Bottom line: New comments from OnePlus are the latest sign of a shakeout set to hit China’s smartphone sector in 2016, with at least 3-4 small to mid-sized brands likely to close up shop by the end of next year.
OnePlus trims product line
The latest signs of trouble in the overheated smartphone space are coming from newcomer OnePlus, which is detailing its own missteps and predicting a much-needed industry shakeout will intensify soon. The comments from OnePlus co-founder Carl Pei are some of the most direct I’ve seen so far about the industry’s current woes, though he’s careful to avoid any implication that OnePlus itself might fall victim of the shakeout he’s predicting.
The fact of the matter is that OnePlus is exactly the kind of player that’s likely to go belly up in the looming shakedown, and Pei’s description of his current situation paints a rather bleak picture for his company. Equally intriguing is Pei’s prediction that one or more major players may also withdraw from the space in the coming consolidation. Read Full Post…
Bottom line: A new patent lawsuit against it in the US highlights one of the biggest challenges Xiaomi and other Chinese tech brands will face in their global expansion, and exposes a major weakness in China’s own patent protection system.
Xiaomi hit with US patent lawsuit
Stumbling smartphone sensation Xiaomi suffered a recent new setback in its global aspirations, after being sued in the US for patent infringement involving technology used in several of its popular models. The new action comes a year after Xiaomi was sued over similar allegations in India, and reflects one of the biggest challenges Chinese high-tech brands face as they try to expand beyond their home market.
Foreign companies often choose to pounce when these Chinese brands venture abroad, because they know that legal systems are more mature and patent enforcement more effective in these countries than in China. Many of these countries take immediate action against suspected patent violators if they believe a case is valid, unlike China where cases can often drag on for months or even a year or more before a verdict is reached. Read Full Post…
Bottom line: Richard Li’s investment in ZTE reflects the company’s improving position after an overhaul during the last 2 years, while Pony Ma’s sell-down of his Tencent stake looks like ordinary share selling by a company founder.
Pony Ma sells Tencent, Richard Li buys ZTE
A couple of stock sales are in the news as we head into the new week, led by Pony Ma’s sale of a massive HK$3.8 billion ($500 million) worth of shares in his company, social networking giant Tencent (HKEx: 700). While Ma was busy cashing out some of his stake, Hong Kong’s Richard Li, son of billionaire Li Ka-shing, moved in the other direction by boosting his stake in ZTE (HKEx: 763; Shenzhen: 000063), the telecoms company emerging from a major overhaul over the past 2 years.
Of these 2 moves, the latter is probably more significant since it marks a vote of confidence in the turnaround story of ZTE by Li, whose investment decisions are fairly well respected though nothing like those by his much better-known father. Pony Ma’s sell-down of his stake looks more routine, though it’s still a relatively large portion of his sizable holdings in China’s second most valuable Internet company, with a market value of $180 billion. Read Full Post…
Bottom line: Huawei’s strong sales for its Mate line of mid-range smartphones and positive coverage of Apple’s newest China store opening spotlight 2 of this year’s top Chinese smartphone trends, which should continue into next year.
Huawei aims high with Mate 8 launch
A couple of smartphone headlines are spotlighting 2 of this year’s top trends in the market, namely the rapid rise of Huaweiand the remarkable turnaround in China for Apple(Nasdaq: AAPL). The first headline has Huawei announcing lofty targets for the latest model from its line of mid-range smartphones. The second has Beijing becoming Apple’s unofficial Asian capital, with the opening of its fifth store in the city — more than any other in Asia.
Both of these stories are quite remarkable, as each represents a major shift from previous trends in 2014. Huawei has struggled for the last few years to differentiate itself from a crowded field of domestic smartphone makers, but finally emerged as a leader this year based on its better product designs. Similarly, Apple’s recent surge marked a major turnaround from the last few years, when its reputation took a beating in China due to poor relations with Beijing. Read Full Post…
The following press releases and media reports about Chinese companies were carried on November 14-16. To view a full article or story, click on the link next to the headline.
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Bottom line: A new alliance between Ericsson and Cisco, and inability to quickly bring its new Nexus 6P smartphones to China reflect the challenges Huawei will face to maintain its growth as it comes under new pressures both at home and abroad.
Ericsson-Cisco alliance challenges Huawei
Two new developments involving Huawei are spotlighting the kinds of challenges the Chinese telecoms giant will face as it tries to maintain growth for its older networking equipment and newer and rapidly rising smartphone business. The larger of the two items have global giants Cisco (Nasdaq: CSCO) and Ericsson (NYSE: ERIC) forming a major new alliance that could provide big new competition for Huawei. The second comes in a smaller news item that has Huawei saying it will launch its new Google (Nasdaq: GOOG) smartphone in Taiwan later this month, but quietly adding it won’t be bringing the Nexus 6P model to its home China market anytime soon.
Huawei grew at a breakneck pace in the first decade of the 21st century, as it made quick inroads into global markets where names like Ericsson and Motorola traditionally dominated. But that growth has slowed sharply in the last few years as the building of traditional telecoms networks slows worldwide. The slowdown has hit not only Huawei, but also led to major consolidation in the global networking equipment industry. At the same time, demand has been growing more strongly for individual company-based networks that are a specialty of Cisco. Read Full Post…
The following press releases and media reports about Chinese companies were carried on November 11. To view a full article or story, click on the link next to the headline.
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Alibaba (NYSE: BABA) Generates $5 Bln GMV in First 90 Minutes of Singles Day Festival (Businesswire)
Bottom line: Larry Page’s latest remarks are the newest signal that Google is working to return to China with a local version of its Play store and Nexus phones, as it tries to open a new chapter in its tense relationship with Beijing.
Larry Page hands off Google China strategy to new CEO
Observers are putting the latest China comments from one of Google’s(Nasdaq: GOOG) co-founders under the microscope, trying to figure out the company’s intentions towards a market that it both loves and hates. The bottom line seems to be that Larry Page wants to personally distance himself from China, following his company’s high profile spat with Beijing over censorship that saw Google withdraw from the Chinese search market in 2010.
But at the same time, Page wants to let others take Google back into China, in a nod to the importance of a market that has become the world’s largest for both smartphones and Internet use. That’s probably quite a prudent approach in face-conscious China, where personal relationships are a key element to doing business. That same principle also means that meetings between people with strained relationships should also be avoided, which is what Page appears to be doing by personally distancing himself from Google’s future operations in China. Read Full Post…
Bottom line: SouFun should be commended for its proactive and open approach to a recent crackdown on internal corruption, which could provide some potential upside to its shares after negative publicity subsides.
SouFun clamps down on corruption
Real estate services provider SouFun (NYSE: SFUN) has become the latest Chinese Internet firm to join a national anti-corruption campaign, with its issue of a slightly cryptic statement that looks related to a scandal that rocked the company earlier this month. That scandal saw media report that SouFun had fired a number of salespeople over vague allegations of inflating their business. (previous post)
More than 2 weeks after those reports broke, SouFun has just issued a statement outlining a recent internal probe that netted an unspecified number of employees who were engaged in corrupt practices. I have to commend SouFun for taking the action and also being relatively open about what it’s doing, even though this particular statement isn’t extremely clear and was almost certainly prompted by the earlier reports. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 28. To view a full article or story, click on the link next to the headline.
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Alibaba (NYSE: BABA) Announces September Quarter 2015 Results (Businesswire)
3 Chinese Suitors Show Interest in Starwood Hotels (NYSE: HOT): Source (English article)
Apple (Nasdaq: AAPL) Beats Wall Street, Investors Wary of China Sales
Bottom line: The failure of 2 major touch-screen technology manufacturers in Guangdong is the latest sign of trouble in China’s overheated smartphone sector, with similar new closures likely to accelerate in the next few months.
Two more smartphone component suppliers go bust
China’s smartphone wars are taking an unexpected twist, with suppliers to some of the nation’s top brands emerging as the first victims of a prolonged battle for market share. I had previously expected at least one or two small- to mid-sized brands would bow out of the market by the end of this year, though we have yet to see any such developments.
Instead the inevitable shake-out appears to be starting in the supply chain, with media reporting that 2 major smartphone part suppliers have gone bankrupt in southern Guangdong province where much of the manufacturing takes place. (Chinese article) The insolvency of these 2 major suppliers, one in the boomtown of Shenzhen and another in the nearby city of Huizhou, comes just a couple of weeks after the bankruptcy of a major supplier of metal casings for smartphones sold by Huawei and ZTE (HKEx: 763; Shenzhen: 000063). Read Full Post…
