Currently, the smartphone market is characterized by extremely high competition and many companies in this business literally survive with minimal profitability. Demand for new devices is constantly falling and the market is shrinking, despite the increase in the supply of budget phones to developing countries.
For example, in March, Sony announced the restructuring of its mobile business, including it in the general electronics division and planning to transfer production to Thailand. At the same time, HTC is actively negotiating to license its brand to Indian manufacturers, which will help their marketing efforts, and HTC will be able to earn a percentage of sales without any extra effort.
Now the news comes from FIH Mobile, a subsidiary of Foxconn, known as the largest manufacturer of Android smartphones in the world. In an effort to cut costs, the company announced that it plans to enter the production of next-generation automotive electronics. To do this, FIH Mobile will transfer hundreds of engineers from the mobile division to a new project.
Smartphones currently generate 90% of FIH's revenue, but last year the company recorded a net loss of $857 million. FIH Mobile customers include companies such as Google, Xiaomi, Lenovo, Nokia, Sharp, Gionee and Meizu. However, according to FIH representatives, only the contract with Google is really beneficial for them. FiH Mobile does not plan to completely leave the mobile phone industry, but at the very least, it will become much more selective in its choice of customers.
The biggest problems for the company are Chinese brands, which often delay payments and are unable to predict their sales. As a result, FIH often had to either keep customer inventory in its warehouses, or vice versa, stop production, keeping part of the capacity in reserve, which directly affected profits.
FIH Mobile has already announced that it will no longer accept orders from HMD Global (Nokia), as the former had to release devices for the latter at almost cost less all expenses. As a result, Nokia had to urgently sign new contracts with other ODMs in China.
“FIH doesn’t have as many smartphone orders as it used to,” an anonymous source told the NIKKEI Asian Review online. “Before, one team served three to four customers on Android smartphones. Now three or four teams are working on an order for one client.”
According to IDC analyst Joey Yen, the combined market share for the top five smartphone makers increased from 57% in 2016 to 67% in 2018, putting strong pressure on second-tier manufacturers. “Small brands are finding it increasingly difficult to stand out and stay relevant in the market because they don’t have the deep pockets that Apple, Samsung and Huawei have to launch massive marketing campaigns and invest in new and expensive technologies,” says Yen.
The reasons for the current market situation are both China's trade war with the United States, and the increased life of old devices due to the lack of any cardinal innovations that would motivate consumers to upgrade their gadgets. While companies have high hopes for the generation of 5G smartphones, competition in the industry will only increase, and it is likely that many brands will cease to exist soon.
Source: 3dnews.ru