Since Huawei released the Mate 60 mobile phone at the end of August, the market has always been in a state of "far ahead" excitement.

In the more than 1,500 days since Huawei was sanctioned, traffic is still busy in new product launches one after another. People seem to have reached a consensus and keep silent about the hidden worries under the excitement-is it our technology? The speed and trajectory of R&D are defined by a safe distance, and we can only follow "others" step by step.

The silent thunder of Mate 60 has triggered a disassembly frenzy. Although there are still many mysteries of the technical implementation path that have not yet been solved, judging from the data parameters, this phone has been given a "fighting opportunity" by the market.

We believe that in addition to being a node of pursuit and balance among products or companies, the more important significance of Mate 60 lies in its guiding effect on the future development of the entire mobile phone industry: after breaking through the technological gap, the original competition pattern was based on the worship of technology. will gradually be broken, and the mobile phone industry will most likely usher in an era of egalitarianism.

The industry comes to a "turning corner"

History has proven that the development of technology is not simply linear. The iteration of technology is affected by multiple factors such as industry development and economic cycles. In the long term, the development of technology has an upward trend and shows a certain periodicity. Therefore, the technological development speed shift period in the technology industry is also a period of high incidence of changes in the industry structure.

In 1978, the defense contractor GCA took a fancy to the development opportunities of the chip market and used high-tech optical systems for military reconnaissance to manufacture civilian chips, and became the first company to sell stepper lithography machines. At the same time, Stepper lithography machines outlawed scanning lithography machines, and GCA controlled 85% of the global semiconductor lithography equipment market in less than a year.

In the early 1980s, the U.S. economy experienced a cyclical recession after growth, and the semiconductor industry also fell back. After experiencing a short period of glory, the arrogant GCA remains untimely optimistic about the future. Rather than pursuing technological progress, the management pays more attention to the pursuit of prestige and wealth. During this period, GCA invested heavily and built factories, including canceling the purchase of precision lenses from Nikon in Japan and instead acquiring its own lens manufacturer, Tropel. However, in the end Tropel failed to produce what GCA needed. lens.

At the same time, Nikon, which had lost the precision lens market, obtained a machine from GCA, reverse-engineered it, and produced a stepper lithography machine with a mean time between failures that was ten times higher than the original. Soon, Nikon's market share surpassed GCA's.

Looking back, key companies drive the ups and downs of industry development. They have the largest market share because they master the most advanced technology. However, once the development speed of the industry or promoter slows down, it is likely to trigger new changes in the market competition pattern as other companies imitate, optimize, or even surpass it.

To put it more generally, in the process of technological development, core technologies show a spiral iterative upgrade externally, and are accompanied by the optimization of structural technical paths internally. We have introduced in our previous research on advanced packaging that the current advancement of advanced packaging technology from behind the scenes to the spotlight is the result of the development of chip manufacturing technology reaching its peak and the development of the industry reaching a "turning point".

Similarly, on January 9, 2007, the first-generation Iphone was released. Since then, the mobile phone industry has officially entered the intelligent stage. Apple has always held the core technology in the industry and played the role of industry leader. The technical specifications of its new products are almost It represents the current “top configuration” of the entire mobile phone industry.

In the past 16 years, we can see that Apple has released more and more types of new machines, but technological breakthroughs have gradually weakened. Among them, the gradual capping of hardware manufacturing technology we mentioned earlier is an important influencing factor, because from the perspective of the industry chain In other words, the upper limit of upstream technology is the ceiling of downstream product performance.

Therefore, Apple's entry into a "toothpaste-squeezing" style innovation model is actually the result of the slowdown in gaming technology iterations, and is also a sign that the development of the mobile phone industry has entered a "turning point."

The logic of competition is about to be reshaped

An irrational consumption phenomenon in consumer psychology is called the Veblen effect, also known as the "outlier effect". It means that the higher the price of the product, the more popular it will be. Of course, the first reason why the Veblen effect is established is that price is not only a price, but also a status symbol. The reason why people are willing to spend more money to buy a product is because of the added value of the brand behind it (or scarce quality, or scarce quantity) large enough.

Apple has masterfully used this effect, with technical specifications that far exceed those of its peers, and marketing strategies of reservation, queuing, and purchase restrictions. For a long time, consumers have considered Apple to be synonymous with high technology. The iPhone's brand premium has now taken hold. Although it was once called a "kidney machine" because of its unparalleled price, it does not prevent consumers from flocking to it.

However, no technology company can survive on brand alone.

Peter Thiel believes that all successful businesses are built on little-known secrets. If we use the rule of thirds to divide the difficulty of things, things can be divided into simple, difficult and impossible, that is, 1) goals that can be achieved with a little effort; 2) goals that can only be achieved with unremitting efforts; 3) goals that can be achieved no matter how hard you try. Impossible goals.

Most companies are awkwardly stuck between simplicity and difficulty. In contrast, a very small number of companies have solved the industry's problems and become the masters of industry secrets, thereby establishing a gap with other companies. Peter Thiel believes that the key to supporting the Apple brand premium is that it has a complex set of patented technologies in hardware (such as super touch screen materials) and software (such as touch screen interfaces designed for specific materials).

At this point in the discussion, it is easy to understand the industrial significance of the Mate 60 launched by Huawei. The Mate 60 is to verify the feasibility of independent manufacturing. The "other mobile phones" represented by the Mate 60 shorten the gap with the iPhone. Correspondingly, Apple's secrets are gradually being cracked.

When the secret of a company is cracked by the industry, the brand premium caused by the lack of scarcity gradually collapses, and the spiritual pursuit fails. Driven by the transformation of consumer demand, the industry will be reshaped from the consumer side. competitive logic.

We believe that as the performance myth of Apple mobile phones fades away, in the next 3-5 years, the mobile phone industry will return to rationality and simplicity from the Mu Qiang-style herd effect, and parameter performance as the first logic for consumers to choose mobile phones will be weakened. There are two reasons:

1) Head end: As technology continues to catch up, the concept of head end weakens, and the oligopoly or duopoly competition pattern will become a thing of the past;

2) Tail end: Judging from the products released in recent years, whether it is Xiaomi's Redmi series or Honor's Play series, from the perspective of parameters, the lower limit of mobile phone products is increasing.

With the blurring of end-to-end boundaries and shrinking distance, the mobile phone industry is about to enter the "egalitarian era."

The mobile phone market will enter an era of egalitarianism

1. What is the era of mobile egalitarianism?

Egalitarianism initially refers to the idea of requiring equal enjoyment of social wealth based on small production. The earliest background is that in feudal society, small producers demanded the overthrow of exploitation and notification by the landlord class and the equal distribution of land property.

In the mobile phone industry, what we mean is that as industry secrets are made public, brand premiums disappear, and industry profits are relatively evenly distributed to companies with strengths in different angles, thereby achieving a state of equal rights in technology and equal rights in consumer expectations.

Based on this, we believe that with the equalization of key competitive factors in the previous era, the industrial structure led by super giants will gradually fragment, and the mobile phone industry is expected to enter an era of egalitarianism. Xiaomi OV Honor, etc., whoever can be the first to understand the consumer psychology logic of the egalitarian era will usher in the second sweet period in history.

2. What is the logic of competition in the era of egalitarianism?

After being unbound from spiritual consumption, mobile phones will return to the essence of commodity attributes.

Figure: Microeconomics commodity supply and demand trend line, source: public information

One of the core tenets of modern microeconomics is that prices are determined by supply and demand. It can be simply summarized as the above chart. The intersection of the demand curve DD' and the supply curve S corresponds to the most effective transaction price P and transaction quantity Q given by the market that can be balanced in the long term. Of course, this assumption is based on the commodity producer. No new technology has been discovered to improve production efficiency.

When the economic cycle is in the stagflation period, consumers reduce their consumption budget, especially the budget for consumable goods. At this time, the DD' curve shifts to the left to D₂D₂', and the new demand curve and supply curve curve S give new supply and demand. Equilibrium point - lower price P₂, lower quantity Q₂.

On the other hand, the redistribution of the mobile phone industry structure in the era of egalitarianism will lead to changes in the upstream of the industry chain. Those mobile phone manufacturers that have been reallocated to more market shares will lead their corresponding suppliers to increase volume at the same time, while suppliers facing "performance anxiety" Chain companies will start a new round of clearing adjustments.

3. When will the era of egalitarianism arrive?

The era of egalitarianism in mobile phones is coming, but since the redistribution of profits, competition landscape, and supply chain adjustment is a complex process, it is unlikely to change suddenly overnight, but will appear in a new upward cycle of the mobile phone industry. from.

Based on long-term tracking of the mobile phone industry, we believe that this round of decline in mobile phone demand is about to end.

Figure: 2023Q2 global smartphone market shipments, source: Omdia

According to Omdia report data, although the global smartphone market shipments are still on a downward trend, overall, the decline in shipments is narrowing. In addition, Xiaomi's financial report showed that the overall inventory amount in the second quarter of this year was 38.5 billion yuan, a year-on-year decrease of 33.5%, which was the lowest inventory level in 10 quarters.

In the new round of climbing period of the mobile phone industry, those manufacturers that first discover the changing trends in the industry's competitive logic, respond and layout first, will receive a new round of industry dividends.

Finally, to summarize the views of this article: Huawei Mate 60’s industrial significance is greater than its product significance, and it has verified the feasibility of technological catch-up through facts. Taking this as a boundary, the competitive landscape of the mobile phone industry will change and enter an era of egalitarianism. In this era, the competitive logic of mobile phone manufacturers will change from a single technology competition to a more diverse business strategy competition.

The contraction period of the mobile phone industry is about to end. In the new cycle, whoever discovers and follows the trend first will gain more competitive chips.

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