On the evening of Dec. 10, Qualcomm announced that the Fuzhou Intermediate Peoples Court had issued a temporary injunction demanding that Apples four Chinese subsidiaries immediately stop selling some models, including the iPhone 6 and 7 series, as well as last years new iPhone 8 series and the iPhone X.
As of December 11, the domestic e-commerce platform has not stopped selling, but the follow-up sales of Apple in China may fluctuate. On December 11, several industry insiders told 21st century economic reporters that the current sales of the iPhone have not been affected, but this years overall decline in sales of the iPhone in China will not change. It is worth noting that the current litigation cases are still in progress, and the final judgment needs to be observed.
At present, the top five brands have occupied more than 85% of the market share in Chinas mobile phone market. According to Counterpoint Research, Chinese brands ranked steadily among the top five in the third quarter, with a combined market share of more than 78% for the five brands. They are vivo, OPPO, Huawei, Glory and Millet, respectively. Apple ranks behind Millet, and its share is less than 10%. If Apple is added, the market share of the first six brands in China will reach 86%, and the battle between these brands will be more intense.
At the same time, the domestic mobile phone market as a whole is at a low ebb. Sales have declined for four consecutive quarters, and the market for switching machines is waiting for a new dividend.
Apple market share fell below 10%.
The mobile phone market is always in the lead for three or five years. With the rise and innovation of domestic mobile phones, the share of foreign brands has been declining. The latest report released by China Communications Institute mentions that in November 2018, the shipment of domestic brand mobile phones dropped by 17.9% compared with the same period, accounting for 86.4% of domestic mobile phone shipments.
Now that Samsung has fallen out of the top six, Apples share is also being hit. According to Counterpoint Research, in the fourth quarter of 2017, Apples market share in the domestic market was 15%, which fell to 9% in the third quarter of 2018, while Huawei, OPPO and vivo all accounted for more than 20%.
In the mobile phone brand, the trend of two-level differentiation and large brand centralization is becoming more and more obvious. Unlike previous years, the growth space of head brand share is not only from the shrinkage of small manufacturers, but also from the fierce competition among large brands. So how much will Apple, one of the leading brands, be affected by this incident?
On December 11, China Merchants Electronics analyst Fang Jing told 21st Century Economic Reporters that the sale of the iPhone was not affected for the time being. Since Qualcomm sued Apple for patent infringement in Fuzhou Intermediate Court was about November 2017, the lawsuit mainly aimed at the old version of iOS 11 system. At the same time, the three new iPhone devices released in 2018 are not included in the lawsuit. Apple can evade related patents by upgrading its system.
He said China was an important market for the iPhone, but the proportion of affected models was limited. According to statistics, in 2017, Apple sold 46.09 million iPhones in Greater China, accounting for 21.4% of global sales; in the first three quarters of 2018, the proportion of sales of iPhones in Greater China declined slightly, to 19.4%, but it is still the second largest market after the United States. Assuming that the sales structure of each model of the iPhone this year is the same as in previous years, and considering that the models of the iPhone 6 and below are not within the limits, it can be deduced that the proportion of the affected models is 18.5% in the fourth quarter and 34.7% in the first half of the year. Even if the ban ignores iOS upgrades and is strictly enforced, the impact on global sales of the iPhone will be limited to 3.59% - 6.73%.
This means that in terms of models and proportions, there is no significant impact on Apples sales at present, but in the face of weak innovation, high prices and strong competitors for the iPhone, the decline in market share in China continues.
As far as Apples sales in China are concerned, about 30% of them belong to the iPhone 7 series and 6 series, while 70% of the sales are made up of the models including the iPhone 8/iPhone 8 plus/iPhone X/iPhone Xs/iPhone Xsmax/iPhone XR. On December 11, Huang Yuqin, Research Manager of DRAMeXchange, told 21st Century Economic Reporter, We predict that Apple sales in China are expected to fall to 45 million units in 2018, 10% less than in 2017. However, due to the saturation of the Chinese market and the weakening of demand momentum for mobile phones, and the unresolved dispute between Qualcomm and Qualcomm, some models can not be sold, which may worsen Apples sales situation and lead to a further decline in sales.
He also mentioned that in terms of global production in 2018, it is now at the end of the year and the production plan has been roughly set, so the total production of Apple this year is expected to be about 220 million units. If the impact of trade disputes continues to expand, its GDP decline in 2019 may expand to more than 10%.
Low Valley Expects New Dividend
In addition to the intensification of competition, the sales of mobile phones in the past two years are not good, and new impetus is urgently needed.
Since 2009, smart phones have gradually become popular, and the mobile phone industry has entered a new growth cycle. According to the data of mobile phone sales in China market from GFK 2015 to 2018, the second half of 2014 has entered an obvious inflection point. The growth rate of mobile phone sales has slowed down. Smart phone replacement function machines have been basically popularized, and reached a wavelet Valley in the first half of 2015.
However, from the second half of 2015 until the end of 2016, low-level cities such as the third and fourth lines still bring about the increment of upgrading. In the past seven quarters, only two quarters of sales increased slightly by 1% year-on-year, while the remaining five quarters fell year-on-year. Especially in 2018, the decline further increased. In the first three quarters of 2018, sales declined by 6.2%, 7.3% and 18% respectively.
Although sales in China are declining, sales are rising all the way. However, sales also fell in the third quarter of 2018. Under this trend, GFK downgraded Chinas mobile phone market index in 2018 and adjusted its retail sales forecast to 422 million units, down 9.5% year-on-year. Considering the year-end driving role of high-end flagship products in the fourth quarter of 2018, the retail sales of high-end flagship products were adjusted to 137 trillion yuan, up 2.4% year-on-year.
It should be said that the domestic market entered a new trough in 2018. Hu Baishan, Executive Vice President of vivo, recently told the media that the mobile phone market will decline next year, hoping to reduce the decline of the market through innovation and promote consumers to pay for innovation.
Todays switching market awaits the release of new demand dividends, 5G will usher in a small cycle of network upgrading. However, it needs to be pointed out that the hardware intellectualization has not been substantially improved, and we are also waiting for a large cycle of hardware upgrade.
For the mobile phone dividend brought by 5G, Fang Jing told 21st Century Economic Reporter on December 11 that the 5G mobile phone will not break out next year. China Mobile expects the price of 5G commercial mobile phone to be above 8000 yuan next year. Everyone will delay consumption of 5G.
According to the 5G terminal strategy issued by China Mobile, in 2019, China Mobile will concentrate on purchasing 10,000 5G terminals and invest 100-200 million yuan in terminal subsidy. By 2020, after 5G commercial use, the price of mobile phones will start to drop to 1000 yuan. At present, 5G terminals also face many difficulties, such as the complexity of 5G technology solutions, limited initial chip solutions, high cost of ultra-high configuration, radio frequency solutions to be stable and mature, and so on.
Therefore, in the face of high-priced products of the first generation of more than 8,000 yuan, there are not a few consumers on the sidelines, and the driving force of purchasing may not begin to highlight until 2020.
Despite the pre-commercial start next year, mobile phone manufacturers have been testing incessantly. Huawei has released 5G chips and folded 5G mobile phones early next year; vivo has first implemented 5G HD live broadcasting and demonstrated a prototype supporting 5G sub6GHz band and millimeter wave; OPPO has also been tested to achieve 5G Internet access; Xiaomi has announced 5G network testing; and Apple has never been catching up with it. The upgrading of communication technology often awaits the follow-up after the technology matures. In the 5G era, mobile phone brand may usher in a new shuffle.
Source: Responsible Editor of 21st Century Economic Report: Qiao Junjing_NBJ11279