Why China smartphone company can offer good quality and cheap products
hile smartphone brands are still able to charge premiums for their flagships, it seems that more and more manufacturers do not offer more cost than these lower-cost Chinese OEMs, still trying to charge the top price. Perhaps this is just to create a high-quality brand image, but Chinese companies also have some advantages, help to maintain with South Korea, Taiwan and the United States compared to the cost of competitors.
Where did you do it?
With the development of smartphones, many of the most expensive core components actually have little to do with China, so it is surprising to see the company offer such a significant cost advantage. Processor giant Qualcomm is located in the United States, Taiwan MediaTek, and Samsung's Exynos in Korea. At the same time, TSMC's large semiconductor foundries are located in Taiwan, while Hynix is in Korea. Memory production is also in these countries, Sony's IMX camera module is also produced in Japan. Even if China's HiSilicon ordered its chips from TSMC.
China in the field of smartphone components for the field is the display, battery and assembly manufacturing. Display technology may be an integral part of the difference between manufacturers because they chose AMOLED or LCD technology, and even cheaper phones sometimes get 1080p resolution in 1440p, although this is hardly the largest Destroyer.
In 2016, 5-inch 1080p AMOLED and LCD display prices for the first time reached about $ 14.30 and $ 14.60. Chinese manufacturers usually choose LCD, but there are also many expensive flagship phones, including Sony's Xperia series, HTC 10, LG G5, V20 and Apple's iPhone 7. Although there will be some price difference here, cheap LCD monitors and the most expensive The cost of the AMOLED panel is about $ 5.
On the core of the internal specifications, many Chinese mobile phone brand features similar to foreign equipment hardware. Some flagship stores have one or two additional features, but the difference in bill of materials costs does not make up for the huge gap we see in terms of price. Perhaps the difference in manufacturing costs could make up for this huge gap? Here are some of the most well-known Android brands put the phone together:
Samsung - Vietnam, South Korea, China, India, Brazil, Indonesia
Apple - China, probably India
Sony - China, Thailand
HTC - Taiwan
LG - China, Vietnam, India
OPPO / OnePlus / Vivo - China
Huawei - China, India
Millet - China, India
In addition to HTC, all other Android manufacturers are importing mobile phones in China, after importing other parts from abroad, the re-emergence of the difference in production costs can be ignored. In addition, manufacturing costs are only between $ 5 and $ 10 in the list of handset materials. In fact, the cost of $ 350 between ZTE Axon 7 and Google Pixel XL is still to be paid, even for the cost of manufacturing the Moto E and iPhone 7 budgets.
Behind our departure from manufacturing costs, Deloitte's interesting research on global manufacturing competitiveness shows that China continues to be the center of manufacturing. According to the data, the competitiveness of China and the United States ranked first, second, fifth, seventh, respectively, Japan and South Korea, Taiwan.
Deeply understand the types of manufacturing exports in these countries, which proves our early smartphone components. The United States, Japan, Korea and Taiwan see high-skilled and technology-intensive manufacturing sectors account for most of their exports, including electronic components. China shows a different combination of low technological content, and technology-intensive manufacturing exports have increased significantly, indicating a greater focus on lower manufacturing costs than for mature ICs.
There are many reasons why these economic structures are so different, from education and talent to wages, natural resources, and the legal and regulatory structures that companies must play. China's great advantage lies in its cost competitiveness in production. This is backed up by the same reported data. When CEOs were asked to rank among the top six countries in a number of individual factors, China achieved a significant victory in manufacturing costs.
In general, the profits of Chinese factories are lower than in the United States. While this prevents them from filling out smaller orders, large quantities of orders can be produced in China at a lower cost than other countries, which helps to lower prices. Combining all the factors we have just discussed, it is quite uneconomical to build manufacturing operations in more expensive countries.
All this is based on a self-fulfilling state where Chinese factories can expand production scale to ensure that batch orders can be completed in a timely manner when needed, all of which help reduce costs and encourage more volume orders.
When talking about China's manufacturing industry, low-wage topics are often not far away. In China, the labor cost of the plant is much lower, which is why the cost of setting up a competitor in other countries is not high. Although several papers show that China's actual manufacturing costs are getting closer to the United States, given the productivity, the wages of countries like Mexico are actually cheaper.
In any case, most smartphone manufacturers are equally benefiting from these low wages on the production line. However, companies specializing in China will usually pay more than engineers, marketing, management and customer support in other countries. The average annual salary of Chinese product engineers is $ 30,500, compared with $ 74,136 in the United States and $ 53,000 in Japan. South Korea is close to about $ 34,800, while Taiwan is actually less than $ 29,700. The following is the salary of certain product development efforts for the largest smartphone producer countries.
Often, compared with South Korea, Japan and the United States, China's product development work is significantly lower wages. Although the work on this list is actually the lowest overall salary, but its main engineering positions are roughly the same as China's wages. In the thousands of employees, these pay gaps will certainly be added, which means that China and Taiwan's product development is certainly cheaper than other major smartphone exporters.
While this is certainly a part of the cost for manufacturers operating exclusively for China, it does not really explain why Taiwanese manufacturers HTC have received more flagship opportunities and why Taiwan's low-cost original equipment manufacturers have not yet appeared.
New business model
China's smart phone OEM manufacturers used a new business model, one of the more frequent discussion, but perhaps the most important aspect of China's price advantage. These companies not only spend less on advertising, especially in China outside the advertising business, but also abandoned the proven carrier partnership, other countries, such as the United States to rely on, turn to online distribution.
A large part of the final price tag for smartphones is actually a reduction in distribution channels and retail channels, followed by a separate part of the carrier's partner. Maintain a tight control of retail channels through their own website sales or with smaller retail deals with some retailers, which means that manufacturers can minimize these costs.
Nonetheless, lack of operator and retail support is also a drawback. In this way the brand of the store is low, so with other mature brands as effectively penetrate into the core consumer market. This also makes it more difficult to expand into new markets because brand awareness is difficult to generate and distribution channels need to be built without the help of established channels.
This is a particularly big obstacle in the United States, because the vast majority of mobile phones are still purchased through the operator's contract plan. In China, India and other Asian regions, online flash memory sales have been very popular, but this is not successful in the United States.
This part is why some of the larger Chinese brands are starting to build stores in the latest markets, even though the cost of their equipment is gradually rising. For example, in Europe, you will often find Huawei and honor equipment on the shelves, while millet and OnePlus are also expanding in the presence of the store.
While some companies have historically associated cheaper Chinese products with inferior manufacturing, the 2016 smartphone market shows that OEMs in the region are sure to produce phones that not only have line-size advantages, but also with the establishment of quality familiar flagships Brand comparable to the same time to keep the price low.
China's original equipment manufacturers have access to some small manufacturing and labor cost advantages to keep retail prices low. However, this is an innovative business and marketing strategy that allows many of these manufacturers to cut many of the more mature brands by using Internet marketing, flash sales and ditch promotions. We also see some manufacturers in the short term benefit from profit margins to help build market share, such as millet early.
Reduced price competition will certainly put pressure on some traditional smartphone developers, but for our consumers, it has produced some very compelling and cost-effective mobile phone.