Over one hundred analysts and media gathered in Shenzhen, China, attending OPPO’s INNO Day activity on Dec 10th 2019. Our analysts from Wireless Smartphone Strategies (WSS) services attended the event. The convention was originally an internal event to showcase its latest R&D development and vision on tech trend to its employees. This year has marked the first time for OPPO to open such exhibition to external audience.
OPPO has enjoyed good momentum in global smartphone market over the years. If taking its online-focused sibling brands OnePlus and Realme into the account, OPPO as a brand house surpassed Xiaomi in Q3 2019, being the world 4th largest smartphone vendor after Samsung, Huawei, and Apple. Meanwhile, OPPO is now under mounting pressure in home market from resurgent Huawei and the vendor is working hard to seek new growth opportunities, especially in the new 5G era.
OPPO announced its ambition yesterday: go beyond a smartphone hardware vendor and become a world-leading high-tech company in 5G era. To realize the goal, OPPO outlined three main action points:
- Increase R&D total investment up to RMB 50bn (~USD 7bn) for the upcoming three years, mainly on frontier technologies. The focused areas include not only 5G/6G, AI, big data, cloud computing, but most importantly “the very core hardware underlying technology, software engineering and system capabilities” which implies the in-house chipset.
- Expand to consumer IoT domain aggressively. OPPO views smartphone as a key device portal to connect users, but it is not necessarily the only one. As a result, OPPO will expand to consumer IoT domain and will launch several new device categories in the near future. OPPO identified smart watches, smart headphones, and smart display in the presentation, and demoed the working prototypes of an AR glass and a CPE in the exhibition hall. OPPO said its in-house efforts will be focused on the device with high frequency of usage. For less-frequently used device categories, it will cooperate with other partners via a shared iOT platform (probably the one that OPPO co-initiated with vivo in 2018)
- Utilize its current user base and develop contents and their distribution system further in 5G context. OPPO is eyeing on software and service business, which enjoys a much higher margin than hardware business. OPPO boasted its 320 million active smartphone users, as well as its over 200 million user base for its browser and its app store in the event. OPPO also revealed that its smartphone users on average spend nearly an hour per day for OPPO’s content and services.
OPPO nowadays is widely known as a marketing-driven smartphone brand, but it was a tech pioneer to embrace 4G technology back in 2014. We expect this will happen again in the 5G era and the OPPO’s latest movements are critical to secure its success. After all, we believe only innovation can help vendors to build up long-term and sustainable differentiator in tech industry.
To achieve the goal, the vendor needs to ensure sufficient commitment and patience for its R&D development especially on the frontier ones and the core ones. The vendor’s move to the iOT makes sense in the 5G era when the boundary of different devices will be blurred. A key question for OPPO now is how to leverage its brand equity in smartphone to new IoT categories. As for its development on content ecosystem, we expect OPPO’s vision will be further clarified in the upcoming OPPO Developer Conference hosted next week in Beijing. We view the strong installed base of OPPO smartphones is the pre-requirement for the success of its service business. In that sense, OPPO needs to maintain and grow further its smartphone sales in the following years. Also, localization is another key aspect of service business. How to leverage its success story in China to overseas market is another challenge that OPPO is going to tackle in the following years.
Exhibit: OPPO’s Framework of Technology Integration in 5G and AI Era
