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Image source: Visual China

In the more than three years since Huawei's strategic "retreat", Apple, OPPO, vivo, Honor, and Xiaomi have all become the "winners" in dividing the Chinese high-end mobile phone market share.Vivo outperformed other brands with a "slight" advantage.Become the number one selling mobile phone brand in China.

In an industry environment where the mobile phone market has been sluggish for a long time and consumers' phone replacement cycle has been continuously lengthened, why has vivo been able to seize more of the market gaps left by Huawei?

"This is the result of the company's continued investment and breakthroughs in chips, imaging, OS bottom layers, and other fields." The explanation given by Hu Baishan, executive vice president and chief operating officer of vivo, has been mentioned repeatedly. From an external perspective, it is not only a balance between its pricing and product strength, but also a strategic trade-off. It makes fewer mistakes than its peers, such as not developing its own SOC chips and focusing on imaging chips.

Most domestic mobile phone manufacturers are impressed by Huawei's brand premium. A mobile phone distributor once revealed to Shenzhen Net that "the same configuration of the model, with Huawei's brand, the price can be several hundred yuan higher."

Premium ability is only one aspect of a brand's ability to demonstrate its strength. Huawei's mobile phones (before 2020) can compete with Apple and Samsung in the international market, and more of its confidence comes from its technological reserves.

Taking the SoC chip, which represents the core technology of mobile phones, as an example, the Kirin 9000 chip, which was once installed in the Mate40 series, is the world's first successfulflowThe chip is made using a 5-nanometer process.

However, Huawei, which has experienced several rounds of external sanctions, has also given domestic mobile phone manufacturers a lesson. At a time when high-end chip manufacturing is "stuck in the neck", self-development and production of SoC chips is destined to be a difficult road to take. OPPO's termination of the ZEKU business involving chips in May last year is an example.

In terms of self-developed chips, Huang Tao, vice president of vivo products, once said, "As early as four years ago, vivo and MediaTek discussed the design concept of the all-big-core architecture, and finally jointly explored the 'all-big-core' architecture of the Dimensity 9300 flagship platform. Now, a team of hundreds of people from MediaTek is working in vivo, and Dimensity 9400 and Dimensity 9500 are also under development."

Vivo's self-developed professional imaging chip has been upgraded to the third generation V3 chip. "Vivo is the only company in the industry that still insists on self-developed imaging and video algorithm chip manufacturers." said Yu Meng, vice president of vivo imaging.

Imaging is recognized by the mobile phone industry as one of the important factors affecting mobile phone sales. In 2014, vivo launched an imaging project code-named "Apollo Project". In the following ten years, vivo has experienced the joint development of imaging systems with Zeiss, self-developed imaging chips, and the launch of its own imaging brand Blueprint Imaging.

According to Deep Net, vivo Blueprint Imaging is composed of self-developed Blueprint sensing technology, self-developed Blueprint algorithm matrix and self-developed Blueprint imaging chip, covering the three underlying technologies of optics, algorithms and computing power.

An insider revealed to Deep Web that vivo is currently working with the AR glasses brand rokid to adapt the system. After users take 3D photos and videos with the vivo X100 Ultra phone, they can upload them to the rokid Space APP in the vivo phone, and after connecting to the rokid AR glasses, they can restore the 3D images in an immersive way.

According to Deep Net, vivo's future imaging is also cooperating with TCL Avatar VR glasses, focusing on future spatial computing and preparing content for future 3D imaging.

In addition, vivo's strong offline sales and service system is the key to vivo's "slight" victory. According to "Shenwang", vivo has more than 200,000 offline stores in China. The gathering and dispersion of the core offline channel dealers of the leading mobile phone manufacturers can affect the market share and even the rise and fall of major leading brands.

In mid-May this year, a provincial branch of vivo convened a meeting of core offline channel dealers. The central topic was to encourage core channel dealers to open more stores. In order to motivate core channel dealers to open offline stores, the company will give two points of the delivery amount as a subsidy to the channels that open new stores.

A core channel dealer of vivo revealed to Shenzhen Net that this subsidy policy is divided into two categories. One is for authorized experience stores. If the sales volume of authorized experience stores under the core channel company reaches the standard of vivo head office, the newly opened authorized experience stores can apply for 40%-50% housing subsidy (rental subsidy); the second is for specialty stores. The company will take out two points of the pick-up amount as housing subsidy for newly opened specialty stores.

"There are only 1-2 authorized experience stores in my area. This subsidy policy is mainly aimed at specialty stores, and the core is to encourage channels to open more specialty stores. Since vivo branches have decision-making power, old stores with large pickup volumes can also apply for housing subsidies. They have to talk to the company themselves." A vivo channel dealer in an eastern province revealed to Shenzhen Net.

According to Shenzhen Net, vivo did not provide rent subsidies before, and the subsidies for core channels were mainly reflected in after-sales services. In order to ensure the quality of after-sales services, vivo will rent certain venues in some stores of core channels to provide after-sales services for users, which is a disguised way to share part of the rent for channel dealers.

"The specific rental area and rent need to be negotiated with vivo staff." A vivo channel dealer revealed.

This time, Vivo gave two points of the delivery amount to channel dealers as rental subsidies in order to deeply bind with core channel dealers. "Old stores can also negotiate rental subsidies based on sales, and the subsidy strength varies in different regions." A Vivo channel dealer revealed to Shenzhen Net.

Generally speaking, mobile phone sales are divided into two channels: online and offline. "Except for Xiaomi, which prefers online sales, the sales of other leading mobile phone manufacturers are mainly based on offline channels, accounting for about 70% of offline sales," said Guo Tianxiang, senior analyst of IDC China, to Deep Net.

"For brands (mobile phone manufacturers), offline distributors such as national distributors, provincial distributors, and municipal distributors are necessary links to open up the entire sales channel and have the function of a capital reservoir. Large merchants such as provincial distributors purchase goods from manufacturers in cash, while manufacturers who sell mobile phones online through JD.com and other self-operated platforms have pressure on payment terms and collection of payments." A core channel merchant of a leading mobile phone manufacturer explained to Shenzhen Net.

After Huawei's mobile phone market share returns to 17% in the domestic mobile phone market, the original mobile phone market share will be broken and decomposed. As the main sales channel for mobile phone manufacturers, the competition in offline channels has entered a white-hot stage.

"In the next few quarters, an important focus will be the competition among manufacturers in offline sales channels and the highlights of popular products." Wang Jiping, vice president of IDC China, once analyzed to "Shenwang".

Maintaining and seizing offline sales channels is only one dimension of competition among leading mobile phone manufacturers. From the user's perspective, whether the flagship product is persuasive is one of the key factors for mobile phone manufacturers to reconstruct product strength and brand awareness.

Following SoC chips and self-developed imaging, self-developed large models and operating systems have become another focus for domestic leading mobile phone manufacturers to impact the high-end market. Since the beginning of this year, the flagship models of leading mobile phone manufacturers have mainly focused on AI phones and folding phones.

According to the "AI Mobile Phone White Paper" released by IDC, the global shipments of the new generation of AI mobile phones will reach 170 million units in 2024, accounting for about 15% of the total shipments of smartphones. By 2027, the number of AI mobile phones in the Chinese market will reach 150 million, with a market share of more than 50%.

Since the end of last year, leading mobile phone manufacturers such as vivo, OPPO, and Honor have been creating differentiated high-end experiences through self-developed or self-trained cloud-based integrated big models and end-side big models. Built-in end-side big models have become standard for high-end flagship mobile phones.

In terms of edge AI, due to the current limitations of Kirin chip performance, the AI ​​functions of Huawei phones are mainly driven by cloud-side computing power.

"Currently, there is still a generation gap of 2-3 generations between Kirin chips and high-end chips from Qualcomm and MediaTek, so Huawei's flagship phones mainly implement AI functions through the cloud. On the contrary, Honor, vivo, OPPO and others have implemented AI scenarios on mobile phones earlier." An informed source revealed to Deep Net.

The future growth of smartphones is tied to generative AI, but at a time when Apple is absent from foldable screens, the most intuitive path for domestic brands to break through to the high-end market is still foldable phones.

After two years of iteration, vivo, OPPO, and Honor folding phones have not only improved in weight, imaging, battery life, drop and water resistance, AI, etc., but also lowered the price to below 6,000 yuan.

"This year, the global sales volume of foldable phones is about 78 million, and the domestic foldable phone market capacity exceeds 10 million. Foldable phones will maintain double-digit growth in the next five years." Wang Jiping, vice president of IDC China, once predicted to "Shenwang".

In terms of foldable phones, since the launch of the first large foldable phone X Fold in April 2022, the vivo large foldable phone has been updated to X Fold3, with a starting price of 6,999 yuan, which is 2,000 yuan cheaper than the starting price of vivo X Fold2 (8,999 yuan); the small foldable phone has been updated to vivo X Flip.

A channel dealer revealed to Deep Web that the offline sales of the vivo X Fold 3 series have been good since its launch, and it is considered vivo's best-selling model in the first half of this year. "Vivo adopts a distribution system for the X Fold 3 pro series (ensuring that each authorized store can get the best-selling model), rather than a pick-up system (channel dealers decide the pick-up quantity themselves)."

Affected by the hot sales of the vivo X Fold 3 series, vivo's foldable screen will have a domestic market share of 23.1% in the second quarter of 2024, ranking behind Huawei (41.7%) (IDC data).

AI and foldable phones have visibly taken up the banner of vivo's impact on the high-end market, but from the perspective of the overall domestic mobile phone market, mid- and low-end mobile phones priced below 4,000 yuan are still the basic base of vivo mobile phones.

It should be pointed out that vivo's sales volume is currently limited to the domestic market. From the global market perspective, vivo's global sales volume in 2023 will rank behind OPPO, Xiaomi, and Transsion; in Q2 2024, affected by the strong performance of the domestic market, vivo will surpass OPPO and Transsion with 25.9 million units shipped, becoming the fourth largest mobile phone brand in the world (IDC data).