Bottom line: The failure of 2 major touch-screen technology manufacturers in Guangdong is the latest sign of trouble in China’s overheated smartphone sector, with similar new closures likely to accelerate in the next few months.
Two more smartphone component suppliers go bust
China’s smartphone wars are taking an unexpected twist, with suppliers to some of the nation’s top brands emerging as the first victims of a prolonged battle for market share. I had previously expected at least one or two small- to mid-sized brands would bow out of the market by the end of this year, though we have yet to see any such developments.
Instead the inevitable shake-out appears to be starting in the supply chain, with media reporting that 2 major smartphone part suppliers have gone bankrupt in southern Guangdong province where much of the manufacturing takes place. (Chinese article) The insolvency of these 2 major suppliers, one in the boomtown of Shenzhen and another in the nearby city of Huizhou, comes just a couple of weeks after the bankruptcy of a major supplier of metal casings for smartphones sold by Huawei and ZTE (HKEx: 763; Shenzhen: 000063). Read Full Post…
Bottom line: Alibaba’s Meizu investment is likely to spark a round of similar buying by major Chinese Internet firms, but could jeopardize Meizu’s access to the latest Android technology from Google.
Alibaba invests in Meizu
E-commerce giant Alibaba (NYSE: BABA) is finally making a smart acquisition to revive its flailing smartphone initiative, with word that it’s investing a hefty amount in the well-respected second-tier player Meizu. This particular investment comes just 2 months after another similar deal that saw security software specialist Qihoo 360 (NYSE: QIHU) form another tie-up with smartphone maker Coolpad (HKEx: 2369), and could auger a new wave of similar investments by Baidu (Nasdaq: BIDU), Tencent (HKEx: 700) and perhaps one or two other cash-rich Internet companies.
The news could provide some new breathing room for companies like Meizu and Coolpad, since they and many of their domestic peers are probably losing big money due to intense competition in China’s overcrowded smartphone space. But this new buying spree could also mean that competition is unlikely to abate anytime soon, since wealthy companies like Alibaba and Qihoo are unlikely to give up easily on their new smartphone initiatives. Read Full Post…
Bottom line: China’s smartphone market is likely to contract another 10 percent this year, forcing some newer domestic manufacturers out of business, while Huawei’s bid to go upscale in the space is likely to face difficulty.
Huawei posts strong growth on smartphones
New data on China’s booming smartphone sector show the industry crossed a tipping point in 2014, with sales starting to sag after several years of explosive growth. That earlier growth was fueled by companies like Huawei, one of the nation’s largest manufacturers, which has just given some preliminary financial data for 2014. Huawei cited a big jump in smartphone sales as a major factor behind its 20 percent jump in total revenue last year, as strong gains for its consumer products division offset slower growth in its older telecoms networking equipment unit. Read Full Post…
Bottom line: Huawei’s low-cost Honor brand is likely to gain global market share in 2015 at the expense of multinationals like Samsung, which is likely to lose its spot as China’s top smartphone seller in the new year.
Sales soar at Huawei’s Honor brand
Two of China’s leading smartphone sellers are in the headlines today moving in opposite directions, reflecting turbulent conditions in the world’s largest but also most competitive market. On the upside, media are reporting that sales are booming for domestic giant Huawei’s low-end Honor brand, as the company borrows a low-cost marketing strategy from domestic rival Xiaomi. Meantime, other reports say market leader and Korean giant Samsung (Seoul: 005930) is sending an emergency team of rescuers to China in a bid to reverse the company’s sudden slide in the market. Read Full Post…
Bottom line: The target of Qihoo’s rumored smartphone purchase could be Coolpad, while Xiaomi’s new tie-up with Midea could be followed by similar pairings in a broader drive to develop smart appliances.
Qihoo eying Coolpad?
A couple of big deals are bubbling around in the smartphone space today, led by yet another new tie-up involving smartphone sensation Xiaomi, this time with home appliance maker Midea (Shenzhen: 000333). But the hyperactive Xiaomi is having to share the spotlight with the edgier security software specialist Qihoo 360 (NYSE: QIHU), which is reportedly eying a deal for its own major smartphone acquisition worth up to $1 billion.
Each of these deals has slightly different motivating factors, but the central theme is that companies like Qihoo and Xiaomi increasingly see smartphones as a central element of larger suites of product and services rather than just a stand-alone product. In Xiaomi’s case, the company already counts smartphones as its core central product and is trying to build up an ecosystem of related products and services like smart TVs and air conditioners. Qihoo is eying smartphones as a vehicle for propagating its core software and Internet services. Read Full Post…
The following press releases and media reports about Chinese companies were carried on December 2. To view a full article or story, click on the link next to the headline.
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Fosun (HKEx: 656) Raises Club Med (Paris: CU) Bid Hours Before Deadline (English article)
Jack Ma, Pony Ma May Join In Ping An’s (HKEx: 2318) $4.75 Bln Fund Raising (Chinese article)
Several news bits are casting a spotlight on growing stress in the low-end smartphone market, where a crowded field of Chinese companies have been engaged in a cut-throat series of price wars for the past year. Leading the headlines is word that Coolpad, a leading homegrown brand, is cutting 10 percent of its workforce as it explores a new joint venture with some of its distributors. At the same time, other reports say that China Mobile (HKEx: 941; NYSE: CHL) won’t be coming to the rescue of these struggling companies by selling their smartphones to its subscribers at subsidized prices, as the leading Chinese carrier embarks on its own cost-cutting campaign to bolster its sagging profits. Read Full Post…
I generally try to avoid writing too much about smartphones in this space, since the blogosphere often seems like little more than a soap box for high-tech execs to hype their latest products. But a series of exchanges between some of the industry’s top executives provided a fascinating snapshot of the current price wars now gripping China, as companies try to undercut each other to see who can offer the cheapest models. Meantime, some of those same executives were poking fun at the recent news that a famous Chinese comedian was planning to enter the space, again reflecting how overheated the market has become.
Elsewhere on a more solemn note, executives from some of China’s leading tech firms were also paying tribute in the blogosphere to Robin Williams, praising the US comedian for his ability to make other people laugh despite his own depression that ended with his suicide last week. Read Full Post…
I recently wrote how smartphone price wars may be claiming one of their first major victims in ZTE (HKEx: 763; Shenzhen: 000063), and now we’re getting word that crosstown rival Huawei may also be getting crunched in the ongoing battle for supremacy at the low end of the market. The latest reports cite Huawei’s mobile device chief saying the company is formally ducking out of ultra low-end smartphones in its home China market, in what can only be seen as a major retreat for one of China’s biggest tech companies. Read Full Post…
Smartphone chatter has dominated the microblogging realm among tech executives this past week, led by nonstop debate surrounding the hyperactive Xiaomi and its newly launched fourth-generation model. But I’m personally growing a bit tired of this company, and thus thought I’d turn my attention this week to smartphone chatter from 2 lower profile brands, namely the unappreciated Huawei and recently launched Smartisan brand.
Huawei executives were in a state of mourning over the past week following the sudden death of one of their colleagues, cellphone chip executive Wang Jin. Meantime, Smartisan’s top executive was bemoaning problems facing his young company due to capacity constraints, as several CEOs of similar young rival brands looked on in sympathy that was perhaps mixed with just a touch of gloating. Read Full Post…
I have a lot of respect for Tencent (HKEx: 700), China’s largest Internet company and now one of the world’s most valuable web firms based on the meteoric rise in its stock over the last few years. But that said, I’m starting to have some concerns about the company’s future due to its sudden move into many unfamiliar areas, including the latest which reportedly has it looking to buy a cellphone maker. In a somewhat ironic twist, Tencent’s cellular foray would come just a couple of months after Google (Nasdaq: GOOG), the world’s largest Internet company, admitted failure with its own cellphone adventure by selling its Motorola Mobility unit at a major loss.
