Internal and external troubles TCL mobile phone sales fell nearly 40% year-on-year

On April 9, TCL Group released the 2016 Results Express and the 2017 First Quarter Results Announcement. In 2016, TCL achieved operating income of 106.4 billion yuan, up 1.79% year-on-year; net profit was 2.1 billion yuan, down 38% year-on-year.

The data shows that all TCL businesses have achieved growth, and only the mobile phone business has experienced a significant decline. In 2016, TCL Communication sold 68.166 million communications equipment and other products, down 17.7% year-on-year; in the first quarter of 2017, TCL Communications sold 105.46 million communications equipment and other products, down 38.7% year-on-year.

Regarding the decline in mobile phone performance and future adjustments, the relevant person in charge of the TCL Communication Market Department responded to an interview with the China Business Journal on April 12 that some information will be disclosed slowly, but this time is not convenient for the outside world.

The reporter found that, coupled with the decline in mobile phone sales, TCL communications personnel turmoil. After Guo Aiping, the former CEO of TCL Communication, left the company, Yang Tuo, who had been placed high hopes, was also dismissed from the group. It was only one year after he took over TCL Communication China. So far, the new TCL communication head is in place, and many of the company’s businesses are also in To be adjusted.

"People's turmoil is an external performance of poor performance, and it is also an important reason. The frequent adjustment of personnel has led to the company's strategy continually swaying." Sun Yanxi, the president of the First Mobile Research Institute, told reporters that the personnel turmoil indicates that the company has not found a good mobile phone business. The breakthrough will continue to drag down the performance in the future.

At present, TCL is trying to reshape the competitiveness of its mobile phone products with the help of the international brand BlackBerry, and hopes to “reverse” the global mid-to-high-end mobile phone market through the new BlackBerry. However, in the increasingly fierce competition in the mobile phone market, TCL has pinned its hopes on a former star mobile phone. Whether it can be "returned" still has to be a big question mark.

According to the above performance report data, in 2016, TCL achieved revenue of 106.4 billion yuan, a slight increase of 1.79% year-on-year; operating profit of 128 million yuan, down 90.47% year-on-year; net profit of 2.1 billion yuan, down 33% year-on-year. A small increase in revenue continued to rank among the “100 billion clubs”, but operating profit fell sharply by 90%.

TCL said that operating profit, net profit, net profit attributable to shareholders of listed companies, basic earnings per share, and weighted average return on net assets decreased year-on-year, mainly due to the sharp decline in the performance of TCL's communications business.

Regarding the reason for the sharp decline in TCL's communications performance, TCL explained that in 2016, due to the downturn in the overseas mobile phone market, the significant increase in the cost of key components and the overall restructuring of China, TCL's communications performance fell sharply year-on-year.

This downturn continued into the first quarter of this year. The first quarter of 2017 results released in the same period showed that in the first quarter, TCL Communications sold 105.46 million units of communication equipment and other products, down 38.7% year-on-year.

According to data from the domestic smartphone market released by research institute IHS Technology in the first half of 2016, TCL ranked 20th with sales of more than 1.33 million units. This sales volume is almost negligible compared with Huawei and OV.

"TCL mobile phone overseas focus market began to encounter strong extrusion of Lenovo, Xiaomi, Huawei, etc., which increased the intensity of going out, and the domestic market was weak." Sun Yanxi said that even the sales decline in the future is predictable. Due to the large volume of feature phone shipments and the low proportion of smartphones, TCL phones are low-end and mainly sold overseas, while international brands such as Apple and Samsung and Huawei, vivo, OPPO and other domestic mobile phones are double-clicked. Under the TCL, TCL has a low market share in the domestic mobile phone market and its influence is limited.

TCL is actually a veteran of domestic mobile phones. Its mobile phone business is mainly operated by TCL Communication. TCL mobile phone sales reached 9.45 billion yuan more than a decade ago, and profits accounted for more than 80% of TCL Group's total profit. It became the mainstay of TCL's profit source. Li Dongsheng, chairman of TCL Group, once said that "the mobile phone saved me."

In 2015, TCL mobile phones reached a peak. At that time, TCL became the world's fifth largest mobile phone manufacturer with over 80 million mobile phone sales, occupying the No. 1 position in domestic sales of domestic mobile phones.

However, behind the dazzling achievements, there have been hidden dangers of peak drop: TCL mobile phone sales rely heavily on overseas markets, and the low-end and mid-range functional machines account for too high. According to data released by TCL Group, the sales volume of smart phones in October last year was 3.913 million units, 93 % is from overseas markets, which also shows that TCL mobile phones have almost lost their position in the domestic market.

"China's mobile phones are currently attacking overseas markets and are still concentrated in the low-end market. The main price/performance ratio is that TCL's domestic mobile phones sold overseas have almost no high technical barriers and thresholds. In the past two years, Lenovo and Xiaomi have established overseas factories. In the overseas market, it is inevitable that its overseas market will be homogenized and squeezed quickly,” Sun Yanxi said. When the most reliant part is strongly divided by competitors, the overseas market and even the overall sales volume will continue to decline in the next few years or it is a foregone conclusion.

Today, TCL phones are undergoing a difficult transition. In April and November last year, there were two large-scale layoffs optimization. Insiders of TCL Communication mentioned that “how many people leave their jobs has a certain relationship with their personal choices.” The business optimization in China in November was a further in-depth adjustment after the reorganization of the mobile phone business in April, and TCL Communication has been from Hong Kong stocks. Delisting also let the outside world see the helplessness of TCL.

Independent telecommunications analyst Fu Liang said that missing the 3G vent is the biggest loss of TCL, Huawei and Xiaomi are using this vent. At present, the domestic market has been occupied by four major manufacturers, such as Huawei and OV, and has formed a large barrier to the outside world. It is very difficult for TCL to break this barrier.

"TCL mobile phones may not be able to do well in the short term. In the eyes of domestic consumers, the TCL brand is difficult and the recognition is not high, and the negative impression left by the Wan Mingjian era more than a decade ago has not been eliminated. Xu Yifeng, an IT commentator, said that Li Dongsheng had recruited Yang Tuo and had too high expectations. He wanted Yang Tuo to successfully transplant his success in Huawei to TCL.

The reporter was informed that in 2015, Yang Tuo was a director of TCL Communications and a member of the Operation Executive Committee. He was responsible for the brand management, marketing strategy formulation, business planning and operation of TCL Communication. At the beginning of his tenure, Yang Tuo once released his words: to make a comprehensive transformation of TCL mobile phones from products, prices, channels, brands, etc., in order to enhance the competitiveness of TCL communication products in the Chinese market.

As a hero of Huawei and Samsung, Yang Tuo has greatly boosted sales of Huawei and Samsung with its marketing philosophy. However, it failed on TCL, and it was also dismissed because mobile phone sales did not meet Li Dongsheng's expectations.

TCL's success in other areas such as home appliances is in stark contrast to the dilemma encountered in the mobile phone business. Is it true that home appliance companies can't make mobile phones?

This is not a catch-and-see. Like Japan's home appliance giants Sony, Toshiba and other mobile phones have been launched, the former Sony Ericsson mobile phone has also been popular, but now it has long been stunned; domestic appliance manufacturers, such as Haier, Changhong are still vigorously launching new mobile phones, But they have not left a deep impression on consumers.

Looking at the entry and exit of home appliance companies in these years, industry observer Liu Buchen believes that Chinese home appliance manufacturers are not suitable for mobile phones, and this is still the case in the next decade. "Because of different mobile phones and home appliances, TCL's mobile phone brand image does not meet the requirements of consumers." Liu Buchen said that home appliances are durable goods, while mobile phones are fast-moving consumer goods, high-tech, consumers can not graft the brand image of home appliances. On mobile phones, consumers will think that home appliance manufacturers are not capable of producing high-tech mobile phones. This impression is not changed, and the mobile phone business is difficult to produce.

At present, the growth rate of the mobile phone industry market has slowed significantly. According to IDC data, the total sales volume of global smartphones in 2016 was 1.47 billion units, up only 2% year-on-year. The competition in the mobile phone market is heating up and the overall profitability of the industry is affected.

In this industry context, in the face of aggressive market squeezes from domestic and foreign competitors, the market space reserved for TCL handsets may shrink.

However, TCL does not seem to give up this business. At present, TCL has reached a cooperation with BlackBerry, which has been booming. TCL Communication manufactures and sells BlackBerry-branded mobile devices worldwide. The first collaborative smartphone, BlackBerry KEYone, is expected to be available in some countries around the world from April to May this year. "The frequent replacement of high-level can not improve the current predicament. TCL's top priority is to improve product quality and change consumer perceptions a little bit." Xu Shangfeng said.

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