As the core link in the mobile phone industry chain - chips are the key to the game of various mobile phone brands in the increasingly red sea market. However, OPPO has recently shut down its self-developed chip philosophy library business. Does it mean that it is difficult to break through the road of self-developed technology?
Let’s look at the background of the times when OPPO made this strategic decision: At that time, OPPO relied on its excellent camera function and fashionable appearance to gain a competitive advantage in the industry. However, when the industry's blue ocean has turned into a red ocean, the domestic mobile phone market is gradually saturated, and competition among mobile phone manufacturers is becoming increasingly fierce. OPPO's once unique advantages have gradually become common in the industry, and its survival is facing huge challenges. In the global high-end smartphone market, Samsung, Apple, and Huawei are three major players, while the low-end market is dominated by Xiaomi and VIVO; OPPO is caught in the middle, and it is difficult to get up and down.
With the increasing maturity of the mobile phone industry chain, almost all mobile phone brands without core key technologies use homogeneous technologies, solutions, suppliers, and even parts. The brand's products are all similar, and the difference in user experience is becoming less and less.
In order to create differentiated features and further enhance competitiveness and profit margins in the market, OPPO established ZEKU in Shanghai in 2019 to develop its own chips, and plans to invest tens of billions of funds to develop Mariana imaging dedicated chips in three years. It is a pity that today, three years later, the chip dream was finally shattered, and Zheku ended up disbanding.
Technology should serve competition
In the mobile phone industry, there are benchmark companies that rely on self-developed chips to create core competitiveness. The major strategic decisions made by a company in different periods will affect the survival of the company. If every company follows in the footsteps of industry giants, will it have stronger competitiveness?
Back then, Apple developed its own chips because the chip business could cooperate with its own computers, mobile phones, and watches under development. The capital flow, market size, and brand influence of these core businesses can completely compensate for the huge investment in chips.
Back then, Huawei self-developed chips because basic communication was the root of Huawei, and the mobile phone business was a trending incremental business direction that Huawei found based on its own core business. Chips, as the backbone of mobile phones, required huge investment, but their B-side business foundation A strong financial foundation can fully support this strategic decision.
In contrast to OPPO, the core business is only the mobile phone business, and the research and development of chips is only to add a differentiated feature to the main brand OPPO. The decision to make this decision needs to look at the competitive landscape of the chip industry chain at that time: once, HiSilicon was in the growth period of the smartphone industry. succeeded, and now Zheku began its journey during the industry's downturn.
When OPPO decided to enter the main chip market, there were already three powerful manufacturers in China, HiSilicon, MediaTek and Zhanrui, which occupied the high-end, mid-range and low-end markets respectively. This is similar to the situation of Qualcomm, Apple, and Intel in the US market. If OPPO wants to enter and occupy a place, the challenges are obvious.
OPPO lags behind Huawei's choice when it chooses to enter the chip market. Huawei's mobile phone baseband chip launched the first version in 2006. It was a special golden age. At that time, the United States did not pay attention to Chinese chips, and TSMC provided high-quality services due to pressure from Intel. And Huawei, with its powerful communications and wireless business, is continuously delivering "blood" to the chip.
However, even in such an environment, it took ten years for the success of Huawei chips, and finally established a virtuous circle between chips and mobile phones. And what is the macro environment that OPPO faces when developing chips?
Facts have proved that the difficulty of building a second HiSilicon is better than reaching the sky. At the current stage of history, any large chip design project that skips chip manufacturing may have to face a dilemma similar to that of Zheku.
It takes 6 to 7 years for a mobile phone's SOC chip (including CPU, GPU, NPU, ISP, baseband/modem, coprocessor and DSP) from the beginning of research and development to the final batch application. Most of the patents related to mobile phone technologies are in the hands of companies such as Qualcomm, Huawei, MTK, and Apple. OPPO's R&D inevitably needs to consider these patent issues. The chip industry is another industry that requires heavy capital investment. Even if billions of dollars are invested in research and development, there is no guarantee that it will have a significant impact. Since OPPO has not been listed, the continuous cash outflow has begun to affect the support of its marketing system and agents, which has also increased internal resistance to chip research and development plans. At the same time, the dividends of many old employees and veterans who are shareholders have also been reduced.
The mobile phone business that supports OPPO's survival, the entire industry has declined for five consecutive quarters. In the short term, the ceiling of the smartphone market has been touched, and the consumption trend is getting closer to the high end. Huawei's strong return in the high-end market and expansion in overseas markets have made it difficult for OPPO to win the competition with just a chip that burns a lot of money and cannot produce disruptive products in the short term. Obviously, in the current competition, technology has not brought more competitive advantages to mid-range OPPO phones.
In general, OPPO's decisions and challenges in chip research and development are not only related to the industry environment and competitors' strategies, but also related to its internal capital flow and organizational motivation. It's a difficult path that requires more commitment and a thoughtful strategy to advance.
The best growth of manufacturing enterprises should be based on the "chain master brand"
For manufacturing companies, the best growth strategy is based on the "chain master brand". What is a chain master brand? It can be understood by the following characteristics:
- Own brand premium rights in the industrial chain or adjacent industrial chains
- Industrial key technology control
- Ability to enter adjacent businesses in the industrial chain
- Has a major say in the supply chain system and pricing influence
- It still has the advantage of public recognition outside the relevant industry chain
For OPPO, choosing to enter the chip industry seems to be in line with the growth strategy of the "main chain brand", but what we cannot ignore is that in the chip industry, there is already a chain main brand-Qualcomm. Therefore, at the key point of strategic decision-making, in the current stage of enterprise development, in what form to enter the adjacent business of the industrial chain, it is necessary for the enterprise to make a careful decision in combination with its own core business and the boundaries of competitors.
To effectively implement the chain main brand strategy, the premise is based on a strong "main brand". The main brand not only means having a strong public recognition advantage, but also means having the ability to support continuous research and development and expansion of new products and businesses .
In order to successfully implement the "Chain Master Brand" growth strategy, companies need to follow the following five steps:
- Determine the growth direction of the industrial chain
- Main brand repositioning: Finding a more scalable main brand competitive advantage
- Turning the technology flywheel: According to the growth direction of the industrial chain
- Continuously update product and business portfolio based on technology flywheel
- Continue to consolidate competition barriers and maintain competitive advantages
Apple is a typical success story of chain owner brand growth strategy. During the development of the computer industry chain, the company did not always adhere to the category of "computer", but chose to develop the iPod music player, which drove a new round of growth of the main brand. When the music player was in the limelight, Choose to enter the smart phone compatible with iPod function... every step is to expand the competitive advantage of its own main brand, and the chip developed by itself has established Apple's unique leading position in product performance. In addition, Apple's successful chip is only one element, and its competitive iOS system has played a competitive synergy between different products. Continue to develop new technologies according to the growth direction of the industry chain, update product and business portfolios, and a series of self-research continues to consolidate the barriers to competition.
Relatively speaking, OPPO and other domestic mobile phone brands at that time seized the dividends of the times and found a differentiated feature during the industry's upward period, based on this. However, as time goes by, each industry will gradually mature, and the initial characteristics will gradually become the commonality of the industry. During this transformation period, enterprises need to make strategic choices: should they continue to deepen the new features of existing products, or develop new incremental products based on existing competitive advantages, or enter a new industrial chain field that can feed back current business?
OPPO has chosen a difficult path, but we need to re-examine this "image-specific NPU" self-developed chip. Which competitive advantages of OPPO's main brand have it strengthened? In fact, this is to further strengthen the "photographing" feature of the main brand, and the product is also developed around the existing "mobile phone" business. However, the mobile phone business is not in an "incremental market". It has not brought new growth to the main brand, nor has it found a more scalable main brand competitive advantage. The self-developed chip technology has not yet found a clear growth direction. , unable to launch products and business portfolios with new competitive advantages, let alone consolidate competition barriers.
Therefore, technology research and development that is not based on the growth strategy of the "main brand of the chain", although it is a key technology in the industrial chain, if it cannot truly enhance the competitive advantage of the main brand, it may instead bring more burden and burden to the main brand at critical decision-making moments. pressure.
We need a deeper understanding and execution of the growth strategy of the "chain master brand" in order to remain invincible in the highly competitive market environment.