The average global smartphone market order amount has decreased by 20%.
The COVID-19 Lockdowns have drastically reduced the number of orders Xiaomi and Oppo receive, with the percentage of decrease ranging from 8% to 20%.
Moreover, Xiaomi, Vivo, and Oppo weren’t the only companies impacted by the new regulation; almost 50 percent of all phone makers have been compelled to reduce production by at least 5% or stop manufacturing as a result of the new law.
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TOP 5 biggest effects
This will directly affect product investment, marketing investment, R&D investment, personnel training, as well as various other factors; The China market has been affected in particular. The current lock-down is effective for all China phones with a 4021MHz to 4300MHz COVID frequency.
The frequency of COVID 19 is a major one for China. According to data from Mirae Asset Securities, COVID 19 accounts for approximately 25% of all network communication services in China. These frequencies are used in mobile phones such as Vivo, Xiaomi, and OPPO.
Manufacturers such as Samsung, Apple, Huawei, and other foreign companies that have not yet entered China’s market or only sell a small number of phones in China, also use these frequencies to develop their flagship products. The obvious impact of reducing orders is that there will be a short supply of mainstream mobile phones in China; Vivo has been directly affected.
Vivo, which is a relatively small player in China, has been particularly affected. According to an official report released on July 20th, 2019, Vivo will reduce product orders for its mobile phones from manufacturing plants in China by about 20%.
Some production lines have also halted their operations due to a lack of mobile phone orders. This directly affects Chinese consumers who are waiting for new Vivo products; The effects on OPPO will be short-term.
They haven’t launched any major flagship products since COVID 19 was placed under lockdown. Most of their products have reached full production capacity so they don’t need to increase order amounts at present. They plan to use their domestic plant for R&D investment and other tasks during periods where there is no production work at their Chinese plant.
What does this mean for users?
COVID-19 is a special order from state security officials for screening all electronic devices before being sold in China. After COVID was issued, distributors of electronic products had to be approved to sell their goods in China which is why many brands have had trouble shipping to Chinese consumers.
As a result, many businesses in related industries such as accessories and parts have suffered huge losses since 2017 due to supply constraints.
COVID-19 has effectively reduced orders from most distributors, including Xiaomi and Vivo, by around 20%. If consumers aren’t able to get their hands on these devices when they launch it will have a major impact on sales. COVID-19 also has other impacts on consumers, such as changing how devices are priced.
Many products were previously sold for much cheaper in China than anywhere else, but COVID’s forced inspections added a lot of expense to their production and transportation. As a result, many manufacturers had to increase prices on their devices or stop selling them altogether.
For example, Apple had to release an updated MacBook Air without any changes to its hardware due to issues with getting it approved under COVID, which means they can no longer sell it at a competitive price point in China.
The same is true for many electronic device makers who have traditionally sold their products at much lower prices in the Chinese market compared with elsewhere because of increased demand in recent years.
How do I react as a user?
In short, you can’t; they have to release a new product. This isn’t because of some government ban on smartphones, but due to a recent law passed by China’s Ministry of Industry and Information Technology (MIIT) that forces smartphone manufacturers to reduce orders for 4G modems to make more room for other competitors.
Although initially reported as a measure against ZTE due to its trade ban with the United States, MIIT has clarified that it is not specific towards any particular company or country; rather, it is being used as an opportunity to accelerate technological innovation.
Fortunately, there are several workarounds: Modem makers such as Qualcomm are working with Chinese firms (read: OnePlus) on ways to circumvent these restrictions through alternative hardware configurations.
Another solution is to roll back your smartphone’s operating system. The MIIT ruling mandates that devices made after 1 July 2018 (except ZTE devices) will have new security checks in place, which might stop your device from running at full capacity if you don’t update it. You should be notified of an OS update via a pop-up notification on your phone; if you aren’t, check for one manually.
How do I react as an OEM?
I believe that building your phone from scratch with all the different parts of hardware, design, and software would be a very risky decision to make. COVID 19 might just have changed that and led many to rethink their strategies because even if they have all these in place, having them shut down will not only reduce performance but also affect sales.
I think it would be a perfect time for android phones to start changing around so they could survive with all those blockades in place.
Making new ways of getting signals can be essential like going wireless or even implanting more security on our communication networks so intelligence agencies cannot go through them as easily anymore. There are some issues though when it comes to going wireless since there’s still a lot of development needed before we get there.
I’m quite amazed at how OnePlus managed to develop their wireless charging technology in just one year, but apparently, they did. I think more phones will start doing that now because of how well it worked for them, with little to no issues at all.
It was said that Apple might consider using similar technology for its new watch but we still don’t know for sure if that’s gonna happen or not. However, many android manufacturers might follow suit here since it seems like a good idea and companies would do anything to avoid being shut down again as Samsung has so far.
The effect of China’s COVID – 19 lockdowns is starting to surface in smaller, non-Tier 1 companies. Xiaomi, Vivo, and OPPO have all reported 20% fewer orders than originally expected due to decreased supply.
Further digging shows that COVID – 19 may be responsible for a dip in the availability of updated models. It also appears that slower COVID enforcement may result in increased stock. However, further investigation is needed before any conclusions can be made.
In addition to reduced shipments, CMOs from these companies have issued statements regarding their forecasts. Xiaomi has said that with decreased production due to less demand caused by COVID – 19, they will be unable to meet their forecasted sales numbers.
In a similar situation, Vivo has lowered its sales forecast for Q2 of 2019. Finally, OPPO’s expected revenue for Q2 2019 is down 12%. This is down 9% compared to its original estimates when it was revealed that COVID – 19 would not be enforced until June 1st.
As more information becomes available regarding China’s COVID – 19 policy, we can expect the stock of updated models to become more plentiful. Unfortunately, it will be difficult to obtain accurate inventory levels as manufacturers may not report lower demand caused by COVID – 19.
Similarly, it will be difficult to determine if these companies are simply understocking due to a dip in demand or if they are intentionally oversupplying to compensate for lost production time.