Dialogue with Honor CEO Zhao Ming: The market is pessimistic, I am optimistic, the market shrinks and I expand

In the past full year, Honor Mobile has staged a movie called "Glory Speed": from a little more than 3% of the domestic market share in the first quarter of last year, it has risen to 16% of the domestic market share today. There have always been only those who fell from Top5 to Others, and few brands that climbed out of Others and rose back to Top5.

Similar to the rapid recovery of market share, it is the rhythm of the release of new Honor phones. In one year, Honor has released a total of 50 series, 60 series, 70 series, as well as Magic 3 series and Magic 4 series. A total of 5 flagship series, It also completed the layout of the mid-range and entry-level mobile phones of the Play, Changwan and X series, and the high-end folding screen mobile phone Magic V was also launched smoothly.

Development is the last word, and this sentence is more suitable for New Glory.

But development is definitely not smooth sailing. For example, right now, the smartphone market is experiencing a great recession. Especially in April, the domestic mobile phone market shipments fell by nearly 40%, and pessimism is spreading in the mobile phone market.

After the launch of the Honor 70 series, Ai Faner came to the Honor headquarters in Shenzhen and talked with Honor CEO Zhao Ming about the market, brand and business.

Again, "Stupid birds don't wait for the wind"

Years ago, when Honor's CEO made his first public speech, he said the spirit of "stupid birds don't wait for the wind". At this time, the popularity of smartphones is booming, and various mobile phone brands are like the crucian carp across the river.

Now the wind has stopped, and the stupid bird has passed its nirvana for a while, but in the interview, Zhao Ming is still in the "stupid bird does not wait for the wind" many years ago, which means that the glory speed and the turnaround are based on this spirit. : Rely on internal power, not external power.

Zhao Ming said:

The first time I gave a speech in China, I said that stupid birds don’t wait for the wind. Now, I think that the current situation may have been interpreted back then. It really is how companies should respond when the wind stops or the wind is headed. Looking back on it today, in fact, many business logics or strategic control points for competition that were formulated back then are still effective today. So it doesn't mean how many concepts are created, but whether it is constantly consolidating the core competence and competitiveness of the enterprise.

One of the manifestations of consolidating the core capabilities of the company is that in the case of layoffs and contractions in the Internet, consumer electronics and even the automotive industry, Glory decided to continue to expand. Zhao Ming said that the total number of employees of Glory will increase by 30%-40% this year. At the beginning of the year, it was More than 10,000 people, and the number of employees will reach about 14,000 by the end of the year. Among them, the R&D personnel who ensure the core competitiveness of Honor account for 55%, and the proportion of R&D personnel will remain above 50%.

Sometimes, when the brand is in the air, it is sometimes unclear whether its own business strategy is successful or whether it is being boosted by external forces from the market, which also tests the judgment of the company's decision-makers on the market.

Therefore, in this dialogue, Zhao Ming emphasized the judgment of the market and the underlying business logic, rather than concepts.

For example, in the first half of this year, some manufacturers have begun to consider using the method of reducing profit margins to ensure market share, which is generally known as price promotion. Honor's current main battlefield is in the domestic market. Facing a more intense market environment, what is Honor's strategy?

Zhao Ming said that Honor has been relatively reasonable in pricing, and there has been no significant price reduction this year, mainly due to normal iterations. For example, before the launch of the Honor 70, the price of the 60 series was adjusted. The price of a product is based on value, and value is based on the consumer's recognition of the product. In addition, whether the channel system and retail system are smooth, and risk control. Zhao Ming said:

In this (sales) process, Honor has also done a good job in risk control. In the case of a decline in the general market, our stocking inventory is well matched with our sales capabilities and market demand.

As of June, the worst time for the entire market should be over. On the 618 Shopping Festival mobile phone list, there are also several Honor mobile phones shortlisted. Zhao Ming is also relatively optimistic about the general trend of the market:

(Expectations on the market) Generally speaking, it is still optimistic, because from the current situation, whether it is from the development of the global epidemic or various domestic policies, including the emergence of consumer coupons and other policies in Shenzhen, it is also I hope that the economy will recover quickly and return to the development of the national economy and people's livelihood.

If the mobile phone is not the first, it will never be a car

In fact, the current mobile phone manufacturers are facing a choice, or a question: what is the next big thing? Is it AR/VR, or is it a car?

The background of this choice is closely related to the market trend mentioned above. The mobile phone market has already become a stock market, and mobile phone manufacturers have already begun to look for more growth points. Almost all mobile phone manufacturers have opened the "mobile phone + tablet + computer + smart phone" Wearable + Smart Home" strategy. But at present, there is no single product that can compete with the mobile phone market.

Therefore, whether it is an AR/VR product from 0 to 1 or an electric vehicle that changes the world has become a multiple-choice question before mobile phone manufacturers, and Honor is no exception.

Zhao Ming believes that in addition to the exploration of new forms of mobile phones such as folding screens, AR (XR)/VR devices may become the future, but the time has not come:

Regarding VR/XR, our team is also working on some key points, because frankly speaking, whether VR or AR launched today, I think the critical point has not yet been reached. The extremely comfortable and immersive experience has not yet been achieved, because I have also used various VR devices, and I felt very good when I first started using them. I might as well go to the real world to enjoy the sunshine and chat with everyone. The current key technologies, core technology reserves, and device capabilities are not yet mature.

This is the same as what we talked about earlier, that is, when an industry reaches a certain period of time and it continues to iterate with difficulty, the progress of each generation is not large. It mainly depends on when this critical point can be broken through.

As for the other option, Zhao Ming expressed a very firm refusal attitude:

We haven't considered (making cars), and the mobile phone has not been done well. When we make the mobile phone the first, we will consider making the car. Because once the core R&D engineers and R&D forces are dispersed (the competitiveness of Honor products will decline), from our management, at least in terms of my energy and ability, I can control this mobile phone track well and win this competition. The competition is already good.

When the expansion of our existing business, ability mining, strategic control points, and competitiveness have not yet been grasped, what kind of cars are we doing?

The business logic of Glory is that if car companies make mobile phones, then Glory can compete and have a great chance of winning. Then, it is better to cooperate with car manufacturers. As the device that users use at the earliest time, there are many places where mobile phones and cars are linked together. The cooperation between the two in solutions is to get what they need, which is beneficial to users. And because there is no competition between each other, it can promote an open cooperative relationship.

However, if Honor once made a car and involves competition, then Honor’s mobile phone is likely to be unable to connect to other brands of cars, and other brands of mobile phones will not be able to coordinate with Honor’s cars. And Zhao Ming also made a judgment:

A (manufacturer) makes both cars and mobile phones, and its market share is definitely a small part.

Honor has become independent, Huawei is the opponent

Talking about the new glory, Huawei and supply chain topics are topics that can never be avoided. These two questions are in the past tense, but even "looking forward" still encounters them.

The just-released Honor 70 series uses chips from MTK and Qualcomm respectively, and also debuted the IMX800 image sensor, which confirms that Honor is now back to normal in the supply chain, and it is well connected with R&D.

When "self-developed SoC chips" and "do not do cars" became multiple-choice questions, Zhao Ming still gave a negative answer:

We didn't build the team by doing SoC, because doing SoC is another thing, but it's okay to do all kinds of other chips.

After Honor became independent, partners include Qualcomm, MTK, Intel, Microsoft and Google, etc. However, the establishment and effectiveness of this cooperation is actually a painful process. Zhao Ming said:

We started from November 17, 2020, when Honor was sold as a whole and spun off from the Huawei system. At that time, the chips had already been pre-ordered. For example, the large number of chips this year, we had concluded the Q4 negotiations last year.

We are recovering to confirm that it can be obtained, and the re-locking of the chip will start in January 2021, and we will start to recover one after another, so we still have a little stock in the original chip system for the V40. The V40 is the first product released by New Honor. , On January 20, I used the one million tablets I bought before and saved a little. After the chips in stock are consumed later, we will re-purchase in the market bit by bit.

The first product we actually released with newly sourced chips was the X20. However, the product that reversed the market pattern of Honor is actually the Honor 50 series. The Honor digital series released this time last year uses the Snapdragon 778G. This chip was not used by other brand manufacturers at the time. It was the only chip that could be obtained in large quantities for us at that time, and it could be used in this gear, and it could also be used overseas, a chip that could be used all over the world.

At the same time, Zhao Ming also talked about the business logic of Honor not developing SoC chips by itself and not doing PlanB:

First, we are consumer electronics. Based on industry solutions and glorious plans, we compete in the global market in this field.

Second, in fact, in various fields, Glory is very open and transparent. The business logic I talk about externally and internally is consistent with many things. In fact, I have adhered to this style for so many years. The surface is the same, so that more people can understand us and the construction of the entire compliance system. When you continue to do this and maintain this very good communication, you will actually see that our global partners now have very good trust and support for us.

I also believe in Qualcomm, MTK, Google, Microsoft, Intel, and hope that Honor can help them compete with Apple, etc. Generally speaking, it is to integrate into a normal business competition system. Otherwise, we don't know how many layers of protection to add, and in that case, we won't be able to do PlanB.

While Honor is on the right track, the situation of Huawei's mobile phones has also begun to improve. In the warm-up video of Huawei's Mate Xs 2 folding screen, Huawei Consumer BG CEO Yu Chengdong said: The supply of Huawei's mobile phones has been greatly improved this year. Huawei The phone started to come back.

For New Glory, Huawei is the shadow of the past, but emotion belongs to emotion, and business belongs to business. Now the relationship between the two needs to be redefined. Zhao Ming said:

Huawei is also our competitor now. It is my old club when it comes back, and I am happy for it. Again, Apple is also our opponent now, and Huawei is also our opponent when it comes back. Everyone should look at this matter according to normal business. I can't worry about Huawei's return all day long. Huawei's return is also a good thing for those of us who have worked at Huawei. But in turn, in the face of normal competition, we can just be prepared.

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