Recently, the GSMA, the sponsor of Mobile World Congress MWC, announced the cancellation of this year’s MWC conference due to an outbreak of pneumonia with the new coronavirus infection. And this move also upset a large number of domestic mobile phone manufacturers of new products release rhythm, had to push back to online release. At the same time, affected by various epidemic prevention and control measures and delayed resumption of work by enterprises, the supply chain upstream of mobile phones and downstream manufacturing plants and parts factories have been delayed, mobile phone new production capacity will also suffer from great challenges.
In addition, affected by the outbreak, offline traffic decreased sharply, which also makes mobile phone sales channels cold.
Delayed resumption: limited capacity, offline channel blocked
On January 27, the State Council announced the extension of the 2020 Spring Festival holiday to February 2, February 3, and then, on the basis of the State Council’s notification, Shanghai, Henan, Guangdong and other places announced that all enterprises except the necessary industries will resume work after the 15th Lantern Festival, the earliest time after February 9 thing; Many cities also require that migrant workers be isolated for 14 days.
The 14-day ban on extended holidays and self-isolation is a significant challenge for the upstream supply chain to resume production.
In the upstream component supply link, to mobile phones must be the camera module as an example, according to Tianfeng International analyst Guo Mingxuan recently in its latest report, the factory is located in China’s medium-high camera module (CCM) recovery situation is gradually improving, but Lijing, Yu optical, Oofi light and Titan in the next 1 – The resumption rate for 2 weeks can only reach 45-55%, 40-50%, 65-75% and 45-55%, respectively.
In the mobile phone production process, to mobile phone factory Foxconn, for example, according to the original plan, Foxconn will be fully resumed on February 10, but according to the 21st Century Economic February 10 report, Foxconn Shenzhen, Zhengzhou, Langfang, Taiyuan and other factories employees said the local resumption of work time to be postponed, the specific resumption of work time is not clear.
Then another media reported that on February 10th the number of employees at the Foxconn plant in Zhengzhou was only 10 per cent of the total. Zhengzhou Foxconn will be quarantined for 14 days for workers returning from outside Henan province, and for workers returning from Henan province for seven days.
On January 31st Lu Weibing, vice president of Xiaomi Group and general manager of the Red Rice Redmi brand, tweeted: “Recently, the various product models are really out of stock and need to wait until February 10th to be gradually alleviated.” February 10th is also the official resumption of work for many factories.
Not only supply chain production, mobile phone manufacturers online channel sales are also facing serious challenges.
Apple, for example, announced on February 1st that it would temporarily close retail stores in mainland China from now until February 9th, and on February 8th, Apple said it was working to reopen its offices and contact centers in the week of February 10th, and was preparing for the reopening of the retail stores, but did not provide a specific opening date. Only a handful of Chinese retail stores have opened.
In addition, the domestic mobile phone brand manufacturers of offline stores are currently mostly closed. Many of OPPO, vivo and Huawei’s off-line stores are brand licensing models, with stores and rents largely borne by dealers, and of course many of them are official brand flagshipstores. Xiaomi Home stores are mostly Xiaomi direct, but even with the cooperation channels, it is far less than OPPO, vivo and Huawei in number.
Obviously, for the previous domestic off-line channels have a strong advantage of OPPO, vivo, Huawei and other mobile phone brand manufacturers, under this outbreak, may be more serious impact.
It is worth noting that recent industry rumors that, affected by the outbreak, originally mainly rely on offline channels shipped OPPO, its new OPPO Reno 3 series at the end of last year sales less than expected, especially based on mediaTek Dimensity 1000L chip OPPO Reno 3 volume less than expected 20% , resulting in opPO slashing OPPO Reno 3 in large numbers.
The original OPPO Reno3 and Reno3 Pro were sold only at OPPO’s Tmall flagship store and a handful of one or two stores, while the OPPO Reno3 gas version was sold in nearly two dozen Tmall stores.
At the same time, OPPO immediately made adjustments, launched the OPPO Reno 3 gas version equipped with SnapDragon765, the price is also pulled to 2999 yuan, and the main attack on the online market, seems to be in reducing the impact of offline channel blocking.
Is the inventory of medium and high-end models serious?
Recently, Tianfeng International analyst Guo Mingyu released a research report, although the camera module (CCM) manufacturers gradually improved the situation, but helpless mobile phone manufacturers inventory is too high, the speed of the new machine is also slow due to the impact of the epidemic, especially for domestic mobile phone manufacturers, high-end mobile phone inventory is still the top priority.
The report pointed out that China’s mobile phone brand’s mid- to high-order lens inventory of about 3 months, will affect shipments in February-April, so upstream lens supplier Daliguang february revenue may fall 15-20%, while 7P lens shipment shipping momentum is not strong, but also pulled down 7P lens profit, its orders in the first quarter of this year to decline 20%-25%.
In fact, before this, Guo Mingyu has given a report that in the first quarter of 2020, the mobile phone industry, mobile phone brands and industrial chain is facing three potential risks, first of all, the Chinese market mobile phone shipments will be lower than market expectations, and secondly 5G mobile phones to Android brand replacement demand contribution less than expected, Finally, iPhone supply in 1Q20 was affected by the outbreak as shipments fell short of expectations.
Guo said that during the 2020 Spring Festival, China’s mobile phone shipments declined by about 50-60%, resulting in about 50-60 million high-water stocks.
China’s mobile phone shipments in 2019 about 360-380 million units, due to lower-than-expected 5G replacement demand and the outbreak of the negative impact of consumer confidence, China’s mobile phone shipments in 2020 is expected to decline by 15% to 310-330 million units (vs. market consensus of 330-350 million units).
In early February, IDC released its global smartphone market report for the fourth quarter and full year of 2019, which included a report that said Huawei had a backlog of inventory in the third quarter of 2019, leading to an expected decline in shipments in the fourth quarter.
Some analysts said that Huawei’s mobile phone shipments, one is to turn sales into domestic dealers inventory, and the risk is therefore transferred to domestic dealers, to the channel has brought a lot of pressure.
Of course, in addition to Huawei, OPPO, vivo and other offline channels of mobile phone brands, may also exist more or less inventory problems.
Guo said that de-chemical inventory is the current China’s Android brand priority, so the brands will be active promotion, and if all goes well, inventory levels may fall to normal levels in the second or third quarter of 2020, but the inventory decontamination process will be detrimental to the Chinese brand new aircraft shipments and related industrial chain.
Strategy Analytics expects HuamiOV to be at risk of falling demand in China’s domestic market in the first half of 2020, while expansion in overseas markets will also be affected by capacity and travel bans. International brands such as Apple are also at risk of running low capacity and falling demand in China.