Wentai To The Left And Huaqin To The Right

While Wentai technology, the leader of mobile phone ODM OEM, has recently increased its deployment in the semiconductor field, Huaqin technology, another major ODM foundry, has officially opened its way to the market.

In line with the Matthew effect of the mobile phone industry, the whole machine ODM foundry is now facing a more severe and high concentration development stage. According to the industry's share of shipment volume, the core OEM factories are Huaqin technology, Wentai technology and Longqi technology respectively, and the manufacturers in the latter list are often vague and unstable; In the mobile terminal industry, there are still four domestic and two overseas leading companies.

However, contrary to the trend that the mobile phone market has been developing into a bottleneck in the past three years, the OEM has become a necessary choice for brand manufacturers when they need to widely launch medium and low-end products because they can provide more cost-effective products.

As the leading role of ODM for the entire intelligent terminal industry chain, as well as the rapid growth of the market in recent years, which will also achieve a more mature domestic intelligent manufacturing industry ecology.

However, Huaqin and Wentai, two company leaders who also graduated from Tsinghua University, are facing the new competition situation of 5g era, and they point to different paths for the next development of the enterprise; Huaqin's IPO is still focused on the production of consumer electronics and research and development of new technologies, and it seems that it has no ambition for more upstream areas.

Although OEM seems to be a hard-working industry with low gross profit rate, it is also an essential industry link, and the higher the degree of concentration, the greater the right to speak; The prospect of cross-border entry into the semiconductor market is considerable, but the short-term pressure on Wen Tai is also obvious.

Of course, there is no right or wrong choice, the key lies in the ability to control the operation.

The white heat of Matthew effect

The development of ODM generation factory and mobile phone terminal brand factory is quite similar, which is essentially due to the strong link effect between each other.

In the field of mobile phone OEM, it is mainly divided into three types: ODM, IDH and EMS. With the demise of more and more small and medium-sized brands in recent years, the number of ODM manufacturers is also on the decline.

According to the statistics of counterpoint, the top three companies in the ODM / IDH industry accounted for only 39% of the total industry in 2016, and rapidly increased to about 78% in 2020.

Some industry insiders told the 21st century economic report that some small and medium-sized ODM manufacturers have faded out of the smartphone market in recent years. For example, since its early years, Hutchison has gradually grown up by OEM for Meilan, TCL, ZTE and other manufacturers of Meizu, and has invested a large amount of funds in the development process for personnel and R & D development.

Unfortunately, China and Germany failed to enter the cooperation list of the four major domestic head companies, and some of the above-mentioned terminal brands subsequently weakened. The current development focus of Germany and Germany has been focused on IOT equipment.

This is also the epitome of Matthew effect of ODM manufacturers. Companies that develop to the head will have stronger control over material procurement, R & D and production capacity. In the process of cooperation with the head terminal mobile phone factory, it has further established its position in the industry.

Today, there are still some OEM leaders in the field of parts and components entering the OEM market of the whole machine, but they are limited to the relatively simple intelligent wearable equipment market, such as lichen precision.

However, from the perspective of categories, there is still room for improvement in ODM concentration in the mobile phone market. According to the statistics of the organization, the penetration rate of ODM / IDH mode in the field of smart phones will be about 36% in 2020, which is far less than the penetration rate of 74% in the field of notebook computers of ODM mode. The reason is that compared with notebook computers and tablet computers, smart phones have faster technology development, smaller internal space, more parts, higher shape requirements, and its design and manufacturing are relatively difficult.

Huaqin technology, which has covered ODM business from mobile phones to laptops, tablets, aiot, servers and other fields, has achieved rapid growth in performance under this trend.

According to the prospectus recently released by Huaqin, during 2018-2020, the company achieved revenue of about 30.9 billion yuan, 35.3 billion yuan and 59.9 billion yuan, and the net profits attributable to the shareholders of the parent company were 180 million yuan, 505 million yuan and 2.19 billion yuan respectively.

From the perspective of revenue composition, the proportion of Huaqin technology from smart phones has been declining year by year in the past three years, from more than 70% of its revenue contribution, to less than 50%. Most of the transferred shares have been replaced by laptops, accounting for less than 10% and accounting for 22.74% of revenue by 2020. In other businesses, the revenue contribution of tablet computers is gradually decreasing, while the proportion of intelligent wear is gradually increasing.

Huaqin's net profit has increased rapidly in the past year, and the income from notebook computers has also increased rapidly, which may be related to the shift of consumption demand driven by the outbreak of new crown pneumonia.

Gao Hongxiang, the research manager of IDC China's global hardware assembly, pointed out to the reporter that for ODM, the core of future growth depends on the fierce competition among terminal brand manufacturers, especially the mobile phone development weight of low price segment products.

"The more fierce competition among terminal manufacturers, the more low-cost mobile phone manufacturing capacity is needed. This is the terminal factory itself is not good at, so outsourcing to ODM manufacturers can solve this problem. " He further analyzed.

From this perspective, the strategy adjustment of mobile phone manufacturers can also be seen from ODM manufacturers. According to Huaqin technology's prospectus, in 2019, the company added major customers oppo and LG, ASUS and China Mobile reduced ODM demand due to the adjustment of smart phone business. This year is also the time point when the demand for smart phones continues to be weak and manufacturers fight to fall into the Red Sea.

In 2020, Huaqin will add Samsung's mobile phone business and Acer's notebook computer business. As LG exits the mobile phone market, it will also reduce the demand for ODM. According to the reporter's understanding, Samsung also vigorously launched the low-cost Series in this year, which soon won the welcome from the global core market, and then helped it solve the problem of insufficient global consumption power during the epidemic period.

The way of ODM manufacturers

The ODM industry, which has developed to a relatively mature stage, is not entirely smooth sailing. The low gross profit margin and the continuous fluctuation of key customers are the challenges that accompany its long-term development.

According to the prospectus of Huaqin technology, the company's comprehensive gross profit margin is 6.51%, 7.87% and 9.90% respectively from 2018 to 2020, although it shows an upward trend, it is not very high. The company also admitted that if the future market competition intensifies, the cost rises or the product shipment volume shrinks, it may further affect the company's gross profit margin; If the layout fails in emerging areas, it may also have an adverse impact on the company's operating performance.

Wentai technology's 2020 financial report shows that the gross profit margin of the company's mobile phone and accessories business is 12.11%, while that of semiconductor products is 29.91%.

On the one hand, in the 5g era, the ecology of the Internet of things has a huge demand for a richer product matrix, but the current usage heat and product ecology are still insufficient; On the other hand, it is a proposition that all hardware industry chain manufacturers are exploring, which also needs time and capital to digest. The two ODM companies choose different solutions.

Wentai is no doubt in a good time. In the recent response of the company to the regulatory authorities, Wentai technology pointed out that its Anshi group had been affected by the downward cycle of semiconductors, and its revenue declined from 2019 to 2020. However, with the improvement of global epidemic prevention and control situation, the current performance began to rebound.

Recently, Wentai once again confirmed that it plans to acquire the assets of the UK's wafer plant, which will further improve the IDM capability of Anser semiconductor. Of course, Wentai's huge investment in semiconductors in the past three years also needs time to gradually digest the problem of collaborative integration.

Huaqin's imagination may not be big now, but it is better than enough concentration.

Gao Hongxiang told the 21st century economic report that under the background of wafer foundry capacity shortage this year, the route of terminal manufacturers is to sprint to the middle and high-end market, rather than the low-end segment. This kind of product is the advantage and ability of the terminal manufacturers. They also tend to produce the leading technology in house (brand manufacturers develop, design or manufacture products by themselves). Therefore, it can not be understood as an opportunity for ODM manufacturers to develop 5g mobile phone products at present.

On the contrary, the overseas market, at present, most of the demand still stays in 4G mobile phones. In addition, the epidemic has affected the consumption capacity. Many countries have higher demand for 4G low-end mobile phones, or the replacement of function machines to smart phones. This is the opportunity for ODM manufacturers this year.

From a horizontal perspective, this is the most advantageous and mature product line of traditional ODM manufacturers, so it is expected to eventually convert into orders of ODM companies.

At the same time, the company began to open up the market in the fields of server, automobile electronics and other new infrastructure. Although the proportion of the company's revenue is still very small, this is also the general development rhythm of the electronic industry chain.

From the perspective of the development of electronic industry chain, it may be the only way to go to ODM business model. Only in this process, how to better embrace the high profit space segmentation industry and expand the ecological circle of platform companies will be the current ongoing challenges.