We have reported that the world of tablet and phone will never work without branding. We believe that people that sell unbranded phones, though they may work, are not riding on a good business model. People do not use phones or tablets for just the usage, they associate the brands.
So after many months of growth, unbranded manufacturers or what the industry calls white-box manufacturers are taking a hit. Nomura Equity Research concludes that the market is on slow down after China Mobile cancelled 90% of 12 million TD-SCDMA 3G handsets it once put in. People as they make money want to be associated with brands and not using a phone with no identify.
This is already calling for changes in quarterly estimates with SIM Technology Group Ltd., one of the largest handset manufacturers in China, issuing a profit warning, saying it expects to make a loss in H1 of 2011.
Also another player in this sub-sector, Longcheer, have implemented significant employee layoffs recently, according to Nomura analyst Leping Huang. The company announced its first quarterly loss in eight years in the third fiscal quarter ended March 31, 2011. When the financial results were announced Deng Hua, CEO, commented: “The market for our mainstay feature phones products continue to remain challenging due to the excess capacity and adverse competition both upstream and downstream.”
At the same time China Mobile has reduced its requirement for TD-SCDMA handsets from 12 million handsets to 1.2 million, which is set to challenge handset design houses and OEMs that had been gearing up to meet orders, Nomura said.
So if you are in Lagos and you hope to get into this business, think again. It is far better to brand your product and give it an identity.