Prospect of Mobile Phone Market and ODM Industry

25 Jun 2019

According to SMT Exhibition research data, global smart phones shipped 1.41 billion units in 2018, down 1.86% year-on-year. The first decline since 2014 was mainly due to:

a) North America, Latin America and China's smart machine market all experienced a decline in 2018, of which the Chinese SMT Exhibition market fell sharply;

b) China's smartphone market has entered saturation and continues to decline, with shipments falling by nearly 10% year-on-year in 2018;

c) The key components of the intelligent SMT Exhibition machine memory chip, screen and passive components and other materials have risen sharply, and the upgrade of cameras, chips and fingerprints has led to a significant increase in costs, which has pushed up the price of smart phones, and the price increase has led to a prolonged change cycle.

China's smartphone market shipped 396 million units in 2018, down 9.9% year-on-year. The SMT Exhibition market is saturated, and smartphone shipments are concentrated in the stock market. The proportion of new users is very small.

China's smart phone market is still the most competitive market. Excessive competition in the market leads to quality improvement and excessive hardware performance. Due to the rapid upgrade of SMT Exhibition component technology, the cost and price increase, and the overall switch cycle is extended.

According to the shipment data of mobile phone manufacturers, only and vivo shipments continued to grow in the Chinese SMT Exhibition market in 2018, while other brands shipped declines, and Apple and Samsung fell sharply.

TOP5 mobile phone manufacturers , OPPO, vivo, Xiaomi and Apple's overall market share reached 88.6%, other mobile phone SMT Exhibition manufacturers have been difficult to have room for growth.

China's mobile phone manufacturers' overall shipments of smart phones continued to grow. In 2018, shipments reached 732 million units, a year-on-year increase of 1.6%. Among them, the overall shipments in the Chinese SMT Exhibition market fell by 7.96%, and shipments in overseas markets increased by 11.9%.

The shipment growth of China's mobile phone manufacturers mainly comes from overseas markets, with and Xiaomi's smartphone shipment growth exceeding 30%.

In 2018, mobile phone ODM manufacturers shipped 320 million units of smart SMT Exhibition phones, down 8.7% year-on-year, of which 260 million of TOP5 ODM manufacturers shipped 62.3%, accounting for 81.3%.

Smartphone customers focus on mobile phone brands such as , Xiaomi, Lenovo, OPPO, LG and China Mobile. Among them, TOP3 ODM manufacturers Wentai, Huaqin and Longqi shipped 233 million units.

Due to the further concentration of SMT Exhibition mobile phone manufacturers' shipments, the mobile phone ODM industry has basically been established, and small and medium-sized ODMs have no chance to be forced to undergo product transformation or exit.

Wentai, Huaqin and Longqi continued to grow their smartphone shipments in 2018, and 2018 shipments reached new highs, reaching 90.3 million, 84.8 million and 57.8 million, respectively, and the SMT Exhibition shipments were far ahead. The advantages of R&D capability, quality control, supply chain management and manufacturing are obvious.

, Xiaomi, Lenovo and OPPO are the main partners of mobile phone ODM companies in 2018. The corresponding ODM suppliers are mainly concentrated in Wentai, Huaqin, Longqi and Zhongnuo.

OPPO began to release the outsourcing ODM project in 2018. It is expected that the shipment of outsourcing SMT Exhibition projects will increase significantly in 2019; Meizu's 2018 smart machine business performed poorly, and shipments fell sharply, which led to a sharp decline in German revenue.

With the concentration of SMT Exhibition mobile phone industry brands and the significant price increase of key components of mobile phones in 2018, mobile phone brand manufacturers have concentrated their purchases with the advantage of their shipments, and their bargaining power has increased. The corresponding ODM vendors' supply chain bargaining power is weakening and cost. The advantage is decreasing.

At present, , Xiaomi, Lenovo and OPPO and other mobile phone manufacturers' subcontracting projects, key materials, main chips, memory chips, screens, cameras and batteries have gradually turned into customer supply, compressing the profit source of mobile phone SMT Exhibition ODM manufacturers, so must pass and Customers collaborate and expand their product lines to increase shipments and product differentiation to increase profitability.

Due to 5G chip technology, cost and operator network restrictions, it is expected that the 5G smart phone shipment will have limited impact on the mobile phone market in 2019, and the 4G penetration rate of the global SMT Exhibition mobile phone market is already high due to the increase of the smart machine cost. Shipments will continue to be concentrated.

It is expected that global smartphone shipments will remain flat in 2019, and the Chinese SMT Exhibition market will continue to concentrate on TOP5 handset manufacturers, and market competition will further intensify. However, due to the strong performance of China's mobile phone brands, in 2019, Samsung, LG and Nokia and other mobile phone brands began to fully seek cooperation with mobile ODM manufacturers. For ODM mobile phone manufacturers, challenges and opportunities coexist.

It is expected that the overall shipment of China's mobile phone brands will continue to grow in 2019, and the growth space will continue to be concentrated in overseas emerging markets, especially in SMT Exhibition Southeast Asia and India, and shipment models will continue to be dominated by thousands of smartphones.

It is expected that Xiaomi and OPPO 2019 thousand yuan intelligent machine ODM project shipments will continue to grow, which will directly drive the growth of ODM manufacturers. At the same time, the overall shipments of Chinese mobile phone manufacturers will continue to grow in 2019. It is expected that the shipment of smart SMT Exhibition phones will reach 750 million units, an increase of about 2.5%.

Due to the impact of China's mobile phone manufacturers, shipments have declined. Samsung, Nokia and LG have significantly increased their outsourcing ODM projects to optimize costs and R&D resources and enhance the competitiveness of their SMT Exhibition products. Open projects and ODM companies cooperate.

Samsung, LG and Nokia are expected to reach 40 million outsourcing of ODM projects in 2019. Wentai, Huaqin and Longqi are the main beneficiaries.

's 2018 outsourcing SMT Exhibition ODM project shipped about 65 million units, which was about the same as 2017. The shipments were mainly concentrated in Huaqin, Wentai, Zhongnuo and Longqi.

However, adjusted its outsourcing project strategy in 2019 and began to control the recycling of ODM projects. It also targets all key components and general materials. It is estimated that the shipment volume of outsourcing ODM projects in 2019 will be around 40 million, and the key is due to customer supply. Materials have a large impact on the SMT Exhibition shipment size, revenue and profit level of their ODM suppliers.

Mobile phone ODM's profit margin mainly comes from R&D solutions, supply chain cost control and manufacturing, as current mobile ODM customers are concentrated in large customers.

For mobile phone manufacturers such as , Xiaomi, OPPO and Lenovo, due to their strong bargaining power in the supply chain, key materials are gradually cut into customer supply, and the profit margin from the cost control of the SMT Exhibition supply chain is compressed. Therefore, mobile ODMs must compete for key projects. Improve profit by increasing shipment size.

Due to fierce competition in the mobile phone ODM industry and low profit margins, TOP3 mobile phone manufacturers are actively expanding their product lines to increase profits and reduce operational risks.

Wentai acquired the Anshi semiconductor device business in 2018, and Huaqin continued to expand its SMT Exhibition, tablet, notebook and server products business.

In addition, ODM's profitability is largely due to the supply chain resource integration capability. It seeks mergers and acquisitions by looking for upstream resources of the SMT Exhibition industry's high-quality industrial chain, expanding its business scope and enhancing its profit and voice.

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