4G and overcapacity to reshape China’s smartphone industry

4G and overcapacity to reshape China’s smartphone industry

Staff Reporter 

2013-10-09

On the eve of the release of 4G mobile phone licenses, indigenous mobile phone brands in China are in for a bumpy ride due to the vicious price competition arising from overcapacities, reports the Chinese-language Beijing Times. Although market leaders Samsung and Apple are still going strong in China’s mobile phone market, indigenous brands dominate the remainder of the market share. According to research firm Canalys, the leading domestic brands — ZTE, Huawei, Coolpad, Lenovo, and Xiaomi — account for 20% of the global shipment in the second quarter this year. On the global top-10 list for mobile phones, headed by Samsung and Apple, Chinese brands also take four spots, including Lenovo in third, Coolpad in fourth, Huawei in sixth, and ZTE coming in seventh.Insiders say that domestic brands are no longer satisfied with their low-end and thin-margin business, and have set their sights on the high-end and high-margin sector, which is currently dominated by Samsung and Apple.

In September, Chinese smartphone makers Coolpad, OPPO, and Meizu rolled out new models, mostly priced in the medium-range of 2,000-3,000 yuan (US$330-US$490), while Meizu also debuted a flagship model priced at 4,000 yuan (US$650). These new models boast high-spec hardware and target affluent consumers, competing head on with Samsung and Apple.

“The intensity of competition in China’s mobile-phone market is rare worldwide,” said He Youren, deputy CEO and head of mobile phone operations at ZTE. Despite the red-sea competition, new comers to the industry have continued to join the fray, He added.

Fu Liang, an independent telecom-industry analyst, said that conditions are ripe for indigenous brands to enter the nation’s smartphone market in the wake of the expansion of its capacity and overall improvement in their operations, including R&D, design, testing, manufacturing, brand image, and after-sales service.

Competition at the low-end sector will intensify further. Fu predicts that “Large numbers of mobile phone suppliers will exit the line by the end of next year,” adding “Some brands will go to heaven and others to hell in three years, when 4G mobile phones will hit the market on a massive scale.”

During a telecommunications exhibition in late September, Miao Yu, minister of Industry and Information Technology, ascertained the 4G licenses will be released by the end this year. Leading domestic brands have rolled out 4G mobile phones, ready to tap the 4G market once it takes shape. However, numerous small and medium mobile-phone manufacturers will be inevitably forced out of the market, due to lack of technological root, the paper said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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