Shulou(Shulou.com)05/31 Report--

Recently, market research company Gartner Inc. Huawei's global smartphone shipments grew by 44.5 per cent year-on-year in the first quarter of this year, with shipments of 58.4 million units and an overall market share of 15.7 per cent, up from 10.5 per cent in the same period last year, according to the report. Samsung still ranks first, with 71.62 million units shipped and its market share falling from 20.5% to 19.2%. Apple ranks behind Huawei with 44.56 million units shipped and 11.9% market share.

Huawei is expected to regain Google's GMS certification and authorization by the end of July, according to analyst Guo Mingpi. Huawei is expected to ship 230 million mobile phones in 2019.

One sign is that Apple fans are turning to Huawei at an accelerating pace.

Three sets of data show the trend and trend of this shift. First, the global high-end smartphone market shrank 8 per cent in the first three months of 2019, while Apple's high-end phone shipments fell 20 per cent year-on-year, according to a report by Counterpoint, a technology market research company. Huawei has overtaken Apple in the high-end mobile phone market, which accounts for 18% of Huawei's shipments.

Second, recently, the ADD Advertising Research Alliance and the Morketing Research Institute released "self-entertainment: a report on App exposure behavior of people with New potential Energy 2018-2019," showing the same signs. Statistics show that post-00 college students like Huawei slightly more than Apple.

In addition, the semi-annual report released by QuestMobile shows that Apple's user loyalty in the market has declined, turning to the Android camp and choosing Huawei more.

Apple's share of the smart terminal market fell from 25.5% in June 2018 to 23.15% in June 2019, according to the report. In June 2019, 54.0% of users still chose Apple devices and 46% chose Android devices, but the latter increased by 2.8 percentage points over the same period in 2018.

From the point of view of 24.7% of iPhone users switching to Huawei, it exceeds the previous switching ratio between iPhone8 series and iPhone6 series, which means that iPhone user loyalty is showing signs of loosening. It's time for Apple to focus on Huawei as a competitor.

1. Corporate governance model and R & D; expenditure affects product innovation performance.

The reason for the loose loyalty of iPhone users is the lack of product innovation, and the reasons behind the lack of product innovation are more complex. If you want to dig deep, it may have something to do with Apple's governance model.

Kevin once talked about apple's governance model in an article: Apple, as an established listed company, differs from companies such as Huawei Xiaomi in that its main shareholders are not founders and management teams, but institutional investors in the market (59%, including vanguard, Blackstone, Buffett's Berkshire Hathaway and other asset management companies).

The key is that investment institutions do not account for a high proportion of Apple's shareholders, and Apple's major decisions are related to the game of multiple interest groups, which is no longer an one-stop conversation in the Jobs era.

Apple has transformed from an innovation-oriented consumer goods company to a company that directly brings short-term returns to shareholders.

Therefore, although Apple is the most profitable company in the world, the money it earns is basically used to buy back some shares and dividends. Last year, it announced $100 billion in share buybacks and dividends, which was rare in the Jobs era. According to the data, Apple's stock dividends and cash buybacks have continued to rise, reaching tens of billions of dollars a year. In 2018, Apple's buyback dividend gradually exceeded the money it could make.

Some analysts question the buybacks of companies such as Apple, arguing that the money should be reinvested. Bruce McCain, chief investment strategist at private banks, says companies should invest in themselves and develop their business, and that long-term growth prospects for companies that buy back shares may not be good.

It is important to note that Apple still accounts for more than 60% of industry profits. Of all mobile phone profits generated in the second quarter of 2018, iPhone accounted for 62 per cent, Samsung 17 per cent, Huawei and Xiaomi only 8 per cent and 3 per cent, respectively, according to CounterpointResearch.

According to common sense, manufacturers with high profits make money, in order to strengthen their own advantages, manufacturers have more money to invest in research and development, and then come up with better products to enhance competitive barriers, product innovation experience and after-sales service, thus forming a competitive advantage.

If a mobile giant, which has earned more than 60 per cent of the industry's profits, invests all the money it earns in stock buybacks and dividends, then its research and development; d spending and funds to broaden the moat through investment acquisitions will be reduced accordingly, which will correspondingly affect Apple's investment in RD and product innovation performance.

Of course, Apple is aware of the lack of R & D investment. In fiscal year 2018, Apple spent $14.2 billion on research and development, up 23% from a year earlier. But Huawei spent 101.5 billion yuan ($15.3 billion) on research and development in 2018, ranking second in the mobile phone industry, surpassing Apple and second only to Samsung, according to Huawei's 2018 financial report.

Huawei ranks among the top five in the world. Although Huawei's R & D; d expenditure is scattered among consumers'BG business, operator business, 5G business and communications equipment business, overall, Huawei's R & D; d expenditure growth is positively related to its profits and product sales.

But behind Apple's huge profits, does the cost of hardware components far exceed that of its friends? Actually, no.

Judging from the cost of components for Apple, Samsung, Huawei and Xiaomi's flagship products, there is little difference.

According to Huawei p released by research institute FomalhautTechno Solutions

The cost of 30Pro components is $363.83 (about 2497 yuan). According to the disassembly analysis of the industry, the cost price of the 256GB version of iPhoneXS Max is about $443, roughly 3000 yuan. Samsung GalaxyS10+ has a material cost of $420. Of course, the most conscientious may be Xiaomi. Some people in the industry disassemble Xiaomi 9 and calculate that the price of all components and parts is about 2628 yuan, but according to the price of Xiaomi 9, its profit margin is only 3%.

Therefore, in terms of material costs, there is little difference between the three flagships. The material cost gap between Huawei Xiaomi and Apple's flagship is about 500 yuan, but in terms of price, the price of iPhoneXS Max can be equal to 2 Huawei P30 Propriors, 3 Xiaomi 9 high-end versions.

In other words, Apple's profits actually have an unreasonable side, it is actually selling the system. But can iOS really support Apple to double or even double the price of its competitors' flagship?

Although, the moat built by Apple's operating system iOS+App Store+iPhone+A processors is stable enough and sticky enough for users.

Judging from the trend of declining shipments and fan transfer, the premium brought by this system experience has become increasingly difficult to support Apple's high profits, and Apple is not vigilant enough about it.

2 the advantage of Apple's supply chain is weakening. Can Huawei seize this wave of strengthening opportunities?

As mentioned above, Huawei surpasses Apple in terms of shipments, but in terms of profit, Huawei is completely unrealistic in terms of surpassing Apple. Huawei mobile phones need to increase their average selling price and gross profit margin in the future, and try their best to increase the net profit of Huawei's mobile phone business. But to close the profit gap with Apple, Huawei needs to strike a balance between higher prices and lower production costs, which requires strong supply chain control.

In the past, Apple's strong control of the supply chain and closed software-hardware integration gave it a high brand premium, controlled the pricing power of iPhone, and was able to strike a balance between higher prices and lower production costs. But this strong control over the supply chain in the past is being weakened and the balance is out of balance. Both Samsung and Qualcomm dealt Apple a fatal blow.

The lawsuit between Apple and Qualcomm lasted a long time throughout 2018, and Apple thought Qualcomm's patent fees were too high and unreasonable, but Apple lost the lawsuit in March, losing Qualcomm $31 million. In the iPhoneXS series, Apple categorically abandoned Qualcomm to choose Intel chip, but Intel's 5G baseband chip could not support the wall, and the frequent signal gate incidents more or less affected the reputation of the iPhoneXS series.

With the 5G era approaching, Apple was forced to shake hands with Qualcomm and sign a six-year technology agreement. The six-year technology license agreement with Qualcomm means that Apple can only be bound to Qualcomm in the supply of 5G baseband chips. Apple's dream of reducing costs and strengthening control through a dual-vendor model on baseband chips has been dashed, and it is not realistic to develop its own baseband chips in a short period of time.

In addition, the rise of Samsung's OLED screen weakens Apple's voice in the screen supply chain. According to IHS Markit, a statistical agency, Samsung accounts for more than 93% of the mobile phone OLED screen market, and 94.2% of flexible OLED.

The dominance of Samsung's OLED screen has made it impossible for Apple to bypass Samsung, and Apple's previous dual-supplier strategy on key components is starting to fail. So we see Samsung's strong attitude towards Apple in terms of screen supply.

According to a previous report from technology website MacRumors, under Apple's original agreement with Samsung, Apple would have to pay Samsung $683 million to compensate Samsung for the cost of producing OLED screens, or about $683 million, due to lower-than-expected iPhone sales.

According to the current news, Apple began to introduce BOE to supply it with OLED screens in an attempt to follow the dual-supplier strategy on OLED screens, but at present, BOE's production capacity, quality and quality control can hardly be comparable to Samsung's OLED in a short period of time, which means that Apple still has to rely on Samsung for its core OLED supply.

With the division of labor in the global supply chain, the dual-supplier model that Apple can do in the past has gradually changed today. on the one hand, the trend of a single manufacturer in the upstream supply chain is becoming more and more obvious.

For example, Apple is currently highly dependent on Samsung on the OLED screen, the chip is highly bound to Qualcomm, the mobile phone CMOS chip is only dominated by Sony, and so on, and the bargaining power is gradually transferred to the upstream core supplier industry chain. Apple's past model of profit growth by nurturing competition between two suppliers and driving down the price of components may gradually fail.

On the other hand, most of the mobile phone industry chain enterprises such as Lixun Precision (002475) (connectors), Ofeiguang (002456) (camera) Gore (Acoustics), Lance Technology (300433) (front and rear covers and cameras) are or used to be suppliers to Apple, and now these manufacturers are de-Applicizing and turning to Huawei's OV camp.

For example, Lance Technology is the main supplier of Xiaomi glass back cover and Huawei Glory back cover, and Ofeiguang is the supplier of Huawei P30 camera and off-screen fingerprint. Apple's supply chain advantage is weakening, and the supply chain camp of domestic mobile phone manufacturers such as Huawei is expanding, with 150 core supply chain companies from Huawei's core supplier conference in 2018.

Because the decline of Apple's market share has led to the spread of the upstream and downstream supply chains, it will be a trend for supply chain manufacturers to flee to other camps in order to protect themselves.

In the past, suppliers were willing to follow Apple because of its large shipments and stability, but the current compression of Apple's market share may weaken Apple's control over the supply chain.

Suppliers will consider placing orders in multiple baskets and give priority to those with growth advantages. We will see that after Huawei removes Flextronics, BYD (002594) is quickly replaced-the supply chain is still very dependent on big order companies. To some extent, if Huawei, OV and other manufacturers can continue to grow, they will usher in a wave of opportunities to expand their supply chain strength.

3 Huawei brand upward, Apple's moat did not dig deeper

At the brand level, we may feel that Huawei is delivering an innovative and technologically powerful brand image to the outside world. On the one hand, the layout of Huawei on 5G and the game with Huawei 5G once attracted global attention, which indirectly enhanced Huawei's international brand awareness, and the coverage of 5G network can indirectly drive the expansion of its smartphone business.

Huawei has also passed on its ability to develop its own operating system to the outside world. judging from the strategy revealed by its smart screen, its Hongmeng operating system may give priority to testing the waters in the field of the Internet of things, and it may follow a curved route to save the nation. By cutting into the field of Internet of things products such as television, when the system ecology grows to a certain scale, it has a certain possibility to feed the smartphone business back.

Secondly, Huawei's product innovation image is reflected in the breakthroughs in GPU Turbo, Huawei Super File system (EROFS), Ark Compiler system Optimization and Tri-photo, 5G Baseband Chip, etc., which is more an attempt to break through the weakness of Android system and smooth out the gap with iOS system.

While 5G is Apple's weakness, Huawei's Barone 5000 is a single, multi-mode 5G baseband chip, while supporting 2max, 3max, 4G, 5G network, with strong compatibility, trying to compete for early consumers and customers to maintain a first-mover advantage.

Communication capabilities and baseband chip capabilities are Apple's shortcomings. I have pointed out many times that iOS is the trump card that underpins Apple's brand premium, but 5G supports low latency and high capacity, GB class, faster network and speed, resulting in higher clarity and a smoother and faster experience. With the optimization of Android system experience, it is a general trend that the system experience gap is gradually bridged.

The brand premium brought by 5G mobile phones is higher than that of 4G era, driving the growth of the high-end market.

If we can see from the comparison between Huawei and Apple over the years, Huawei is gradually making up for its shortcomings, including chips, supply chain, systems and other aspects, and strengthening its home court advantage-5G.

But from Apple's point of view, it has also begun to control core technologies as its main goal, such as the planned acquisition of Intel's baseband chip business to make up for its own shortcomings and consciously increase R & D costs.

However, while Apple's resumption of cooperation with Qualcomm means that Apple's supply on the 5G baseband is guaranteed, Apple's current path of profit priority has not changed, which may continue to affect iPhone shipments and market share expansion.

Even now Apple's main position at the top end of the market is being lost. In the latest statistics given by Counterpoint Research, among smartphone brands worth more than $400 (2684 yuan), Apple's share fell from 58% to 51%, Samsung from 23% to 22%, and Huawei from 8% to 10%. Around 2016, Apple once accounted for 80% of the high-end market, but now half of the high-end market no longer belongs to Apple.

This means that Apple has not dug its own moat deeper in recent years, and it has not made up for its shortcomings in the patents of communications technology and the independent supply of baseband chips. Apple's brand premium and high-end brand image are not in a continuous upward trend.

4 the battle in the second half has begun

How Apple sees these competitors getting stronger is a mystery to the outside world. In an interview with the media in May, Cook said: it regards Huawei as a strong competitor and will not deliberately pay attention to it. The implication behind this may be that Apple has attached great importance to the rapid development of Huawei's mobile phone business.

Apple's defense consciousness has become more and more obvious.

We will find that from last year to this year, the frequency of iPhone price reduction is obviously higher than in previous years, the current iPhoneXR, iPhone 8 series and other products have been reduced to 5000 yuan.

On the other hand, Apple's introduction of BOE is actually a scramble for supply chain resources. In the past, the BOE screen was almost exclusive to Huawei, from the Huawei Mate 20 series to Huawei Mate X using BOE's OLED screen. Apple's entry is essentially an attempt to control or divert Huawei's supply chain resources.

In addition, from the product level, the strategy of Apple latecomers is also reflected in the iPhone11 series. From the existing exposure of iPhone11, from the three shots of Yuba to wireless reverse charging, they are basically follow-up and imitation of Huawei products with high recognition.

It is clear that Apple is trying to become the highlight of its own products and squeeze Huawei's flagship selling points by covering Huawei's dominant functional points and integrating them with iOS.

Follow-up imitation and integrated innovation is one of iPhone's product strategies in the past-that is, optimizing and integrating immature innovation through an one-step time lag of future generations, validating consumer demand, re-improving, packaging and optimizing it, and then overtaking at the corner of the latecomer, which used to be aimed at Samsung and now against Huawei.

Although, as expected in the industry, it is difficult to see a unique and amazing innovation in the iPhone11, at a time when consumers are looking forward to 5G and domestic mobile phone brands climb at a premium, Apple's strategy is relatively safe, because from the past experience of large screen, double card and full screen, Apple's integrated imitation and innovation of the Android camp has led many users who originally chose Android to fall to iPhone.

It needs to be recognized that there is a big gap between Huawei and Apple in terms of profit, the voice at the top of the operating system, the ability to integrate software and hardware and the ability of ecological chain, especially the ability of software service. Huawei can't catch up with it in a year or two.

In addition, the income gap between Huawei App Store and Apple's software services will be the most important and key link that limits Huawei's ability to catch up with Apple in profits.

Huawei App Store faces strong competition from many domestic third-party application markets. As Apple shifts its focus to software ecology and content services, Apple's service profitability will continue to strengthen. At present, Apple has invested a lot of money in music, video, apps, news and other content areas to build a content distribution ecology, and the gap between Huawei and Apple in software services revenue will widen.

At present, Huawei's way is to hope that there will be great achievements in the 5G era, based on the integration of the technological advantages of 5G basic equipment and services into the mobile phone field to create new bright spots, expand into the field of the Internet of things, and build a new competitive dimension. then drive the influence and brand power to rise, and break the situation through differentiated competition mode.

In a sense, from the current flow of users, we can actually see Apple's crisis. From the revelations of Apple's iPhone11 products and the rumors of cooperation with BOE, we can see that the secret war between Apple and Huawei has begun.

There is no doubt that there will be a new wave of growth in the 5G era, which is the second half of smartphone manufacturers.

According to the Gartner report, global mobile phone shipments this year will fall by 68 million, or 3.8 per cent, compared with the previous year. 5G phones are expected to account for 51 per cent of total sales by 2023, up from 6 per cent in 2020.

The Gartner report reveals a signal that 5G phones will bring greater demand for replacement, and that more than half of 4G stock users will switch to 5G users in the next three to four years.

But the high-end market may no longer be Apple's monolithic, and as the Counterpoint report points out, all 5G phones are expected to become high-end phones in 2019 and 2020 before 5G chips start to move into mid-range phones.

In the future, the duel between the two will no longer be limited to sales and shipments, but may also be reflected in the competition of supply chain resources, high-end market users, 5G product innovation, content services and so on. The dispute between the two sides in the second half is still to be seen.

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.