What Are the Main Reasons for the High Inventory Level of Mobile Phone Manufacturers

For Smartphone manufacturers, inventory is a very smart balancing technique. In the mobile phone market under the impact of the current epidemic, inventory has once again become the focus of the industry.

According to Guo Mingyu, an analyst at Tianfeng international, during the Spring Festival in 2020, mobile phone shipments in the Chinese market declined by about 50-60%, resulting in a high-level inventory of about 50-60 million units in the current channel. In the view of many people in the industry, most of these inventories may be 4G mobile phones.

So, what are the reasons for the high inventory level of mobile phone manufacturers? What impact will high water level inventory have on mobile phone manufacturers? How should mobile phone manufacturers deal with it in the future?

According to the analysis, the reasons for the high inventory of mobile phone manufacturers may include the following aspects:

Reason 1: the overall market shipment has shrunk. According to the latest quarterly mobile phone tracking report released by Market Research Institute IDC, in the fourth quarter of 2019, the shipment of China's smartphone market was about 86.2 million units, a year-on-year decrease of 15.6%. In 2019, the overall market shipment of China's smartphone was about 370 million units, a year-on-year decrease of 7.5%. The overall decline of market shipments is an important reason for the accumulation of high inventory.

Reason 2: the negative impact of the epidemic on mobile phone sales. Mobile phone stocks are mobile phones during the Spring Festival every year. But the idea of cleaning up mobile phone stocks during the Spring Festival shopping season is basically destroyed by mobile phone manufacturers' influence on New Coronavirus mobile phone. IDC also pointed out: in the first two weeks of January, although the overall market performance improved year-on-year, due to the epidemic, the Spring Festival holiday, which should be the peak sales season, was "cold".

Reason 3: the embarrassment of the transition from 4G to 5g. At present, when 5g replacement wave is coming, on the one hand, manufacturers should try their best to occupy the first mover advantage of 5g. At the same time, most manufacturers are faced with practical problems such as immature and insufficient supply of 5g chips and other core components, so they have to continue to launch 4G Mobile phones. However, when some manufacturers push 5g mobile phones with lower prices, some consumers turn to 5g mobile phones or continue to wait and see, As a result, many manufacturers left a lot of 4G mobile phone inventory at the end of 2019.

The high level of inventory will have the following impact on mobile phone manufacturers and the whole mobile phone market:

Impact 1: facing a cruel price war. Missed the great opportunity to promote inventory clearing during the Spring Festival, and manufacturers have greater pressure to clear inventory in February and March. IDC predicted: "the overall domestic market from January to February will face a sharp decline of about 40% year-on-year. If the epidemic is stably controlled in March, the overall market will gradually enter the recovery period, but it is still difficult to recover to the same period last year. The domestic market is expected to experience a year-on-year decline of more than 30% in the whole first quarter." the decline of market capacity, It may make a large number of inventory 4G mobile phones that have been subject to price reduction promotion have to be further reduced to make way for 5g mobile phones.

Impact 2: or affect the confidence of channel sales of 5g mobile phones. If a large number of 4G mobile phones are overstocked in the hands of channel providers, channel providers may not dare to ship a large number of 5g mobile phones. Therefore, even if the price is greatly reduced, manufacturers should empty the 4G mobile phone inventory as soon as possible.

Impact 3: capital turnover or challenges. Some people may say that the inventory of up to 60 million units is allocated to each manufacturer, that is, less than 10 million units. In fact, even if the inventory is 1000 yuan, it is not a small amount, not to mention some high-end model inventory. Therefore, if the inventory pressure is too large, it will also bring some challenges to the manufacturer's capital turnover.

So, facing the high level of mobile phone inventory, where should mobile phone manufacturers go?

First of all, price reduction and promotion is one of the few ways to clean up inventory, but at the same time, it can't make money at a loss.

Secondly, we should start to build a healthy and balanced inventory management and operation mechanism, and try to establish an inventory response mechanism to deal with the crisis.

Thirdly, with an eye to the future, while clearing the inventory as soon as possible, we must restore the supply chain capacity as soon as possible. Don't wait until the 4G inventory is cleaned up, but there are not enough 5g products to sell, which will be even more embarrassing.

What Are the Main Reasons for the High Inventory Level of Mobile Phone Manufacturers 1

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