OPPO has plummeted from first to sixth, suffering a "Waterloo" amidst the industry's recovery! By betting on AI technology, OPPO aspires to regain its glory, but the reality is grim. Without proactive measures, AI may not be able to help OPPO reclaim its top spot, and its future path is fraught with uncertainty.

In the past two years, the smartphone industry has embarked on a new replacement cycle, with the entire market showing signs of recovery. Shipments from various players have increased qualitatively, but long-time market leader OPPO is far from elated.

According to data from multiple authoritative research institutions both domestically and internationally, OPPO has experienced a notable decline in both market share and shipments, both domestically and internationally, failing to capitalize on this round of growth.

In fact, OPPO's struggles extend beyond market competition. The company's internal business layout has also been plagued by unforeseen challenges. From the much-hyped chips to subsequent XR initiatives and foldable smartphones, these high-tech businesses have either been completely halted or temporarily shelved, reflecting the company's indecisiveness in strategic planning.

OPPO is going all in on AI, seeking to leverage this revolutionary technology to reshape its competitiveness in the smartphone industry. However, under the triple pressures of market conditions, competitors, and internal challenges, OPPO faces formidable obstacles in regaining its former glory.

Part 1

Plunging Sales, Struggling to Maintain Top Spot

In terms of sales alone, OPPO's decline has been evident for some time.

According to IDC reports, OPPO shipped 103.1 million smartphones globally in 2023, accounting for an 8.8% market share, a 9.9% year-over-year decrease, placing it fourth globally. However, when examined quarterly, OPPO fell out of the top five in both Q2 and Q4.

In fact, the difference in market share between the fourth, fifth, and sixth positions globally is not substantial. Yet, starting from Q4 of last year, OPPO has seen declines in both shipments and market share.

According to a report by market research firm TechInsights, Samsung led with nearly 19% of shipments in Q2 2024, followed by Apple with 15%. Xiaomi, vivo, and Transsion occupied the top five spots, with OPPO (including OnePlus) trailing behind.

Among these smartphone vendors, OPPO was the only one to experience a decline in shipments. According to TechInsights, OPPO and OnePlus combined shipped 25 million smartphones globally, an 8% year-over-year decrease, making OPPO the only brand among the top ten in Q2 to experience an annual decline. This marked OPPO's 11th consecutive quarter of annual performance declines.

Even domestically, OPPO's performance has been lackluster.

According to IDC's quarterly tracking report on China's smartphone market, OPPO held a 19.6% market share in Q1 2023, ranking first domestically. However, this share dropped to 17.7% in Q2, further slipping to 16.2% in Q3 before inching up slightly to 16.7% in Q4. Yet, OPPO's struggles became evident upon entering 2024.

According to TechInsights, China's smartphone shipments grew 5% year-over-year in Q2 2024, with vivo leading the market with a 19% share. OPPO (including OnePlus) followed, ahead of Huawei, Honor, and Xiaomi.

However, a crucial point is that OPPO's Q2 shipments stood at 11.2 million units, down 8% year-over-year, marking its fourth consecutive quarter of negative growth. TechInsights' statistics are based on shipments. If sales are considered instead, OPPO's domestic market ranking would have declined even more significantly.

According to Counterpoint data, China's smartphone sales grew 6% year-over-year in Q2 2024, with vivo, Apple, Huawei, and Xiaomi occupying the top four spots. OPPO held just a 14.6% market share, plummeting from first to sixth in a year.

It's worth noting that global smartphone shipments have maintained a recovery trend for three consecutive quarters. This suggests that OPPO's former market share is being increasingly usurped, marginalizing the company further.

Part 2

Bound by Distributors, Strategic Indecisiveness

Despite its declining market share, OPPO has never been a company content with mediocrity.

Beyond its long-term focus on imaging, OPPO made a decisive move to develop its chips in 2019, embarked on channel reforms in 2020, and subsequently invested heavily in XR and IoT. The company is eager for change.

However, the results have often fallen short of expectations. After four years of chip development, OPPO announced the closure of its ZEKU company and disbanded its R&D team in 2023, effectively ending its chipmaking journey.

OPPO's IoT strategy focused solely on developing related hardware products without targeted strategic deployment, leading it to miss the optimal window for IoT development. Nowadays, IoT has receded from OPPO's core focus. The IoT business group has undergone personnel adjustments, with year-end bonuses slashed by 70%, and rumors of TV business line layoffs persist.

Internally, OPPO's failed business reforms are partially attributed to the strong influence of its distributors.

Strong ties with distributors are crucial to OPPO's survival. As core components, distributors hold significant equity stakes and wield considerable influence. This means they play a pivotal role in shaping company strategies and product decisions, acting both as judges and players.

As the smartphone supply chain becomes increasingly transparent, a conflict arises within OPPO: if the brand fails to elevate itself and pursue high-end models, it risks being attacked from all sides. However, distributors prioritize profitability and prefer selling the most lucrative models. Investing in R&D inevitably impacts short-term profits, and distributors often lack patience.

As a result, reforms that do not generate immediate profits often falter within OPPO. The abrupt disbandment of ZEKU and the gradual silence surrounding IoT are prime examples. For OPPO, cutting its in-house chip development means losing a growth driver for its high-end products. If mid-to-high-end products and IoT offerings underperform, distributor profits shrink, necessitating subsidies from the parent company, which in turn reduces funding for new product R&D.

Distributors who see no product improvements or SKU expansions often blame failed reforms. However, both product and system reforms rely on distributor support, creating a negative feedback loop. Amidst strategic indecisiveness, OPPO misses critical windows of opportunity.

Industry insiders observe that OPPO's business fluctuations stem from its aggressive strategic decisions. "It feels like OPPO approaches business with a merchant's logic, pursuing profits where they exist and cutting losses where they don't," they say.

Frankly, OPPO's product capabilities and investment commitments are on par across imaging, chips, TVs, headphones, and other IoT products. However, when the company pushes a new business, it must first consider profitability and consult with major agents. Without market momentum, new businesses struggle to gain traction.

Nevertheless, a long drought has ended with a timely rain. As the biggest transformation in the past five to ten years, AI-powered smartphones will usher in a new replacement cycle, shaking up the industry. OPPO has halted traditional smartphone projects and embraced the slogan "ALL in AI," aiming to reclaim its industry leadership.

Part 3

Seeking Solutions in AI, a Long Road Ahead

Compared to smartphones from three to four years ago, there have been no significant performance enhancements across brands. Regardless of vendor claims, technological innovation holds no secrets, leveling the playing field.

Most people replace their phones not because they seek better products but because their old devices can no longer handle increasingly bloated apps. Moreover, apart from Apple, user loyalty is low across smartphone brands, trapping the industry in endless competition and simplifying the phone-buying decision to finding the cheapest option among similar specifications.

Thus, integrating AI into smartphones offers an industry breakthrough. OPPO is no exception, with a more concentrated AI smartphone strategy and internal integration, pooling scattered resources to tackle the market.

From a market perspective, AI smartphone penetration will attempt to breach the 10% threshold from the second half of this year to the first half of next year. If the discourse of interactive innovation proves true, AI smartphone penetration is expected to reach 50% within three years.

On paper, it seems all major smartphone vendors will embrace this change, starting on an even footing. Each brand has launched its own on-device language model, with comparable parameters and accompanying operating systems. A commonality is that nearly all Android vendors prioritize empowerment.

Taking the OPPO Find X7 series as an example, its key selling points at launch were AI call summaries, image erasure, and a new AI assistant. OPPO described it as "tasting AI," but consumers still prioritize phone heating and battery life when making purchases. Essentially, current AI lacks significant appeal.

Moreover, the popularization and application of AI technology require a mature ecosystem. While OPPO has invested heavily in AI technology, its ecosystem development lags behind. Compared to companies with robust ecosystems like Apple, Xiaomi, and Huawei, OPPO's AI services and applications fall short in user experience and market influence. This ecological weakness obscures OPPO's AI advantages, hindering its ability to quickly establish a strong market position.

To achieve rapid breakthroughs in AI, OPPO needs to create a landmark event akin to the "iPhone moment" to distinguish itself from competitors. However, the reality is that neither the market nor competitors will grant OPPO the time or opportunity to do so.

In today's fiercely competitive market, every smartphone vendor is actively deploying AI technology to seize market opportunities. For OPPO to stand out, it must not only make technological breakthroughs but also innovate in market strategies and user experiences.

The global smartphone market is showing signs of recovery, but competition remains fierce. Excess capacity and lack of differentiation plague all vendors. As the industry's "lifesaver," AI smartphones will undoubtedly generate significant traffic. However, given the complexity of the market environment and OPPO's difficult situation, its path to revitalization is fraught with challenges, and its future remains uncertain.