Photography: Li Yating
China, the world's largest mobile phone market, is almost saturated, and manufacturers need new growth points to protect sales. They chose to go to sea, hoping to make up for the possible losses in the domestic market with the increment of the overseas market. Millet is one of the most positive ones.
Cui Peng, journalist of Chinese entrepreneur
Editor Ma Jiying
The average altitude of the European continent is 340 meters, where most of the landforms are plains, the lowest continent in the world. But for the international millet, it is a high ground that must be taken.
Analysis Agency Canalys data showed that the rapid growth of the Chinese smartphone market was over. In 2017, China's smartphone annual shipments fell for the first time, of which the four quarter fell 14% year-on-year. The fall is still continuing, with a report by the China Institute of information and communication research that China's smartphone shipments in the first three months of this year were 81 million 870 thousand, with a 26.1% decline in the year on year.
The signal is already very clear. China's largest mobile phone market in the world is nearly saturated, and all TOP manufacturers need new growth points to protect sales. They chose to go to sea, hoping to make up for the possible losses in the domestic market with the increment of the overseas market. Millet is one of the most positive ones.
In its prospectus to the Hong Kong Stock Exchange, Xiaomi sees overseas business as one of its three future growth points. In its earlier CDR prospectus, Xiaomi also claimed that 40 per cent of the funds raised would be used to expand its global operations on July 7 and 8, the day before Xiaomi went public. Lei Jun also stressed in the open letter Xiaomi's three paths to a broader space for development, internationalization is one of them.
For Lei Jun, millet has changed the structure and history of China's smart phone industry for eight years, and has also created a legend of capital circles. In overseas markets, millet has handed out a report card with bright spots, but there are still many regrets. Can post listing millet turn the ambition of internationalization into reality?
Millet depends on red rice, red rice depends on India
India may be the most representative market in the process of millet internationalization.
As the second largest population country in the world, India is the market that almost all Chinese manufacturers want to win. Millet prospectus shows that in 2015, 2016 and 2017, 6.1%, 13.4% and 28% of the total millet revenue came from outside China, with India taking the most major overseas market share.
But the development of millet in India was not successful at first. At the end of 2014, millet entered India and suffered a patent lawsuit of Ericsson in second years, leading to a ban on the low-end models using the co - chip chip and a stagnation in the sales of millet in India. In the same year, it began building factories in India to make mobile phones locally. In 2016, the millet India began to resuscitation, and then India became a haven for millet. When the whole line of domestic markets collapsed, the story of the overseas business was not disillusioned, and finally the domestic market turned over.
Xiaomi's rebound in India has run into perfect timing, with oppo and vivo having just made a rescheduling round of dealerships that have yet to be combed out, while Huawei was not yet in the Indian market because of brand positioning.
Unlike competing concerns, Xiaomi has decisively replicated its low-price fashion strategy in India, focusing its sales on
In the recovery of Xiaomi India, Manu, managing director of the company
Tarun, Deputy Director, Counterpoint, Market Research Institute
However, the success of India is not only millet, domestic mobile phones in India market share of more than 50%, the top ten in addition to Samsung are Chinese brands, OPPO and vivo in most of the Southeast Asian market share the top three, even in the India market, HUAWEI glory into the post - share growth is also very fast; and millet in addition Although India is ahead of the sales volume, the main models are red rice phones, which still do not make money or even lose money. After the listing of millet, Lei Jun undoubtedly needs to open up more Xinjiang domains.
Close to the gate of Latin America
Because of the market size, purchasing power and consumption habits, Latin America and the African market should be second key areas of millet after millet in India, Hugo (Hugo Barra), vice president of Millet (Hugo Barra), also told the New York Times in December 2015 that the next focus of the millet overseas market is Africa. It is also investing in Brazil. However, in the past two years, millet has not made a breakthrough in the above market. In the outside world, the focus of internationalization has become the European market, without mentioning Latin America and the African market.
Because it has tried these two areas, but failed.
Although Africa has more than 1 billion 200 million people, its network infrastructure is very poor, and the number of smart phones is only around 100 million. Canalys data show that the first name of the African mobile phone market is the voice of Chinese mobile phone makers, with a 38% share of its three big brands, and more than 90% of its mobile phones in Africa, not smartphones, which also reflects the current status of mobile phone sales in Africa. Although the African market is experiencing changes from functional machines to smart phones, the most popular model there is still a 100 billion function machine.
Yan Zhanmeng, director of research at Counterpoint, told the Chinese Entrepreneur that the African market is expensive to channel, that low-cost mobile phones can only be built locally, that logistics and safety costs are high, and that they need to operate for a long time, and that Internet companies will find it difficult to solve problems in the short term. Voice is based on local research and development, production and sales, in Africa for many years of deep cultivation channels, after-sales and logistics layout is perfect, so can make money, but for Xiaomi this kind of
Latin America also let millet return without success, there is the territory belonging to Lenovo. In Brazil, for example, the largest market in Latin America, Motorola has a share of more than 23%. An employee of Lenovo's mobile phone told the Chinese entrepreneur that the Brazilian business was doing very well.
Latin America and Africa are not getting in, the U.S. market is repelling Chinese brands, Xiaomi wants to push internationalisation further, and Europe is the only place left.
Attack the European highlands
In 2017, Millet's battle over the India market and the operational needs of the company after listing, all provided ample justification for Lei Jun's determination to enter Europe.
According to the survey of GFK, the average sales unit price (ASP) for smartphones in the Western European market is $446.7, a market with the highest consumption univalent except North America. European users are not sensitive to the price of mobile phones because operators provide substantial subsidies.
In the European mobile phone market, the operator channel accounts for 50%, the open market (the offline channel) accounts for 40%, the online market (e-commerce) is only 10%. Unlike the Chinese market, the European users are more accustomed to buying the operator contract machines instead of buying the naked machines in the e-commerce channels. So for every Chinese manufacturer who wants to enter the European market, the relationship between operators is not a big mountain.
On the day of the millet prospectus, the Lei Jun went to Hongkong to visit Li Jiacheng. The two sides reached a strategic cooperation. The Yangtze River, the Changjiang River, and millet, founded by Li Jiacheng, announced the formation of a global strategic alliance. The news was drowned in the millet listing report, but it is actually one of the few advantages that millet has to enter Europe.
Changjiang Hutchison's operations include telecommunications, with overseas telecom assets concentrated in Europe, mainly by its three Mobile group. Under the agreement, Xiaomi products will be in Austria, Denmark, Ireland, Italy, Sweden and the United Kingdom
But the 3 group only in some European countries have operators, unable to let millet into all the mainstream market, and these operators are generally in the three or four place, and the European channels are mostly concentrated in the hands of the head operators, millet in fact can not get too many benefits. At the same time, European operators have a high standard of access, for example, red rice phones are designed according to the standard of Chinese operators, and may not be able to meet the European standard immediately. It also needs long-term preparation.
At present, millet has been breaking through only two open markets in Spain and France, and Kantar's data show that two of the 11 best selling smartphones in Spain in the first half of the year were from millet and 6 from HUAWEI. With its long business relationship and continuous brand marketing, HUAWEI has more than 8% in Europe's mainstream market, and even more than 30% in some areas. It has become the best Chinese brand in the European market.
However, an employee of Huawei's Glory Market Division told "Chinese entrepreneurs" that Xiaomi's impact on glory in Europe is very great, because there is only glory and one plus in the online channels in Europe, and Xiaomi is in the European route, and the price is close to that of glory. Have a direct impact on glory.
Another big threshold for Europe is patent. Although Qualcomm is a stockholder for millet, millet also reached a patent license with NOKIA in 2017 to remove some of the obstacles to Europe, but it still has to face the giant Ericsson in Europe.
Ericsson is the European communications industry leader, responsible for the development of European 5 G standards, has great influence in Europe. The aforementioned observers told the "Chinese entrepreneurs" that Xiaomi's low-end models are mainly made up of MediaTek chips.
In the India market, Xiaomi had a patent conflict with Ericsson, and later successfully relied on the reverse authorization of Qualcomm to avoid the crisis. In addition, Xiaomi has encountered the patent litigation of KPN and Holland's largest telecom company at home and abroad. Compared with competitors, millet seems to have no advantage in patent accumulation, and is more vulnerable to patent sniping. Its research and development fund in 2017 was only 3 billion 151 million yuan, accounting for 2.75% of the total revenue. In contrast, the R & D cost of HUAWEI in 2017 was 89 billion 700 million yuan, accounting for 15% of the total revenue.
So millet is now focusing on the Spanish, Greek and French markets in Western Europe, where open channels are more open and less resistance to millet, which has no operator resources. At the same time, consumers in these markets are more enthusiastic about cheap phones. IDC data show that in the first quarter of this year, the market share of millet in Greece was 24%, and its market share in Spain was 12%, ranking fourth.
In addition to operators and patents, another hot factor facing millet is brand weakness. Compared with users in Asia and Africa, European users are more concerned about brand and quality. European users are also more traditional, Sony and LG are not common in China's traditional brands, but there are good sales here. The accumulation of this brand is short of millet.
Xiaomi's European rival sold a total of 4 million handsets in 2017, of which 70 percent came from overseas markets, with an average selling price of 3200 yuan per phone. The latest one and six mobile phones were positioned at the middle and high end of the range of 500 euros. Instead, it sold 1 million units around the world for 22 days. Although Xiaomi also brought the mix series of high-end products into Europe, but the real volume is red rice and other low-cost models, the price is generally no more than 1000 yuan. The status quo of this low-end machine is like a double-edged sword, helping Xiaomi get good data, and sticking it up for Xiaomi.
Wang Xiang, senior vice president of global expansion, has said that there are opportunities for development in Europe because the competition in the local market is not fierce. However, several countries that have made major efforts in Europe have faced fierce competition from Chinese counterparts. According to the Russian satellite news agency, HUAWEI and glorified two - brand smartphones outsold apple for the first time in Russia in February 2018, next to Samsung, far beyond millet.
Lei Jun has said that millet three years ago internationalization is very anxious, once opened 7 markets, the loss is very heavy. But the formation of a team, understanding of the situation in each country, including the policy and the competitive environment, has not been two or three years of brewing, and it is almost impossible to enter a country quickly. Just do not know this European battle, how long will the capital market wait for millet?