OPPO announced the deeper integration with its sibling brand OnePlus in June. Since then, roughly 3 months have passed. How does the integration go? Where kind of synergies have the new OPPO achieved?

From revenue side, OnePlus is helping OPPO to uplift brand image especially among online community and affluent consumers. In yesterday’s autumn product launch event, the new OPPO announced its dual-flagship strategy. As a sub-brand, OnePlus will focus on premium segment and join Find X series to strengthen OPPO’s portfolio in the segment. Our tracking in Q2 2021 shows that with OnePlus’s share, the new OPPO has climbed to the third position in global premium segment (wholesale ASP above USD 300) by volume. Its distance to top two players - Apple and Samsung – however remains far, while its gap to Xiaomi and vivo is narrow. So, for the new OPPO the key assignment is how to solidify its current position in global premium market.

The cost synergy goes more straight-forward than that from revenue side. OnePlus’s OxygenOS is merging into OPPO’s ColorOS in China, and the overseas version is likely to follow soon. OPPO is reportedly cutting jobs especially in software R&D team and in iOT team. We do not interpret such layoff means OPPO in trouble. Instead, we view it is achieving the cost synergy from the brands’ merger. Our tracking shows the increasing cost pressure of OPPO in the previous quarters. OPPO’s rising investment on overseas expansion, on brand uplift, and on new technologies (in-house chipset, foldables, 5G and etc) all require long-term cash commitment. OPPO’s recent re-org is a proactive profit-oriented exercises and makes financial sense.

We view the brand merger is on the right track.  What remains to be seen is whether OPPO will leverage OnePlus’s presence in North America and to establish the partnership with local operators. Though its likelihood is low given the current political uncertainty between US and China, it will be very interesting if it does happen.