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the sanctions on huawei are a recent lesson, and self-developed chips remain the moat for the long-term development of smartphones.

@new entropy original

author: jiang li editor: jiuli

under the general environment of economic pressure and sluggish consumption, the domestic and international smartphone markets experienced a long period of lows. however, as the industry has passed the deep water zone, the smartphone market has returned to the growth track and ushered in a new stage of recovery.

recently, the popular xiaomi group delivered its best quarterly report in history. in addition to the high gross profit margin of 15.4% in the automotive business, the smartphone business also performed well in the second quarter.

in the second quarter of 2024, xiaomi's smartphone revenue reached 46.5 billion yuan, a year-on-year increase of 27.1%, and global shipments were 42.2 million units, a year-on-year increase of 28.1%.

according to canalys data, xiaomi ranked among the top three in global smartphone shipments in the second quarter, with a market share of 14.6%, and was the brand with the fastest year-on-year shipment growth among the top five.

the global smartphone shipment report for the second quarter of 2024 released by techinsights shows that samsung ranks first with a shipment share of nearly 19%, and apple ranks second with a market share of 15%. xiaomi, vivo and transsion rank in the top five, while oppo (including oneplus) falls out of the top five and becomes "others".

as a leading domestic smartphone manufacturer, oppo's sales performance in the second quarter was somewhat disappointing. data shows that oppo and its subsidiary brand oneplus shipped a total of 25 million units worldwide in the second quarter, down 8% year-on-year, becoming the only brand among the top ten brands to experience a decline. among them, oppo's brand shipments fell 5% year-on-year, while oneplus's brand shipments fell a more significant 22% year-on-year.

the smartphone market has ushered in an industry resurgence. in the domestic market, domestic mobile phone brands have surpassed apple and samsung in terms of shipments and returned to the top. among xiaomi, huami, ov, only oppo has fallen behind.

huawei has returned to the table after the chip monopoly incident, and its momentum is rapid; xiaomi, under the operation of "leibs", has attracted a lot of attention through the new energy vehicle su7; vivo, which is from the same school as oppo, even ranked first in domestic sales in the second quarter. in comparison, oppo, which was once in power, has gradually lost its voice.

abandoning self-developed chips and xr

in 2019, huawei was included in the us trade blacklist, and the us government later took severe chip sanctions. after several rounds of sanctions, huawei's mobile phone business plummeted. omdia data showed that huawei's smartphone shipments fell from 190 million units in 2020 to 35 million units in 2021, a year-on-year decline of 81.6%, and further fell to 28 million units in 2022.

when a whale falls, everything comes to life. the decline of the king of domestic mobile phones has led to the birth of a new king. due to the supply of qualcomm chips during the period when chip supply was not restored, vivo and oppo ushered in a stage of rapid development. in 2021, oppo ranked first in shipments with sales of 64.4 million units, a year-on-year increase of 34.3%.

however, oppo's rise to the top was more like a flash in the pan. after being overtaken by vivo in 2022, its market share continued to decline and it has never reached the top again.

oppo’s lagging behind may be related to its frequent adjustments in strategic direction in recent years.

in 2019, oppo announced the establishment of the zeku chip business, focusing on providing software and hardware support for high-end flagship phones. in 2021, oppo officially released the first self-developed 6nm imaging-specific npu (neural network processor) chip mariasilicon x.

at that time, oppo's ceo, chen mingyong, a disciple of duan yongping, said that mariasilicon x is just a small step for oppo to develop its own chips. in the future, oppo will continue to invest resources and use a team of thousands of people to work hard to develop its own chips.

in 2022, oppo released its second self-developed chip, mariana y, which is a bluetooth audio soc chip.

the bold words of the past are still fresh in our ears. in may 2023, oppo suddenly announced that it would stop making chips and shut down the zeku business, laying off nearly 3,000 related employees. the market speculated that this might be related to the sky-high cost of making chips. according to relevant news, oppo's single chip tape-out test cost as much as 100 million yuan, and the related expenses of the r&d team were also a considerable expense.

due to the huge expenditure and the decline in mobile phone sales in the smart terminal market, oppo's journey of chip manufacturing collapsed halfway.

earlier this year, there were reports that oppo had stopped exploring xr projects since 2019. xr refers to the collection of vr (virtual reality), ar (augmented reality), and mr (mixed reality).

in response, the company said that oppo will continue to conduct pre-research on ar. at the same time, the company believes that ai is a strategic technology that will lead the future. oppo research institute will increase its exploration of cutting-edge core technology breakthroughs and new opportunities such as ai, ar, 5g/6g. oppo has changed its direction again, and this time, it has set its sights on ai.

the market has mixed opinions on the two times of letting go. some people think that this is a wise move for oppo to protect itself and stop losses in time, while others think that this reveals the chaos in oppo's internal management, "chasing whatever concept is popular" and wasting a lot of money by giving up halfway.

betting on ai and foldable screens

earlier this year, oppo ceo chen yongming defined 2024 as the first year of ai mobile phones in an internal open letter. on february 20, the company held an ai strategy conference and announced the "1+n" intelligent body ecological strategy, including the oppo ai super intelligent body and ai pro intelligent body development platform.

in fact, since the emergence of generative ai applications such as chatgpt, smartphone manufacturers have already sensed the business opportunities and started to lay out the ai ​​big model track. huawei, vivo, xiaomi, honor, samsung, apple and other domestic and foreign mobile phone manufacturers have laid out in this track.

at the 2023 developer conference, vivo released its self-developed general-purpose large model matrix blue heart big model, which includes three parameter levels of one billion, ten billion, and one hundred billion, and a total of 5 self-developed large models (blue heart big model 1b, blue heart big model 7b, blue heart big model 70b, blue heart big model 130b, blue heart big model 175b).

recently, xiaomi group president lu bingwei said on a social platform that xiaomi surge os 2.0 will focus on ai technology and will be reconstructed by ai big models. earlier, it was revealed that the xiaomi 15 series will be the first to be equipped with surge os 2.0.

huawei also launched pangu big model 5.0 this year, and the huawei mate 60 series is equipped with the company's self-developed pangu big model.

oppo will release the self-trained personalized big model and intelligent agent andes big model (andesgpt) at the end of 2023. earlier this year, oppo released the flagship find x7 series, which was first connected to the andes big model.

in august this year, oppo's chief product officer liu zuohu said that oppo's international version of the phone is connected to google's ai big model gemini.

as competition for smartphone stocks intensifies, foldable screens have become a new direction for manufacturers. in 2019, samsung released its first foldable phone, the galaxy fold. since then, the form factor of smartphones has changed rapidly, from small vertical folding to large horizontal folding, and then to three folding.

oppo launched its first foldable screen product, the find n series, in 2021. from august to october last year, the company intensively launched three new models: oppo find n3 flip, oppo find n3, and oppo find n3 collector's edition. among them, oppo find n3 flip is a small foldable phone that is lightweight and portable.

idc data shows that among china's foldable screen mobile phones in the second quarter of 2024, huawei accounted for half of the market with a market share of 41.7%, followed by vivo and honor, and oppo ranked fourth.

in terms of folding form, the current growth of small folding screens is weak, the price of large folding screens is gradually decreasing, and tri-fold screens have become a new battlefield for competition among leading manufacturers.

on august 25, a blogger broke the news that xiaomi had started testing its three-fold screen. earlier this year, huawei's yu chengdong was seen holding a new three-fold screen phone on a plane. honor also said that it has the conditions for mass production of three-fold phones.

whether it is the ai ​​big model in software or the folding screen in hardware, oppo is actively making plans, but compared with its competitors, it has neither the first-mover advantage nor much differentiation. under the premise of basic product homogeneity, consumers' choices focus on product quality and brand tone itself. therefore, if it wants to seek growth, it needs to continue to deepen its differentiation route.

going overseas still needs to seek high-end

oppo's winning formula at the beginning of its establishment was marketing and offline channel advantages. however, high-end technology and brand additions have become the main factors in seizing the minds of users. in comparison, the overseas market seems to be more in tune with oppo.

as of now, oppo's business has spread to more than 60 countries and regions around the world, with more than 400,000 sales outlets.

compared with developed markets such as europe and the united states, southeast asia has always been a gold mine for domestic overseas merchants. oppo entered the southeast asian market in 2009 and successfully became a leader in the early days by building factories, advertising and marketing, and positioning itself in the mid-to-low end.

after gaining enough market share, oppo also began to move into the high-end market. in 2023, based on the homogeneity of the candy-bar market, oppo proposed an "all in folding screen" strategy in the overseas market and sold the small folding model oppo find n2 flip overseas.

data shows that in the second quarter of 2023, oppo find n2 flip achieved a market share of more than 50% in indonesia, malaysia, thailand and singapore, with a market share of as high as 81% in malaysia.

canalys' latest research data shows that in the second quarter of 2024, oppo (excluding oneplus) returned to second place in the southeast asian market, with shipments reaching 4.2 million units and a market share of 17%.

the small folding phone has played an important role in oppo maintaining its leading position in the southeast asian market. however, there have been market rumors this year that oppo may cut off the small folding product line and instead plan to mass-produce more folding screen concept phones. this is certainly because the small folding phone is not as good as the candy-bar phone and the horizontal large folding phone in terms of battery life and performance, resulting in weak growth, but it is still unknown whether other folding models can replicate the success of the small folding phone overseas.

in addition to oppo, domestic brands such as xiaomi, huawei and vivo have achieved impressive results in overseas emerging markets. however, looking at the international market, samsung and apple are still synonymous with high-end brands. after gaining market share with mid- and low-end products, how to make up for the lack of brand awareness in the high-end market is a problem that domestic mobile phone manufacturers need to further solve.

back to the core issue, facing the fiercely competitive business environment at home and abroad, oppo should come up with more new ideas to reverse the downward trend.

oppo's liu zuohu once said, "competition will always exist, and the only way to survive the cycle is to make good products." so in order to improve core competitiveness, the self-developed chips that were once withdrawn by the company may be something oppo should pick up again in the next cycle.

on january 29, 2023, huawei launched the mate 60 series on the same day as oppo released the oppo find n3 flip model. it is understood that this series of models is equipped with the kirin 9000s processor. this is the first time that huawei has adopted the kirin flagship chip again after being blocked by the united states for three years. the release of this model is of historic significance for domestic mobile phones represented by huawei to break through the shackles of the united states. with its self-developed chips gradually getting rid of the shadow of sanctions, huawei may soon return to its position as the domestic leader.

since researching chips undoubtedly costs a fortune, which requires oppo to increase sales to accumulate capital. ai large models and folding screens have room for operation. in the long run, huawei's sanctions are a lesson not far away, and self-developed chips are still the moat for the long-term development of smartphones. if oppo wants to reverse its decline and continue to maintain its leading position, it can only save itself.