ODM is the original design manufacturer. The manufacturer independently develops the product structure, appearance and process of the smartphone. After the customer places an order, he starts to produce the products and sells them under the customer's brand; IDH is an independent design company that engages in design and R&D. After obtaining an order from the smartphone brand, the designed products are sent to the production process. Generally, EMS (Electronics Manufacturing Service) manufacturer is responsible for the next production and manufacturing work.
Overall data shows . In the first half of 2022, the shipments of smartphones by ODM/IDH companies fell by 3% year-on-year. In contrast, global smartphone shipments in the first half of 2022 decreased by 8% year-on-year.
That is to say, when the mobile phone industry enters a state of sluggish market demand, mobile phone manufacturers are more inclined to manufacture products through outsourced OEM. In the first half of 2022, the global share of outsourced smartphone OEM increased from 37% in the first half of 2021 to 39%, while in the first half of 2019, this figure was only 26%, which shows the recognition of mobile phone manufacturers for the ODM/IDH business.
Senior research analyst Ivan Lam said that the weak performance of OPPO and Samsung has led to a reduction in the outsourced OEM volume of mobile phones, but orders from vivo, Transsion and Honor have pulled back this value.
Senior research analyst Shenghao Bai said that with the arrival of inflation, consumers will tend to choose products with lower prices. Faced with cost pressure, mobile phone manufacturers will allocate more mid- and low-end products to ODM companies. For example, after vivo first conducted outsourced OEM production in the second half of 2021, ODM shipments in its products have now accounted for 20%.
From the perspective of the competitive landscape of ODM manufacturers , Huaqin led the market with a share of 30%, Longqi followed closely behind, and Wingtai ranked third with a share of 20%; the top three accounted for 75% of the market, achieving further growth from 70% in the first half of 2021. It can be seen that mobile phone OEM is also gathering with leading manufacturers.
From the perspective of year-on-year changes, Huaqin's shipments decreased by 6% year-on-year, but they are still ahead of other manufacturers; Longqi's shipments increased by 23% year-on-year, making significant progress; Wingtai's shipments decreased by 0.5% year-on-year, with almost no change.
As for Huaqin , Xiaomi, OPPO and Samsung previously accounted for more than 80% of their shipments. The sluggishness of the three in the first half of this year had a certain impact on it; however, as vivo's exclusive ODM supplier, Huaqin's market position is still relatively stable. I wonder if Huaqin will usher in a new round of growth after the successful transfer to the main board.
As for Longqi , its main customer was Xiaomi before, but recently developed Samsung. The orders for breakthrough cooperation have promoted its growth. Huaqin, which has a market share of upward trend since 2018.
As for Wingtai , its market share has begun to decline since it reached its peak of 27% in 2019. Samsung and OPPO are Wingtai's top two customers. In 2021, Samsung halved the orders for Wingtai and transferred them to other manufacturers. At present, Wingtai's market share is hovering around 20%. Now, Wingtech has allocated its business focus to three major areas: semiconductor, optical module, and product integration business, opening up the path of business transformation. Compared with traditional integration business, the gross profit margin has increased significantly.
Looking at the global smartphone market, a large part of the products designed by manufacturers are handed over to EMS manufacturers to produce, the most typical of which is Apple. At present, the world's leading mobile phone manufacturers include Foxconn, Pegatron, Wistron, Jabil, Flex, BYD Electronics, etc.
In recent years, mobile phone manufacturers have also begun to build their own factories. Xiaomi Black Light Smart Factory and Honor Smart Manufacturing Industrial Park have been put into use. More high-end products are used to create this brand, which means that smartphone manufacturers have also begun to try to explore their own manufacturing path while maintaining their original cooperation.
However, for some mobile phone manufacturers, when the market consumption is sluggish and high-end products fail to successfully establish an image, they will still hand over many mid- and low-end products to ODM manufacturers for cost considerations.
In the long run, the leading ODM manufacturers are moving towards vertical integration or horizontal expansion, and diversifying their own business layout, and market competition continues.
