The status of meager profit in the smartphone market is more advantageous to Chinese enterprises

Summary: To be profitable, is already a kind of ability. March 22, Yulong Executive vice President Li in an interview, said that although the Yulong cool 2012-year gross margin fell 2.7%, but in the industry's fierce competition, means of convergence,

"Being profitable is already an ability. "March 22, Yulong Vice President Li in an interview, said that although the Yulong cool 2012-year gross margin fell 2.7%, but in the industry's fierce competition, means of convergence, this result is not easy.

According to the annual report released by Yulong, China Wireless (2369.HK), in 2012, the cool faction almost achieved revenue growth, with revenues rising from HK $7.34 billion a year to HK $14.36 billion, up 95.6%.

This is thanks to the rapid growth of China's 3G market, as well as the operator's strong push of the thousand-yuan smart machine market. But the operator through collection, customization brings huge scale at the same time, also let handset manufacturer's profitability is tested. China's wireless annual report shows that revenue doubled in 2012, with net profit growth of 19.6%, and a net profit margin of HK $14.36 billion in close exchange for HK $324 million, with net revenue margins of only 2.26%.

Li explained that the smart phone market's meager profit status, in fact, more favorable for Chinese enterprises.

Revenue doubled

According to Mobile, Unicom, telecommunications and other three major operators recently released annual report, the three major operators in 2012 the total number of new 3G users successfully broken billion, a single year in 2009 years, the user capacity expansion of a record. Among them, unicom 2012 net gain 3G user 36.437 million households, a total of 76.456 million households, mobile new 3G users 36.716 million, cumulative up to 87.928 million households, telecom last year added 32.76 million households, the cumulative number of 3G users 69.05 million households.

To speed up the growth of 3G users, the three major operators in the establishment of a dedicated terminal company, on the basis of increased sales subsidies to mobile terminals. The annual report shows that in 2012, mobile, telecom and Unicom invested 23.8 billion yuan, 21.8 billion yuan and 6.1 billion yuan in terminal subsidy respectively.

The operator channel is known for the Woo Dragon Cool faction, is undoubtedly the beneficiaries of these gorgeous figures behind. Li told reporters that in 2012, Yulong total sales of about 21 million smartphones, in the Chinese market last year ranked the top four, and its product portfolio has no functional machines and 2G mobile phones, all 3G, 4G intelligent Machine.

China's wireless earnings show that Yulong's top three sales revenue last year amounted to HK $4.04 billion, HK $3.07 billion and HK $2.54 billion, which accounted for as much as 67% of total revenue.

According to the Yulong cool annual revenue and mobile phone shipments of simple calculation, the single smart phone's factory price is not enough to reflect the retail market, is the operator of the main push of the thousand-yuan intelligent machine. Li said that although Yulong last year to join the operators launched more than 4000 yuan high-end models, is the only product price of more than 4000 yuan of domestic brands, but from the sales accounted for, high-end machine share is still very low.

Low margin benefits Chinese manufacturers

"Local manufacturers to adapt to the survival of meager profit." "Li to reporters that the trend of the smartphone market is the PC, especially the operating system and the main components are in the hands of overseas manufacturers, in this case, we can compete is the meager profit and micro-innovation.

Earnings showed that in 2012, China's wireless margin rose from HK $1.08 billion in the previous year to HK $1.72 billion, although gross margin fell from 17.7% in 2011 to 12%.

By contrast, Lenovo Mobile, which jumped in China's mobile phone market last year, announced its first profit only when it released its third-quarter financial year of fiscal 2012-2013, and said it was "not making much money" in the words of Lenovo's CEO, Yang.

For the Chinese thousand Yuan intelligent machine market overall low margin, Li that this is precisely to the Chinese local manufacturers to set aside the development opportunity, "low margin limits the development of overseas manufacturers space, gross margin hit below 15%, many manufacturers will not go down."

In Li's view, this is the road to many Chinese industries, with the PC industry, Lenovo Group is in the case of low margin, the current market ranking is ranked first, second in the world. Another example is the home appliance industry, the local brands that survived after more than 10 years of tidal waves in the Chinese market have squeezed foreign firms into smaller high-end markets or specific markets.

"At present, the global handset Terminal market (including the function machine and the data card) annual capacity has 1.8 billion parts." Li said that with smartphones in the global PC, civilian, in this huge market, future Chinese manufacturers believe there will be greater opportunities.

Of course, in the habit of meager survival at the same time, China's mobile phone manufacturers have to adhere to micro-innovation. Li to reporters, this includes the Android operating system in-depth two-degree development, provide the latest user interface, research and development Coolcloud cloud platform, improve the user experience of smartphones. Historically, Yulong is also a good performance in double mode, quick handwriting, and private mode. China's wireless earnings show that its research and development cost was HK $370 million in 2012, and HK $240 million in the previous year.

However, Li that at present China's thousand-yuan smart machine market has almost reached the bottom of the margin, although manufacturers will still suffer from low margins of pressure, but the gross margin to decline in the space has been very small.