-on-year decrease of 5.75%. In the first three quarters of this year, Gree Electric's total revenue was 127.468 billion yuan, a decrease of 18.64% over the same period last year; net profit was 13.699 billion yuan, a year-on-year decrease of 38.06%. Although this was affected by factors such as the epidemic, it was indeed bleak compared with the other two major domestic home appliance giants, Midea and Haier.

The slowdown in profitability and the obvious deterioration in growth capabilities may also be the key to Gree's accelerated transformation to intelligence and the release of 5G mobile phones.

Although the past glory has not collapsed, Gree is indeed different now. For now, making mobile phones has not brought Gree any profits or market influence, but has consumed internal research and development resources.

Regarding whether the business failed, Dong Mingzhu once said, "Gree has always adhered to independent creation, independent research and development, and its own design. It just takes time, so I never think that my mobile phone has failed." However, we do not know whether Dong Mingzhu's insistence on making mobile phones is due to her stubbornness in sunk costs and ignoring the correct business decisions.

“Mastering core technology”

However, Gree, a veteran home appliance company that has been practicing "mastering core technology" all the way, still deserves respect from the industry. Unlike other domestic white appliance companies, Gree insists on making mobile phones while continuing to conduct research in the semiconductor field.

Tianyancha shows that Gree Electric has invested in Nexperia and Sanan Optoelectronics in the past two years. At the same time, Zhuhai Zero Boundary Integrated Circuit Co., Ltd., a wholly-owned subsidiary of Gree, has become a one-stop service provider of smart home series chips, industrial-grade MCUs and power devices, as well as supporting development solutions and algorithms.

(Photo source: Tianyancha)

In the future, although it is not known whether Dong Mingzhu will continue to make mobile phones, optimizing product structure, actively promoting online business, and increasing the research and development of phenomenal home appliances will become important strategies for Gree to stake out its place in the smart home market.