Huawei launched ADS 2.0, an AI-powered Advanced Driver Assistance System (ADAS), just before the Auto Shanghai exhibition in April 2023. In the same month, Counterpoint Research analysts attended the Huawei Analyst Summit 2023 while Senior Analyst Ivan Lam participated in Huawei Digi Salon, where a documentary was shown about Huawei ADS 1.0’s development and integration into the Arcfox Alpha S Hi model from BAIC. Interviews with the BAIC chief engineer and Huawei ADS engineer were featured in the documentary.

ADS 2.0 – Huawei’s major step forward

ADS 2.0 is a significant upgrade over Huawei’s first-generation autonomous driving system ADS 1.0. It has several new features and capabilities, including:

• Improved map accuracy: ADS 2.0 utilizes a new road network topology inference technology, which enables it to map its surroundings more accurately. This is crucial for safety, as it allows the system to better identify potential hazards. Besides, ADS 2.0 supports both high-speed NCA (Navigation Cruise Assist) and urban NCA without relying on high-precision maps. The company plans to promote its mapless (without High-Definition maps) ADAS in 15 cities in Q2 and 45 cities in Q4 of this year.
• Enhanced safety: ADS 2.0 has been trained on a massive dataset of real-world driving data, which has helped improve its safety performance. The system can now detect and avoid obstacles more effectively, and it is also better at handling unexpected situations. ADS 2.0 can now drive for up to 200 km without manual intervention, up from 100 km in ADS 1.0, making it more practical for everyday use.
• Human-like judgment and operation: With massive data training and AI-powered technology, the system demonstrates driving performance equal to that of an experienced driver, with a stable driving style that avoids excessive aggressiveness or conservatism for safety. It performs well in driving scenarios such as accurate turning, giving way to pedestrians, recognizing and avoiding irregular obstacles, as well as detecting and avoiding animals.
• More features: ADS 2.0 includes several new features, such as automatic and valet parking, making it easier and more convenient to use the car.

ADS 2.0 is enabled by both hardware and software upgrades. The system is powered by Huawei’s self-developed processor computing platform, which allows the system to process more data and make decisions more quickly. Meanwhile, more sensors are equipped to give the system a more complete view of its surroundings. Huawei benchmarked Tesla Autopilot as an important competitor.

Huawei ADS 2.0 vs Tesla Autopilot

Before ADS 2.0’s massive adoption in vehicles, the system has more advanced features than Autopilot, but its price may act as one of the obstacles to its popularity.

Commercialization

Although ADS 2.0 is a promising new ADAS in the market, there are some downsides and challenges to consider.

In China, there are four main groups of EV makers. The first group is made up of traditional car manufacturers such as SAIC Motor and GAC Group, which produce mostly budget to mid-range Evs without ADAS. However, most of these manufacturers are currently investing in ADAS companies as well as developing their ADAS systems in parallel. The second group consists of international vehicle giants, which will mainly use own ADAS systems in their cars. The third group, known as the “new car-maker forces”, includes companies like Nio, Xpeng Auto and Li Auto, which are pioneers in the EV industry and are developing their own ADAS systems and ecosystems like smart cockpits and smartphones. The last group consists of small to medium-sized car makers that produce cars ranging from entry-level to high-end.

Therefore, when Huawei announced again that it would not make cars or use the Huawei brand directly in any cooperation, it meant that it had fewer options. After a series of adjustments, Huawei’s smart auto business has three approaches:

1. Traditional parts supplier model: Huawei provides standardized components to manufacturers under a buyer-seller relationship.
2. HI business model: Huawei integrates software and hardware related to smart car solutions with automaker partners, including BAIC ARCFOX and Changan Avatr.
3. Huawei’s Smart Selection business model: Huawei is deeply involved in product concept, vehicle design and channel sales, and works with car companies at the brand marketing level. “Aito” is an example.

With the current cost level of ADS 2.0, there will be fewer and only high-end cars equipped with this advanced ADAS. As regards its global expansion, Huawei is still in a sensitive position as this ADAS is powered by Huawei Cloud. Data privacy concerns about Huawei Cloud from foreign enterprises will be a potential hurdle. Nevertheless, it is still too early to make any judgment since China is currently the biggest EV market in the world. Huawei is keen to have its footprint across the industry as a supply chain player.

Outlook

Huawei put one-quarter of its revenue in 2022 into R&D for the whole group. The launch of ADS 2.0 shows that the company will continue with its strategies for the automotive business, including auto parts manufacturing, HI (Huawei Inside) and Smart Selection. The strong domestic market will be the stepping stone for Huawei’s automotive business growth. For instance, its cooperation with BAIC for the Arcfox Alpha S Hi showcases its competence in the high-end market.

Nevertheless, Huawei will face pressure to take ADS 2.0 to the next level of success because of the limit of its possibility to penetrate more vehicles. It will take time to prove ADS 2.0’s performance to the consumers. Besides, the cost of ADS 2.0 and its role will further threaten its expansion.

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The post Huawei ADS 2.0: A Promising New ADAS in Market appeared first on Counterpoint.

November 14 2022

Lenovo’s revenue fell 4.4% YoY and rose 0.8% QoQ in Q3 2022 (or Q2 2022 of Lenovo’s 2022-23 financial year) due to global macroeconomic headwinds, regional uncertainty and exchange rate hikes.

The company’s Solutions and Services Group’s (SSG’s) 26% YoY revenue growth, along with the 33% YoY revenue growth of the Infrastructure Solutions Group (ISG), took the non-PC sectors’ revenue share in the whole group’s total revenues to 24% in Q3 2022. With a service-led transformation strategy, the company continued to improve profitability and scalability across the three sub-sectors.

In the sales mix, the Intelligent Devices Group (IDG) took the largest share of the Lenovo group’s revenue with a 76% contribution, compared to 82.2% in Q3 2021, given the overall slow recovery in smartphones. Lenovo/Motorola smartphone unit shipments were down nearly 15% YoY in Q3 2022 to take a 3.7% share of the global smartphone market, according to Counterpoint Research’s Global Smartphone Market Monitor. Given the 12% YoY decline in global smartphone shipments, Lenovo has suffered worse than the average downtrend.

Commenting on Lenovo/Motorola’s smartphone segment performance, Senior Analyst Ivan Lam said, “Lenovo’s key markets such as LATAM and the US are facing macroeconomic and inflation headwinds. Lenovo/Motorola got a direct impact because their target consumer group suffered more than the high-end smartphone consumers. Although they tried to build up other markets like China and some emerging markets, this will not generate a significant portion of revenue in the short term. Lenovo/Motorola also launched high-end smartphones and XR products. However, these moves will still be more favorable for marketing and not provide concrete sales revenue for now.”

Lenovo’s PC and tablet shipments decreased 16.1% and 40.2%, respectively, in Q3 2022, according to Counterpoint Research’s Global PC and Tablet Monitors. The company continued its leadership in the PC market and grabbed a 23.7% share globally.

Commenting on Lenovo’s PC performance, Senior Research Analyst William Li said, “Despite a slight outperformance in PC shipments, industry headwinds due to the macroeconomic environment remain challenging for OEMs. Fortunately, Lenovo is seeing healthier demand in sell-out (end market), which is better than sell-in shipment data. The management also reiterates its self-design and manufacturing model could help Lenovo weather the industry downturn.”

Li added, “The management expects the total addressable PC market will likely decline in both 2022 and 2023, though overall shipment levels will be still higher than pre-COVID levels. In addition, the company has highlighted some bright spots amid the overall soft demand, like the gaming PC growth hitting 34% YoY and 65% commercial mix in the PC business, representing the #1 shipment volume in the industry.”

Commenting on the tablet market’s weak performance, Lam said, “After massive growth in 2020 and 2021, a decline in the tablet market was expected in 2022. The market is now experiencing a slowdown in demand. Besides, with the slow upgrade in hardware, consumer upgrade cycles will be extended longer. The penetration will be held at a steady level.”

Lam added, “Strong US dollar has already made a tangible impact on the revenue, which, as the quarterly brief mentioned, should be up 3% YoY in constant currency terms. The hardware business will be continuously facing the cost increase challenge.”

Lenovo Holds up Under Multiple Pressures, Outlook Uncertain

August 12 2022

Despite operational headwinds due to COVID-19, regional political turbulence, inflation pressure and currency exchange rate volatility, Lenovo reported resilient revenue growth of 0.2% YoY and 1.6% QoQ for Q2 2022 (or Q1 2022 of Lenovo’s 2022-23 financial year).

The company’s Solutions and Services Group’s (SSG’s) 23% YoY (4.3% QoQ) revenue growth in the quarter implied a successful strategic focus on service-led transformation. Along with its other two groups – Intelligent Devices Group (IDG) and Infrastructure Solutions Group (ISG), the company continued to improve profitability and scalability across the three sub-sectors with several growth drivers, including expansion from hybrid working and digital workplace upgrades.

ISG and SSG saw solid YoY revenue growth of 13.7% and 22.9% respectively in Q2 2022, offset by IDG’s 2.7% YoY decline due to global consumer demand weakness. On the sales mix, IDG took the largest share of Lenovo group’s revenue with 80% contribution, though slightly diluted by ISG and SSG’s double-digit sales growth.

Lenovo/Motorola smartphone unit shipments grew 0.3% YoY in Q2 2022 to take a 4.2% share of the global smartphone market, up from 3.5% a year ago, according to Counterpoint Research’s Global Smartphone Market Monitor. Given the 9% YoY decline in global smartphone shipments, Lenovo has been marching against the downtrend. It performed well not only in its traditional American continental stronghold but also in the European and APAC markets, including China, to achieve 21% YoY revenue growth, highlighted by group chairman Yuanqing Yang.

Commenting on the continuous growth of Lenovo/Motorola’s smartphone segment, Senior Analyst Ivan Lam said, “With its low penetration in the Chinese and European markets a year ago, Lenovo was able to avoid the headwinds from these two markets. Major Chinese smartphone brands suffered significant drops, with both vivo and Xiaomi seeing declines of over 20% due to their exposure to the Chinese and European markets. Lenovo/Motorola is continuing with its cost-effective, or ‘affordable high-end’, product strategy. Therefore, its entry seems to be facing less resistance from the channels and target consumers. However, its comeback has just started and challenges remain. Its US and LATAM markets will also have more powerful rivals on the battlefield, such as Xiaomi in LATAM.”

Lenovo’s PC and tablet shipments decreased 13% and 20% respectively in Q2 2022, according to Counterpoint Research’s Global PC and Tablet Monitors. The company continued its solid leadership in the PC market, shipping 17.4 million units in the quarter to grab a 24.4% market share. The brand’s shipment decline was mainly due to weak consumer demand, partly offset by moderate commercial orders. Lenovo’s management team also held a cautious tone on 2022 PC shipments but stayed positive on a flat-to-slight increase in 2023.

Commenting on Lenovo’s PC performance, Senior Research Analyst William Li said, “Lenovo’s PC business suffered weak consumer demand amid global inflation pressure. Unstable order visibility and relatively high inventory levels will have a negative impact on the overall global PC market. Therefore, we had lowered our 2022 shipment forecast in Q2 2022 to reflect the weakening PC demand. We expect order adjustments to continue even as the average selling price (ASP) plateaus on easing supply constraints.”

Commenting on the outlook for Lenovo’s second half, Lam said, “Macro headwinds, inflationary pressure and strong US dollar may impact the demand for PC, server and other consumer electronics goods that Lenovo offers. At the same time, issues such as manufacturing cost and channel inventory may pop up if timely actions are not taken.”

Lenovo Reports 17.9% YoY Revenue Growth in FY 2021-22; ‘3S strategy’ Working

Jun 13, 2022

Lenovo has reported solid revenue growth of 17.9% YoY for FY2021-22 (Lenovo’s financial year starts in April). But Q1 2022 (January-March) saw its revenue falling 17.1% QoQ and rising 6.8% YoY.

In April 2021, Lenovo adopted a new organizational structure under its ‘3S strategy’. In the new structure, it has three major business groups — Intelligent Device Group (IDG), Infrastructure Solutions Group (ISG) and Solutions & Services Group (SSG). Lenovo’s latest financial numbers indicate the ‘3S strategy’ is working to re-energize this giant enterprise.

IDG is still taking the biggest share of Lenovo’s global revenues. The three business groups – IDG, ISG and SSG – saw acceptable YoY increases in the last financial year, at 17.5%, 13.3% and 29.8% respectively.

Commenting on IDG, Senior Research Analyst Ivan Lam said, “Lenovo has made constructive progress in its PC and tablet business, but its smartphone business has seen a phenomenal bounce.”

According to Counterpoint Research’s Global Smartphone Market Monitor, Lenovo achieved a 53.2% YoY smartphone shipment increase in CY 2021 by units. In terms of Lenovo’s financial year, its smartphone shipments grew 33.5% YoY in 2021-22.

Lam added, “Motorola contributed to Lenovo’s smartphone growth. LG’s exit from the smartphone business gave Motorola a great chance to improve performance in the North America and LATAM markets. With its good fusion of hardware specifications and fair pricing, Motorola broke through the market. In the mid-range of smartphones in LATAM markets, Motorola‘s devices have higher-pixel main cameras and bigger ROM, making them attractive for LATAM consumers.”

Based on Counterpoint Research’s Smartphone Market Monitor data, Lenovo’s smartphone shipments in North America and LATAM took up 79% of its total sales in Q1 CY2022.

According to Counterpoint Research’s Global PC and Tablet Monitors, Lenovo’s PC and tablet shipments decreased 9.5% and 20.2% respectively in Q1 CY2022. Lenovo continued its leadership in the PC market, shipping 18 million units in the quarter to grab a 23.1% market share. The 9.5% YoY decline in PC shipments was mainly due to component shortages and a relatively high base in Q1 CY2021.

Commenting on Lenovo’s PC performance, Research Analyst William Li said, “Lenovo’s PC business is one of the biggest beneficiaries of hybrid working environments. However, global inflation and regional conflict brought uncertainties to PC demand, and the order visibility and outlook are not as good as they should be at the beginning of the year. In addition, consumer demand has largely slowed down since H2 CY2021, while commercial demand remains strong and could be the key support for PC shipments in CY2022.”

During its earnings call, Lenovo mentioned that the group would continue to invest in new innovative and advanced products, which is reflected in its latest interest in XR and the Metaverse. Also, Lenovo chairman and CEO Yang Yuanqing highlighted that the group faced challenges from the supply chain and macroeconomic environment.

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The post Lenovo Quarter Update Q3 2022 (Jul-Sep ) appeared first on Counterpoint.

The total NEV sales in Japan from 2018 to 2021 were just 4% of the total sales in China in 2021. It is easy to conclude that Japan is not an attractive market for EV makers. But opportunities can be found when taking an in-depth look into the market. In fact, the Japanese government is now actively pushing EVs by providing subsidies to set up EV charging stations.

FCEV vs BEV: What will be the future trend?

The debate on fuel cell electric vehicles (FCEVs) and battery electric vehicles (BEVs) has been going on for years now. Many in countries like Japan and South Korea still believe that hydrogen fuel will be the future, while China has been pushing BEVs. Leading NEV maker Tesla has also bet on BEVs and made it to the top of the China NEV market by achieving almost 50% share in H1 2022.

The FCEV has many advantages but the BEV can be scaled up in a shorter time due to a more favorable infrastructure construction cost for the government and enterprises. Moreover, the BEV beats the FCEV both in terms of unit price and cost of use. Given the current macroeconomic headwinds, any plan to set up FCEV infrastructure will find few takers in the government or industry in the near future.

The Nissan Leaf BEV was the best-selling NEV model in Japan in 2021, with more than twice the sales as the second-placed Mitsubishi Eclipse Cross, a plug-in hybrid electric vehicle (PHEV).

Why BYD decided to enter Japan electric car market?

China’s BYD recently launched three electric car models in Japan – Seal, Atto 3 and Dolphin. As discussed above, Japan’s NEV market is comparatively small. So, what are the factors driving BYD’s Japan electric car market entry? We discuss them below:

• Not a newbie in Japan’s vehicle market: BYD is already selling its electric buses in Japan. Furthermore, through tie-ups with Japanese companies including Toyota, Kansai Electric Power Company and Keihan Bus Company, BYD has a better understanding of the country’s consumption patterns.
• Cost competitiveness: Within the same price segment, BYD can offer better vehicles in terms of mileage and other performance parameters.
• Investment in charging infrastructure: Either by itself or together with the government, BYD has to increase the number of charging stations and charging points. The difference between China and Japan here is that there is a higher proportion of private charging points in China. But in Japan, more public charging points are needed due to the higher cost of land and parking slots. That is why the Japanese government is providing subsidies to set up EV charging stations.
• Localization: The Japanese market has a unique taste in consumer electronics, such as the consumers here prefer to buy the iPhone SE while their counterparts elsewhere are likely to favor bigger-screen smartphones. The same is true for vehicles. The Kei car category, created by the Japanese government for the smallest permissible cars, is popular among local car users. Of the three models launched by BYD, the Dolphin is very similar to a Kei car. The key reasons why Kei cars are welcome in Japan include:
  • Streets are narrow in Japan, especially in major cities.
  • There are many mountain roads in Japan.
  • Parking space is scarce.

China EV makers going overseas: Challenges and opportunities

Unlike the traditional internal combustion engine (ICE) vehicle era, China’s vehicle makers are big players in the NEV arena. Core NEV technologies like battery, motor and electronic control systems are all now being developed in China also. It is undeniable that China’s NEVs now dominate the market volumes globally. China’s NEV companies and even traditional car companies consider it strategically important to enter overseas markets.

Besides China, Europe and US are the other major markets with good EV penetration and growth. The rest of the markets are still in an educational phase. Therefore, some caution is needed for the NEV makers planning to enter markets like Japan.

The acceptance of the NEV: Although the safety levels of BEVs, PHEVs and FCEVs have improved and reached that of ICEVs, it still needs time for a large number of consumers to trust NEVs, especially in the markets dominated by ICEV manufacturers. But the situation is gradually improving with more and more friends, relatives or other known people using NEVs.

Cost: Many times it is the cost that triggers a purchase or replacement decision. For Chinese NEV makers, cost control is important as still many key parts are made only by a few players.

Better products: Besides the core technologies for the car’s hardware, new applications such as smart cockpit, driving assistant and driverless option are being introduced on the software side to improve the car user experience. Vehicle makers must continue to focus on removing key pain points of target consumers.

Brand power and market competitiveness: Car consumers are more willing to pay a premium for a known brand name. At the same time, many are looking for more bang for their buck. Therefore, it is important for car makers to study consumer behavior and composition of the market they are planning to enter.

Investment and policies: The NEV ecosystem in many markets is still not mature. Huge investments are required to develop this ecosystem, whether it is manufacturing units, service centers, points of sales or charging stations. With the goal of “zero carbon” in mind, many countries provide incentives to NEV makers and consumers, though the risk of policy change always remains.

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The post Can Chinese EV Makers Make it Big in Japan? appeared first on Counterpoint.

Buy-now-pay-later (BNPL) has been a rapidly growing payment method in recent years. Even as digital/mobile wallets are increasingly becoming popular, the fintech sector is developing further, with BNPL catching on with consumers, particularly in the US and Europe. BNPL is a short-term financing service that allows consumers to trade first and pay the total amount in instalments within a specified period after the product purchase and delivery. It helps in expanding the consumer’s purchasing power. It should be noted here that BNPL is not a replacement or alternative for credit cards or debit cards. It relies on the user’s original bank account (credit card or debit card) to offer a time gap between consumption and payment.

How Apple’s Pay Later works?

When the consumers choose Apple Pay to make payments at Apple stores or merchants adopting the Apple Pay API, the payment can be split into four equal instalments spread across six weeks, without incurring any interest or fees. “Built into Apple Wallet and designed with users’ financial health in mind, Apple Pay Later makes it easy to view, track and repay Apple Pay Later payments within Wallet,” the company said in a press release on Monday.

Apple Pay Later is operated on its own database set mainly. It is the latest technologies being used in financial services that differentiate BNPL from the traditional credit card system. These technologies enable a new way of assessing personal credits and managing risk levels. BNPL needs to update the database to adjust the risk control model quickly to be much faster than the credit card repayment cycle, generally no more than three months. Each cycle (from borrowing to repayment) is considered to have run out of data once. The BNPL companies need to continuously run the data to improve the risk control system. With the tons of data on transactions and purchasing behaviour via Apple Wallet, Apple possesses a healthy and trained risk management model to support its operation on Pay Later.

Pay Later Advantages and Risks

Just like Apple Cash and Apple Card, Apple Pay Later will launch in the US initially. After all, Apple Wallet enjoys the biggest base in the US. Furthermore, the US has some of the best banking and credit systems globally.

Klarna, Afterpay (owned by Square) and Affirm are the world’s largest BNPL companies and they all have operations in the US. Moreover, the US is among the top countries in terms of BNPL consumers.

It is a good move to launch Tap to Pay together with Pay Later because Pay Later has a strong link with merchants. The typical business model of BNPL companies has most of the operating income coming from merchants. With Apple Pay’s new functions, merchants can benefit from Tap to Pay with less system integration investment and extra transactions from the Pay Later users. The Tap to Pay and Pay Later combination is the unique selling point for Pay Later over other BNPL providers.

At the same time, Apple Pay Later may experience the shared risk of other BNPL companies –  uncertainty cropping from macroeconomic changes. The BNPL companies have to pay more for funding when the central bank or federal government raises benchmark interest rates. Furthermore, if the debt carries floating interest rates, it gets more expensive when the Federal Reserve raises its benchmark rate. Some companies can pass higher funding costs to merchants through higher fees, or to their borrowers. However, raising the fee for merchants may affect the business relationship. Even if some companies choose fixed-rate debt funding, the attendant risks will come along. But Apple may have less to fear as it has a solid cash flow.

Also, Apple can only encourage its current installed base because the business model leverages Apple Wallet. This can make it easier for the current Apple users to buy more or upgrade Apple products at an early stage.

Apple’s Pay Later will probably be released after the new generation of iPhone and iOS 16 upgrades. Its popularity is expected to grow within years because it is more like an ecological development.

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The post Apple’s Pay Later Option May Impact US Consumption Patterns appeared first on Counterpoint.

Smartphone shipments from ODM/IDH (Original Design Manufacturer/Independent Design House) companies grew 6.4% YoY in 2021, according to Counterpoint Research’s Global Smartphone ODM Tracker and Report, H2 2021. This is attributed to a rebound of 4.5% YoY in the overall global smartphone market in 2021. The share of smartphone shipments from outsourced designs (from ODM/IDH companies) increased to 37% in 2021, up from 36% in 2020.

Global Smartphone Design Operation Status, 2021

 Senior Research Analyst Ivan Lam said, “Although the pandemic continued to impact the global smartphone market, and specifically the 4G SoC supply, ODMs managed to achieve decent growth. The ODM market growth was primarily driven by increasing orders from key clients Xiaomi, Lenovo/Motorola and Transsion. Key ODMs for Xiaomi benefitted the most due to its 31% YoY growth in shipments in 2021.”

Senior Research Analyst Yang Wang added, “Huawei’s decline impacted the ‘Big 3’ and CNCE, as the embattled OEM’s outsourced orders dropped 78% YoY. These were partially offset by HONOR’s return in the second half of 2021. Overall outsourced orders by HONOR still dropped 11% YoY. But on a brighter note, we see the trend of in-house production being outsourced to ODMs continuing in the next few years. For example, vivo saw the first shipments of ODM-made devices in H2 2021.”

Looking at the competitive landscape of the global smartphone ODM/IDH market, Huaqin, Longcheer and Wingtech continued to dominate the market. The ‘Big 3’ now account for 70% of global ODM/IDH smartphone shipments, though the lead is down from 77% in 2020.

Ranking, Growth of Global Smartphone ODM/IDH Vendors

Commenting on the leading ODMs’ performance, Lam said, “Huaqin captured the biggest share among ODMs. Longcheer’s shipments increased significantly, thanks largely to Xiaomi’s orders in 2021. Wingtech shifted its main focus in 2021 to the semiconductor and optical module sectors. Its smartphone shipments retreated mainly due to shortages of 4G SoCs at key clients. Tinno continued to trend in the right direction due to Lenovo and Motorola’s progress in LATAM markets and carrier businesses in North America and Africa.”

The diversification of manufacturing in the global electronics industry has continued. While smartphone OEMs are aggressively investing in India, EMS companies such as Foxconn, Pegatron, Compal and Wistron are expanding assembly lines to India, North America and Southeast Asia.

Commenting on these trends, Lam said, “Smartphone ODMs are gradually moving away from IDH services and focusing more on production and assembly services. Leading ODMs are also constructing local production lines in places like India, Southeast Asia and Brazil. However, one should be wary of limiting factors such as availability of skilled labor, sub-optimal supply chain ecosystem and local policy risks.”

Counterpoint Research’s market-leading Global Smartphone ODM Tracker and Report service is available for subscribing clients.

Feel free to contact us at press@counterpointresearch.com for questions regarding our in-depth research and insights, or for press enquiries.

You can also visit our Data Section (updated quarterly) to view the smartphone market share for World, USA, China and India.

Analyst Contact 

Ivan Lam
ivan.lam@counterpointresearch.com

Yang Wang
yang.wang@counterpointresearch.com

Counterpoint Research
press@counterpointresearch.com

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The post Smartphone ODM/IDH Companies’ 2021 Shipments Rise 6.4% YoY Despite COVID-19, Component Shortages appeared first on Counterpoint.

Xiaomi was the first OEM to bet big on combining internet characteristics with consumer electronics, especially e-commerce. The way the company built the connection between the brand and the consumer conveyed that it wanted to cut hardware and channel margins as much as possible. This was indeed a disruptive strategy for the market 10 years ago. Other OEMs in China were forced to adopt the same strategy. If we look at this 10-year period, this is how leading smartphone OEMs have survived:

1. Adopted the internet brand strategy, where online-centric brands were launched. Examples: Xiaomi, realme, OnePlus.
2. Adopted the internet brand strategy while leveraging the offline networks at the same time. Example: HONOR.
3. Continued the offline strategy while targeting a decent pie of internet sales at the same time. Examples: OPPO, vivo.

Xiaomi, with its strong value-for-money and predominantly below-$300 product portfolio, has grabbed a huge market share globally, especially in the past three years. This is due to two main reasons.  First, Xiaomi has managed to take a big share from the local brands, which were mainly getting their supplies from Chinese ODMs and, therefore, lacking in pricing advantage and core competency in software. Second, the local OEMs are not in a position to match Xiaomi’s marketing muscle. Therefore, with the right kind of penetration strategy, it can be a very potent mass market alternative. But today, other players too are playing the same “internet brand” game as Xiaomi and are close behind.

What has caused Xiaomi’s undulating performance in the past few quarters? Globally, Xiaomi experienced the ongoing SoC shortage, as was mentioned in its latest quarterly earnings call. Xiaomi’s main shipment contributors are 4G-enabled smartphones, especially those below $300. 4G SoCs also happen to be the ones facing the biggest shortage gap in smartphones.

In Xiaomi’s home country, China, it continued to struggle in the offline market. OPPO and vivo held more than 65% share in the offline market, while HONOR’s strong return meant a huge impact on Xiaomi. In Q2 2021, with the big e-commerce festival of “618”, Xiaomi beat expectations. But in Q3 2021, there was no such festival, which led to Xiaomi’s underperformance. Xiaomi has been working to overcome downsides:

1. It is working to ease component shortages, especially in SoCs.
2. It is trying to raise its ASP by targeting the mid-to-high segment.
3. It is doing offline channel mapping to better target the segment, though this segment takes time to produce results.

Xiaomi will perform much better in online sales in Q4 2021 when two big e-commerce festive sales of Singles’ Day (11.11) and Double 12 take place.

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The post Xiaomi’s Smartphone Strategy Under Scanner appeared first on Counterpoint.

Hanoi, the country’s capital, opened in late September after the COVID-19 lockdowns, while Ho Chi Minh City (commonly known as Saigon), the country’s largest city, opened a little bit later. While hugely impacting the economy, the lockdowns also pushed online sales to new heights. Retailers like Mobile World Group (MWG), which owns the highest number of offline shops in Vietnam, registered record online sales. According to an August financial release, MWG’s online revenue contributed 17.5% of its total revenue with 17% YoY growth, undoubtedly a big achievement for the offline channel giant. Thegiodidong (TGDD) and Dien May Xanh (DMX), the MWG chains selling mobile phones and consumer electronics, together accounted for 51.5% of the total group revenue.

TGDD, which means “mobile world” in English, built its standing in the market as a chain of stores selling mobile phones and related 3C products.

In July this year, COVID-19 started spreading rapidly in Vietnam. More than 70% of the offline stores and shops in the country had to be closed due to the restrictions. The situation worsened in August and September. In Saigon, the military had to be called in to enforce social distancing. Only essential stores and deliverymen were allowed to function in the key cities.

With offline channels dominating Vietnam’s mobile phone retail, the COVID-19 impact was severely felt by major OEMs like Samsung, OPPO and vivo, which had been mainly focusing on building offline retail in the country. Even Xiaomi, an internet brand, had to rely on national distributors to cover main offline channels. The lockdown surely made an impact on these leading brands’ distribution strategies.

In such a situation, offline retailers like TGDD and DMX, which had been strategically investing in online business for a while, reaped unexpected benefits. TGDD and DMX’s website experience is as good as pure e-commerce players in the mobile phone and consumer electronics domain. Apart from TGDD, there are offline store chains like Viettel and FPTShops which have also been investing in online stores at different levels.

With the easing of social distancing norms in many provinces and cities in Vietnam from the second half of September, retail businesses are expected to recover. However, even after regaining normalcy, the shift towards online will not stop.

Not just Vietnam, the whole of Southeast Asian mobile phone and consumer electronics market is heavily dependent on offline channels. But with the pandemic, the region’s leading e-commerce platforms in consumer electronics, like Lazada, Shopee and Tiki, have been reporting robust numbers. On the other hand, offline retail chains have been facing the most painful challenges. Online and offline channel constructions are totally two different business models, requiring two sets of strategies, teams and finance models. Thanks to the solid financial support it gets, TGDD has been able to develop its online business and hence limit the damage due to the lockdowns. Other store chains in the region, such as Jaymart Thailand and Erajaya Indonesia, are also keen to embrace the e-commerce era and the new normal.

For the market, it is a good sign that the distribution structure is evolving and becoming more diverse.

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The post Vietnam Offline Channels Successfully Embracing Online appeared first on Counterpoint.

Counterpoint Research’s SEA Channel Tracker shows that in August 2021, online smartphone sales share in SEA’s key markets, including Indonesia, Philippines, Thailand and Vietnam, reached a record high at 20% of the overall shipments. Apart from the immediate reason of the pandemic, there are other factors pushing this e-commerce growth:

1. Big Chinese e-commerce players, like Alibaba, JD.com and Tencent, and some Singapore investors continue to make strategic investments in SEA markets.
2. Local investors and tycoons are also keen to be a part of the growth story.
3. With a median age of around 30, Southeast Asia’s population holds big potential for e-commerce as young people are more likely to try and adopt new things. During the lockdown in September, Vietnamese were told to book vaccination slots online via government channels. Besides helping their families book these slots, young people also assisted them in buying food online.

In the past three years, essential conditions have improved to accelerate the development of e-commerce in the region:

1. Development of e-wallets and payment gateways: E-commerce giants, ride-hailing services, banks, carriers and even governments are pushing e-wallet penetration. In the past, with the traditional banking systems, the rate of bank account ownership was relatively low in SEA. This was due to the inability of many to provide the documents required to open a bank account. But this changed with the new technology and mechanism of e-wallets.

2. Logistics improvement: Besides the traditional local logistics companies, foreign logistics giants and investors have also set up subsidiaries or invested in existing players in the region to support e-commerce.
3. Platform incentives: Typical cases are the e-commerce giants Shopee and Lazada, which have big sales events every year. These have more than 30 big and small promotions in which the platforms, together with the merchants, offer various subsidies and discounts to encourage online purchases.

Smartphone OEMs are becoming more and more mature in online channel strategy and planning:

1. OEMs or local distributors have dedicated teams to manage online channels.
2. Online-exclusive models are being designed. They have a special channel margin structure. An attractive price point is one of the most essential requirements for online sales conversion.
3. Factors such as flagship online stores and 7-14 days unconditional return policy are convincing the consumers about the credibility of online channels.

We strongly believe that Southeast Asia will be the next e-commerce hotspot and smartphone OEMs will surely ride this wave.

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The post Online Smartphone Sales in Key SEA Countries at Record High in Aug appeared first on Counterpoint.

OEM Market Shares in China by Quarter

 China Smartphone Shipments of vivo by Quarter

Though all top OEMs have benefited from Huawei’s retreat, it is vivo that has managed to reach the top spot with its secured supplies of crucial components, optimized product portfolio, and a strong distribution network.

Remarkable component supply chain management

The COVID-19 pandemic has plunged the whole world into a chipset shortage which is not expected to end soon. Main chipset suppliers for mobile phones — Qualcomm, MediaTek and UNISOC — are seeing lengthening delivery lead times. As a result, they are only focusing on key accounts and also increasing prices, the latest being UNISOC with its average 25% hike. But with the BBK group’s powerful supply chain, vivo can maintain a consistent supply of chipsets for its key volume segments — Y series and the newly launched S series. Within the Y series, there are 5G models available for as low as CNY 1,298 (~$200).

Optimized product portfolio

The newly launched S series of vivo is a liberator. Its focus on the CNY 2,000-CNY 3,500 segment means the X series is now free to focus on the CNY 3,500 and above segment. The Y series, with its focus on the CNY 1,999 and below band, remains a volume-driven product group. This clear categorization of smartphones has helped vivo’s performance in 2021. While retaining around 50% share in the CNY 1,999 and below segment with its Y series, vivo has managed to make a breakthrough with the S series and increased visibility in the CNY 3,500 and above segment with the X60 series. Other major Chinese brands have been aiming to have such product categorization and increase their ASPs (average selling prices), but their efforts in this direction are yet to see big results.

Channel distribution

Huawei’s woes have provided an opportunity for OPPO and vivo to grab more than 70% share in China’s offline channels. vivo has also gone in for a reorganization of its offline channel partners. The rising e-commerce sector has been hugely impacting both brands and offline channels. However, due to different levels of development in Chinese cities, there is still a big offline market. vivo has invested considerable resources in the offline segment, including in trade marketing, promoters, ATL and BTL synergy, and margin schemes.

iQOO: Designed for Generation Z

Although iQOO operates independently from vivo since its launch in 2019, it is still listed on vivo’s website as a series. Unlike OPPO, realme and OnePlus, iQOO is heavily focusing on the online segment. The consumer group it is eyeing here is those born in 1995 and beyond. These are the people who have been exposed to the internet, social media and mobile phones from their earliest youth.

iQOO has been the sponsor for ‘Honor of Kings – KPL’, an e-sport competition, since 2019. As the hottest smartphone e-sport competition in China, it has been attracting millions of viewers every season. In fact, the vivo family (vivo and iQOO) has been its sponsor since the beginning of this game back in 2016.

Fierce competition

On August 12, 2021, HONOR unveiled its flagship Magic 3 series, aimed at capturing the space vacated by the Huawei Mate and P series. However, its high prices have left many unimpressed. To Chinese consumers, a smartphone above CNY 4,000 is a segment reserved for a few, like Apple’s iPhone, Samsung’s S and Note series, and Huawei’s Mate and P series. This is because these brands have invested a lot over the years in promoting their flagship models as high-end phones with cutting-edge technology and innovation. As we know, vivo has a series called NEX which is high on innovation, just like Xiaomi’s Mix series. Maybe vivo can use this series to target the high-end segment.

With HONOR pushing ahead with its comeback and Xiaomi’s focus on the offline channels, the Chinese smartphone market will see fierce competition between vivo, OPPO, Xiaomi, HONOR, Apple and keen-to-be-back Samsung in the coming days.

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The post vivo: The Low-profile King of China Smartphone Market appeared first on Counterpoint.

VinSmart’s future strategy will take three directions — R&D for VinFast, Vingroup’s carmaker unit; IoT solutions for vehicles and homes; and winding down the smartphone production for partners, such as some US carriers. While the VinSmart’s move looked wise against the backdrop of ongoing component shortages, the real logic working behind the decision is more complicated than expected.

Original Design Manufacturer (ODM) vs ‘Made in Vietnam’

Prior to VinSmart’s exit, a few popular Vietnamese mobile phone brands had already disappeared from the market, such as Q-mobile, Mobiistar, and FPT Mobile. Q-mobile quit the market quite early, around the time the Android smartphone segment started heating up. Q-mobile failed due to cash flow issues stemming from its smartphones’ average cost being two to three times compared to a normal feature phone. Mobiistar tried expanding to India, the second-largest market, to counter competition in its domestic market. Although Mobiistar entered India in a joint venture with a Chinese manufacturer, it was still a wrong move because India was already a very competitive market.

These failures of local brands can be pinned down to their business model. Most of them relied on ODMs (mainly based in China), which means outsourcing design and manufacturing to some other firm. But the Chinese brands, with their manufacturing and supply chain advantages, didn’t take much time to beat the local firms.

Secondly, most of the Chinese ODMs provide Android turnkey solutions, with only minor customizations for the local brands, such as housing, wallpapers, and ringtones. However, with the Vietnamese consumers already becoming used to the variety of features and improvements offered by international brands, the local companies found it difficult to keep pace.

Thirdly, establishing and building a mobile phone brand involves cash burn. But brands like Q-mobile, Mobiistar, and Masstel had no such solid capital. With squeezed margins, it is super-easy to block cash flow. For example, 10,000 handset units costing $50 per unit mean $500,000 worth of goods. But in case these units fail to sell, it would take more than three months to convert this stock back into cash. And for a local brand, $500,000 is a big amount.

Therefore, the ODM business model is very challenging for local brands. But in the light of the abovementioned challenges, VinSmart got a head start. It was backed by Vietnam’s biggest business group, which believed in promoting ‘Made in Vietnam’.

Was VinSmart a Success?

Looking at VinSmart’s past performance, it ranked among the top four OEMs (by volume) both in Q1 2020 and Q1 2021.

VinSmart managed to impress the market and consumers alike. The channels were happy to have such a ‘Made in Vietnam’ brand on their shelves. The key selling points (KSPs) for VinSmart were:

1. Made in Vietnam (Manufacturing).
2. R&D in Vietnam after teaming up with Spain’s BQ.
3. Cost-effective and better than Xiaomi.

All this made VinSmart stand strong in the $150 and below segment (wholesale price). As much as 70% of VinSmart’s smartphone sales came from this segment.

From a strategic point of view, it is reasonable and practical to scale up the volume in the mid-low segment and then climb up the value chain by frequently launching flagship models. For sure, VinSmart was in for a bright future.

Why VinSmart Decided to Exit Market?

The news of VinSmart exiting the smartphone and television business was indeed sensational. Besides the obvious reasons, there were still some unfathomable causes behind the move.

VinSmart entered Spain, Russia, and some other markets even when that would have meant increased brand-building and other expenses. What triggered the foreign foray was the size of Vietnam’s market. The country, with around 100 million population, sees a mobile phone volume of around 2 million per month, of which VinSmart had a 10% share. The company’s ambitions were far bigger to be satisfied by this user base. And that, in turn, contributed to the latest move.

On the R&D front, the results were not strong enough to differentiate VinSmart from other brands. Its OS, called VOS, was just a customized Android OS.

Vietnam’s government is keen to transform the country into a manufacturing giant. In the long run, Vietnam’s development heavily relies on foreign investment and overseas markets. Foreign companies in Vietnam take up 70% of its foreign trade. As much as 25% of Vietnam’s total exports are taken by Samsung, which set up its first smartphone production line in the country around 10 years ago. However, Samsung’s arrival started to change the industry’s labor structure in Vietnam. Top-quality manpower became difficult to find for VinSmart even as it strived for ‘Made in Vietnam’.

To conclude, VinSmart had no choice as both resources and core competencies were in short supply to sustain the ‘Made in Vietnam’ push.

Market after VinSmart

Today, if we visit the website of Thegiodidong, Vietnam’s biggest organized chain store, there are only Masstel and Vsmart in terms of local brands. Masstel has only feature phone models on sale with the highest price of 550,000 VND (~$24). So, is this an end for local brands? Right now, the answer seems ‘no’. It is unlikely that any local brand will rise in the near future to capture the space vacated by VinSmart and take on the international biggies.

However, Vietnam’s government has a clear aim of improving the country’s industrial capabilities in the next 10 years. Therefore, in the long run, another local challenger is likely to rise in the Vietnamese market.

“Vietnam’s electronics industry is developing, and it certainly needs a leading local mobile phone brand,” said Tran Viet Hai, CEO of Bkav Electronics, the company that produces Bphone, as well as famous anti-virus software.

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The post Will Vietnam Produce Another VinSmart? appeared first on Counterpoint.

Mobile Subscribers Share in Philippines, Jun 2021

With continuous lockdowns in multiple places, including the world’s longest lockdown, DITO is facing serious challenges in setting up its infrastructure. China Telecom has transferred some of its experienced manpower from China to help expand DITO’s network, while the local Udenna Group is helping with the funding besides guiding the China team.

DITO’s prepaid offers

After analyzing the market, DITO has launched attractive packages for consumers. To welcome new users, the operator is extending its P199 (roughly $4) prepaid offer until the end of September. The offer comes with 25GB of data, unlimited texts, 300 minutes of calls to other networks and unlimited DITO-to-DITO calls for 30 days. There is also a P99 ($2) offer that comes with 10GB of data for 30 days, unlimited DITO-to-DITO calls, 300 minutes of calls to other networks and unlimited SMS to all numbers.

Consumers who already have a DITO SIM card can subscribe to these plans using the DITO app. If the consumers don’t have a SIM card yet, they can buy it from the company’s e-shop or the official stores on Lazada and Shopee. With P199, the consumer can get 6GB with no expiry date when buying it via the Smart App portal.

Conclusion

DITO has a long way to go to close the gap with established rivals Globe Telecom and Smart Communications. However, it can be a disruptive competitor in the current market. Duterte too is keen to project DITO as one of his big achievements during the coming elections.

Around 30% of the mobile phone users in the Philippines are still on the 2G/3G network. Compared to Globe and Smart, DITO is starting with a 4G/5G network, which can prove to be an advantage in attracting 2G/3G users when combined with attractive offers.

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The post Philippines’ Third Operator Fights Odds to Expand Share appeared first on Counterpoint.