BCG-马来西亚国库中国R2X Content and IOT商业尽职调查报告-20151120

ProjectRice2XInterim2:Content/servicesandIoTNov.13th,2015ProjectupdatesSurveycompleted3focusgroupdoneThisweekwewillshareourpointofviewoncontent/serviceandIoTNextweek,wewillfocusonbuildingtoplineforecastExecutivesummaryR2X'sisexpectedtoholdorevengrowmarketshare,andthetotalMIUIuserbaseisexpectedtosurpass150Mn.Withbarelynoflagshipproductsin2015,R2Xstillholdsitmarketshare,andrankedNo.1in11.11onlinesalesbyshipmentR2X'ssmartphoneandIOThavesynergies,i.e.,smartphonesalescandriveupR2XIOTproductsales,andR2XIOTproductsalesarealsoeffectivetoconvertuserstoR2XsmartphoneBasedonsurveyresult,20%+R2X'sSPuserspurchasedR2XIOTproducts,muchhigherthanR2XIOTmarketshare70%+R2XIOTusersconsidertobuyR2X'sSP,muchhigherthanpercentageofrandomusersconsideringtobuyR2XSPHowever,ithasnotbeenproventhatR2Xcangeneratesubstantialrevenuewithmobilecontentandservicestosupportitsvaluation,asgamingcurrentlyisonlymonetizationtoolthatbringsinsizablerevenuewith24ARPUBut,R2Xhaspotentialstomonetizeoncontentandservicesbasedonitshugeandmobileinternetsavvyuserbase,andgrowthtrendofmobileARPUR2Xusershavehighstickinesstomobileinternetvs.otherOEMsR2Xhaslargetrafficonsearch,videoappandappstore,butcurrentlynoAdsmonetizationisinplaceduetoUXconcernARPUofgamingisexpectedtogrowasheavygames(MMOPGR,Action)movingfromPCtomobileThreekeypotentialC&SrevenuesourcesforR2XinthefutureMobilegameprovidesARPUof24RMB,andmaygrowto38RMBMobileads,currentlystillindevelopment,mayprovideARPU10(2017)-42(2020)RMBInternetfinancerevenueistooearlytotellasthewholeindustryisstillindevelopmentstageRevenueofR2Xreading,theme,lifeO2OserviceistrivialFinally,themonetizationpotentialsofhighmargincontentandservicesmainlyrelyonSPuserbaseinsteadofIOTuserbase,thuslow/nogrowthofSPwouldtankthewholeinvestmentthesisMonetizationonTV,OTTbox,router,tabletandwearables'sisdoubtfulinshortterm,andhardwaremarginisrazorthinAgendaFeedbacksfrominterim1Survey/FocusgroupresultChinamobilecontentandservicemarketMobileOSAppstoreMobilegame&ARPUAdvertisementInternetfinanceO2OChinaIOTandsmarthardwaremarketSmartTVOTTboxRouterTabletWearablesandothersAppendixFeedbacksfromlastinterimProfitpoolanalysise-commercepenetrationofdifferentcitytier11-11SalesperformanceProfitpoolanalysis:almostzeroprofitforentrysegment

OnlyHuawei,R2XandOPPO/vivoaremakingdecentprofitsamonglocalplayers<$10088%1%11%$400-5502%42%44%2%6%$250-40019%4%17%$175-2503%8%2%13%4%36%24%2%4%$100-1754%11%5%12%52%7%7%18%15%16%12%5%CoolpadvivoMeizuAppleOPPOHuaweiSamsungLenovo1R2XOthersPrice

bandEntryLowMidPremiumSuperPremiumUpper-mid<5M~0%~240M6%~120M3%~630M15%~3,000M67%~400M9%%MS1.NotshowingsharesifOP%isnegative;2.onlytracktheplayerswithvisiblesharesinIDCdatabase;Source:IDC,Expertinterviewandequityresearch;BCGanalysisOperatingmarginanalysisforChinasmartphoneOEMsbypriceband(15Q2)OPwithinsegment%oftotal~0%3~5%3~5%10~15%8~15%$AverageOPmarginwithindifferentpriceband25~35%ChineseSPmarketisverycompetitive,among~302sizableOEMs,onlyHuawei,R2X,OPPO,vivocouldmakingdecentprofit75%ofprofitareearnedbySamsungandAppleOthersareontheedgeofbreakevenorevenloss>$550Smartphone

(HW)$MS1OP%$MS1OP%$MS1OP%$MS1OP%$MS1OP%Entry22%<1%~0%-~0%-1%~0%22%-8%Low19%3~5%18%10%9%3~5%4%3%8%-5%Mid6%3~8%11%~10%10%~3%6%5~8%4%1%Upper-mid18%5~10%13%10~15%15%10~12%4%~8%1%5%Premium2%8~10%37%10~30%8~10%>10%----Superpremium0%-0%-0%-----Revenuesharevs.operatingmarginbypricebandLTM(14Q3to15Q2)ValuesharesandoperatingmarginPricebandsegmentCategoryHuaweiOPPO/vivoR2X1.MS=RevenuemarketshareintermsofSmartphonevalueineachpricebandsegmentintheLTM(14Q3to15Q2);Source:IDC,Expertinterviewandequityresearch;BCGanalysisMeizuLenovoBackupMarginsofmostChineseSPplayers'arealreadyquitethinBrands15Q2volumeshares2012201320142015EApple11.1%36%29%28%~30%SamsungMobileBiz7.6%18%18%9%10-15%R2X16.3%12%8%~3%~3%OPPO/vivo~8%each~7%6-7%~10%8-10%HuaweiMobile15.8%<5%4%7-10%10-15%Coolpad7.1%3%2%~3%~1%HTC<1%7%0%1%LossLenovoMobileBiz5.3%Loss~1%-2%LossTCLcommunication<1%-2%~2%~4%3-5%SonyMobileBiz<1%-8%-5%-17%LossNokiaMobileBiz<1%-8%-5%-21%LossBlackberry0%11%-6%-52%LossSources:Analystreport;WSJ;MerrillLynch;BCGanalysis;EBITmarginofmajorphoneplayersBackupe-commercepenetrationkeepincreasing,butlowtiercitieslaghightiercitiese-commercepenetrationincreasedby~5%annuallyOnlinepurchasefrequencyreachedalmostfourtimesperyearin2013e-commercepenetration,2011-20131

Onlinepurchasefrequencyperyearperhousehold,2011-2013Tier1Tier2Tier5Tier3Tier42012:25%2013:29%2011:19%2011201220132011:2.92012:3.22013:3.8Tier5Tier4Tier3Tier2Tier11.Onlinepenetrationisthenumberofhouseholdsthatpurchasedacertainbrandfromtheonlinechannelatleastonceperyear,dividedbythelocalnumberofhouseholdsSource:KantarWorldpanel;Tier5-6citestendtopurchaseSPmoreinofflinechannels,whiletier1-2tendtopurchasemoreinonlinechannels2014SPonline/offlinechannelbreakdownbycitytiers100208006040Tier3-4Tier1-2Offline92155172Tier5-6Online%,MnSource:Expertinterview,litresearch,industryreport,surveyresult,BCGanalysisR2XsmartphoneandIOTbusinessgrewin201511.11saleswithoutanewflagshipmodelR2XsmartphonerankedNo.2invalueandNo.1involumefor201511.11sales......OtherIOTbusinessallgrewfastcomparingtolastyearOthersTotalHuaweiAppleMeizu20LeTVXiaomi28201511.11onlinesalesofsmartphone(RMB100Mn)R2XrankedNo.3inTmallinSPvalueR2XjustenteredJDbutwithgoodperformanceHuaweioutperformR2XinsmartphonevaluebecauseofhigherASPR2XrankedNo.1byallitemvalueinTmall,JDandSuningplatformsR2X'sTmallSPsalesdecrease,buttotalSPsalesincreaseasexpandingtoJD.comTmallJD,Suningandothers+138%+82%+200%506630TVOTTbox4010+62%22RouterTablet81282014.11.11201511.112014-1511.11R2XsalesofIOTonTmall(UnitsinK)Source:litresearch,BCGanalysisQikuOPPOSamsungCoolpad...TmallONLY201511.11Tmallsales:R2XrankedNo.1inSPshipmentandNo.3inSPvalue,andRMnote2rankedNo.1inshipmentBrandrankingbyvalueandshipmentSmartphonerankingbyshipment#ModelBrand1

红米note2

R2X2荣耀5XHuawei3魅蓝metalMeizu4红米2A增强版R2X5iPhone6SApple6荣耀畅玩4CHuawei7魅蓝2Meizu8小米4cR2X9荣耀6Huawei10荣耀7iHuawei#Brand1R2X2Huawei3Suning4Uniqlo5Meizu#Brand1R2X1.03M2Huawei0.94M3Apple4Meizu5QikuByvalueofallitemsBySPshipmentR2XrankedNo.1inTmallbyvalueofallitemsandSPshipmentR2XrankedNo.3inTmallbySPvalueBackupSource:litresearch,BCGanalysisTmallONLY#Brand1Huawei94%Honor2Apple3R2X4Meizu5QikuBySPvalueAgendaFeedbacksfrominterim1Survey/FocusgroupresultChinamobilecontentandservicemarketMobileOSAppstoreMobilegame&ARPUAdvertisementInternetfinanceO2OChinaIOTandsmarthardwaremarketSmartTVOTTboxRouterTabletWearablesandothersAppendixExecutivesummaryofSurveySmartphoneR2XandHuaweiwerebothperceivedastier2brands(AppleandSamsungastier1),withclearadvantageoverotherlocalbrandssuchasMeizuandLenovoForR2Xuserprofile,R2Xareyoungerandwithlowerincomevs.HuaweiandHonorMostpeoplementionedhigh'Valueformoney'forR2Xastop'definitelybuyagain'reason,deeplyrootedinconsumer'sheartOnly~8%ofcurrentR2Xuserswilldefinitely'notbuyagain'thesamebrandagain,onlylowerthanAppleandHuawei(butnotHonor),asreferencethisrateis20%forLenovoand21%forMeizuMeizuisactingascopycattoR2Xbyadoptingsimilarchannelstrategy,pushingvol.throughonlinechannelsInlowertiercitiessuchasDongguanandZhengzhou,~75%purchasedSPthroughofflinechannels,muchhigherthanintier1and2cities(~30%)ContentandserviceAppstore,R2XusershavehigherstickinesstoOEMpre-installedAppstorethanotherAndroidphonesFornewservicesuchasfinanceandO2Oservice,usersaremorestickto3rdpartyAppsIoTPeoplebuyingR2XIoTbecauseof"likethebrand","wordofmouth",and"highvalueformoney"R2XsmartphoneusersareactivebuyerofR2XloT,with90%ofthemowningsomekindofnon-SPdevicesViceversaconversionrateofR2XIoTproductstoR2X'sSPisveryhigh,with92%ofthemeitheralreadyownR2XSP,willdefinitelybuy,orinterestedtobuye-commerceplatformE-commerceplatform()servesasanactivechannelforR2Xproducts;~20%oftotalsurveytargetboughtproductsonoritsSPe-commenceApp;SP,bandandaccessoriesarehotitemsSurveyOverallsampledistributionofsmartphonecustomersurveyDongguanWuhanChengduBeijingShanghaiZhengzhou

SPBrandDistribution(Currentphone)IncomeDistributionCityDistributionN=1,334N=1,334N=1,3340.4%10,000-14,999<15001,500-2,9993,000-5,9996,000-9,999≥20,0000.2%15,000-19,999StudentSource:BCGSmartphonesurveyin15Q3;BCGanalysis%Others7%Lenovo3%Meizu13%Applevivo5%OPPO9%Huawei24%Samsung20%4%15%R2XSurveyHuaweiandR2Xwereperceivedastier2brands(AppleandSamsungastier1),withclearadvantageoverotherbrandsAwarenessConsiderPurchased15%10%21%46%14%46%48%35%20%8%16%15%13%3%4%9%(%)(%)Conversionrate1.Unaided;2.Unaided;3AidedSource:BCGSmartphonesurveyin15Q3;BCGanalysisSmartPhone/Brandfunnel15%23%35%51%49%50%(%)38%37%32%34%43%501000Tier1(Top3brands)1

Apple98%93%Lenovo75%6%29%40%Meizu66%4%16%46%OPPO80%7%34%40%R2X92%19%46%27%HWHonor60%2%13%45%Huawei93%24%48%21%Samsung95%73%15%8%Tier33

20%19%27%40%60%HWHonorisasuccessfulcomplementarybrandtoHuaweiTier22

SurveyMostpeoplementionedhigh'Valueformoney'forR2Xastop'definitelybuy'reason,deeplyrootedinconsumer'sheartOthers高性价比18%性能非常好非常喜欢它的操作系统和用户界面质量非常好没有特殊原因，就是习惯，懒得换了4%口碑好18%售后服务好7%周围很多人用，品牌流行7%喜欢它的外观设计7%27%17%20%37%30%13%23%27%8%12%12%16%4%21%15%13%30%57%34%23%38%7%10%28%7%10%17%28%21%10%45%SmartPhone/ChannelApple(N=45)Samsung(N=30)OPPO/vivo(N=25)R2X(N=47)Huawei(N=29)[Q13.1]Whywillyoudefinitelybuytherelativebrands?Source:BCGSmartphonesurveyin15Q3;BCGanalysisBreakdownbybrands(N=176)SurveyOnly~8%ofcurrentR2Xuserwilldefinitely'notbuy'nexttime806020400100SamsungvivoOPPOApple

HuaweiHWHonorLenovo2%8%R2X%MeizuDefinetlynoDefinetlyyesMaybeyesNotSure[Q13]:Possibilityofbuyingsamebrandnexttime(N=1,206)Source:BCGSmartphonesurveyin15Q3;BCGanalysisSmartPhone/switchingbrandSurvey'Lowquality,slow'astop'definitelynotbuy'reasonforR2XMostlyduetooldmodelssoldasinventoryinthemarketdilutingR2X'sbrandequityOthers没有特殊原因，就是用腻了，想换个品牌57%口碑差，大家都不用了售后服务差不喜欢它的外观设计档次太低太贵了，不值14%性能太差了，卡讨厌它的操作系统和用户界面14%质量太差了14%现在讨厌这个品牌4%43%4%4%57%13%30%0%0%44%0%0%8%12%16%32%12%0%0%5%14%10%19%5%62%10%38%5%7%36%14%21%7%7%29%7%21%SmartPhone/ChannelApple(N=7)Samsung(N=23)OPPO/vivo(N=25)R2X(N=21)Huawei(N=14)[Q13.1]WhywillyoudefinitelyNOTbuytherelativebrands?Source:BCGSmartphonesurveyin15Q3;BCGanalysisBreakdownbybrands(N=176)MostlyownersofR2X'soldmodelsreleasedover2yrsRMNote(50%)XM2/3(38%)SurveyWhoisbuying?(1/2)

R2Xhasahigherpenetrationinlowerincomesegment602080100400vivo2%HWHonorHuaweiMeizu30%%1%2%2%Apple

SamsungOPPO2%1%2%3%3%1%2%3%1%R2XLenovoNoincome/Student15000-19999≥20000<15001500-29993000-59996000-999910000-14999MonthlyincomelevelbreakdownbySPbrand(N=1,206)SmartPhone/CustomerprofileSource:BCGSmartphonesurveyin15Q3;BCGanalysisRMB/monthSurveyWhoisbuying?(2/2)

Apple,vivo,R2XandMeizuhasahigherpenetration(>70%)amongthepeopleunder30100040806020Apple

%2%2%Huawei2%R2X3%OPPO1%Lenovo1%SamsungHWHonor1%1%1%70%vivoMeizu50-6040-5030-4020-3010-20/StudentAgebreakdownbySPbrand(N=1,206)SmartPhone/CustomerprofileSource:BCGSmartphonesurveyin15Q3;BCGanalysisSurveyOnlineandofflinechannelbydifferentbrands

MeizuascopycattoR2XadoptssimilarchannelstrategyOthers1%Otherofflinechannel10%OperatorOfflineretailer21%OfflinestoreofGOME/SuningOtheronlinechannel1%JD/JDApp11%TB/Tmall/App3%OfficialWebsiteApp

OfficialWebsite33%2%14%16%26%18%2%8%4%2%9%12%2%13%11%21%16%2%17%6%2%3%8%12%38%18%n.a.9%3%2%7%7%n.a.11%11%n.a.n.a.26%11%~0%35%n.a.17%14%~0%29%17%9%n.a.11%3%SmartPhone/ChannelR2X(N=272)Huawei(N=195)HWHonor(N=102)OPPO(N=105)Meizu(N=47)Lenovo(N=35)[Q17]:WheredidyoupurchaseyourcurrentSmartPhone?OnlineChannel:OfflineChannel:Source:BCGSmartphonesurveyin15Q3;BCGanalysisBreakdownbybrands(N=1,334)Focusonlinechannel,alsosuccessfulexpandtoofflineinlowersegmentDualbrandstrategyforHW45%55%76%24%62%38%79%21%28%72%77%23%SurveyOnlineandofflinechannelbycitytier

Offlinechanneltakes~75%inTier3cities:DongguanandZhengzhouOthersOtherofflinechannelOperator14%Offlineretailer30%OfflinestoreofGOME/Suning13%Otheronlinechannel1%JD/JDApp10%TB/Tmall/AppOfficialWebsiteApp

OfficialWebsite15%4%8%11%26%16%2%15%4%1%13%6%3%10%28%11%<1%19%10%3%9%2%20%17%14%10%<1%4%0%3%29%1%19%13%24%17%1%9%4%~0%9%2%26%18%26%6%1%6%2%14%SmartPhone/ChannelSH(N=223)BJ(N=223)CD(N=236)WH(N=212)DG(N=227)ZZ(N=213)[Q17]:WheredidyoupurchaseyourcurrentSmartPhone?OnlineChannel:OfflineChannel:Source:BCGSmartphonesurveyin15Q3;BCGanalysisBreakdownbybrands(N=1,334)Higher%ofofficialwebsitesuchasX,A,etc.62%38%64%36%59%41%63%37%74%26%77%23%SurveyRatioofR2Xstickingtothepre-installedAppstoreishigherthanHuawei,MeizuandothersAndroidSPOEMs(N=159)(N=272)N=297N=47Appstore/pre-installmentSource:BCGSmartphonesurveyin15Q3;BCGanalysis402060100800Huawei/HonorPre-installedApp1R2XAppleMeizu3OtherAppStores1Din’tknowOthers4BothNeveruseSurveyWhyseekfor3rdpartyAppstore?

ImprovementareasforSP'spre-installedAppStorebydifferentbrandsR2X(N=272)Huawei/HWHonor(N=297)Meizu(N=47)%Others有最热门的APP和游戏有很多免费的APP和游戏APP和游戏有购买折扣我上一部手机用的是这个应用商店广告少，界面整洁应用商店的推荐功能和排名功能好用APP和游戏的质量高，安全APP和游戏更新快Q22:Amongalltheuserswhochoosetoinstall3rdpartyAppsuchas360/Tencent,reasonsareasfollow:%%Appstore/bySPbrandSource:BCGSmartphonesurveyin15Q3;BCGanalysisn.a.SurveyManyconsumersareusedtospecificApp,andonlyasmallportionwilltryR2X'sAppDon’tUseUseDailylifeservice(O2O)MobileLotteryserviceMobileFinancialProductService(理财产品)OnlyR2XOnly3rdParty10%10%R2X+3rdparty

R2XMobileInternetcontentserviceuser(%)Contentserviceproviderchoice(%)WhynotuseR2X'scontentservice?%Don’tknowthisR2Xservice

DonottrustR2X’sservice10%R2X’sAppsarenotuserfriendly4%11%3rdpartyhasmorechoice32%3rdpartyserviceischeaper/betteryield35%Usedtothepreviousapps60%Amongtheusersonlyuse3rdpartyApp,reasonsasfollows:Source:BCGSmartphonesurveyin15Q3;BCGanalysispenetrationstillverylowC&S/pre-installAppConsumerofwellestablishedcontentservicelikeO2OandmobilefinancialproducthashighAppstickinessN=272SurveyConsumershowsdifferentwillingnesstobuyregardingdistinctIoTcategory,w/lowestinotherSmarthomeAppliance20%40%60%80%0%R2XDeviceNon-R2XdeviceInterestedinR2XNotinterestedinR2XOtheraccessories(headphone,batterypack)Wearabledevices(smartband)OtherSmarthomeappliance(airpurifier,waterpurifie1%SmartrouterTV/OTTbox[Q26]:NotInterestedinfollowingIoTcategory(N=1,334)AlreadyownedIoTDonotownbuthaveinterestinIoTIoT/InterestandwillingnesstobuySource:BCGSmartphonesurveyin15Q3;BCGanalysisConsumerNOTinterestedinthefollowingIoTcategorySurveyMostpeoplepurchasedIoTdevicesduetoitsusefulfunctionalityindailylifeReasonstobuyortobeinterestedinIoTdevices(N=851)OthersPercentageDecentbrandwhichcancatchotherseyeIt’sthefuturedevelopmenttrend

TomakeconnectionswithotherdevicesCheaptohaveatryHighervalueofmoneythantraditionaldevicesInfluencedbypeoplearoundusingthisproductToexperiencethemostadvancedtechnology

Usefulindailylifewithfunctionality[Q27]:ForthosewhohaveinterestorpurchasedIoTdevicesbefore,reasonsareasfollow:Source:BCGSmartphonesurveyin15Q3;BCGanalysisIoT/InterestintheoverallCategorySurveyPeoplebuyingR2XIoTbecauseof"likethebrand","wordofmouth",and"highvalueformoney"[Q28]Reasonstobuy/beinterestedinR2X'sIoTdevices19%Advancertechnology

26%High’Valueformoney’ConnectiontootherR2Xdevices5%4%BetterDesign2%OthersBetterquality

13%Morefunctions

27%Pleasantuserexperience

17%NottryyetbutlikeR2X

15%TriedandlikeR2X’sbrandimage28%18%Positivecommentsonline

recommendedbyrelatives/friends/colleague

10%13%16%14%4%0%25%14%23%31%3%18%12%1%7%6%24%16%17%18%21%16%11%17%23%9%28%19%2%18%7%15%17%21%18%10%24%31%10%24%14%3%31%22%6%6%18%7%%24%ForthosewhopurchasedR2XorhaveinterestinR2X'sIoTdevice(for[Q26]whochose1/3)IoTSource:BCGSmartphonesurveyin15Q3;BCGanalysisTV/OTTbox(N=230)SmartRouter(N=185)SmarthomeApplianceeg:airpurifier(N=149)Wearabledeviceseg:smartband(N=255)Accessorieseg:batterypack(N=376)SurveyForpeoplewhowon'tbuyR2XIoT,"notawareofthat"isthemainreason,butforwearable,itis"lowvalueformoney"ReasonsNOTtobuy/havenointerestinR2X'sIoTdevicesOthers4%Can’ttryitoffline

7%Outoffashiondesign

6%Lowbrandimage

3%Low’Valueformoney’18%Poorquality

20%Limitedfunctions

13%Outdatedtechnology

11%Negativecommentsonline

9%Notrecommendedbyrelatives/friends/colleague

20%Baduserexperience

7%Don’tknow/heardofR2Xhasthisproduct36%4%7%5%4%17%18%11%9%8%21%7%36%2%4%7%2%24%19%13%8%6%18%7%33%17%6%4%9%7%32%19%13%10%8%25%7%%24%6%10%4%19%12%8%8%9%21%9%22%TV/OTTbox(N=381)SmartRouter(N=419)SmarthomeApplianceeg:airpurifier(N=289)Wearabledeviceseg:smartband(N=223)Accessorieseg:batterypack(N=500)Forthosewhopurchasednon-R2xorhavenointerestinR2X'sIoTdevice(for[Q26]whochose2/4)IoTSource:BCGSmartphonesurveyin15Q3;BCGanalysisSurveyR2XsmartphoneusersareactiveloTpurchaser,yetproductcategoryareoflowerunitpricesuchasbatterypack,etc.%Non-IoTUserIoTUserR2XSmartPhoneowner11%89%R2XSPuserIoTownershipbreakdown(N=272)IoTproductcategorybreakdownamongR2Xusers(N=242)Accessorieseg:batterypack52%%OtherSmarthomeappliance4%SmartRouter11%Wearableeg:smartband11%21%TV/OTTSource:BCGSmartphonesurveyin15Q3;BCGanalysisIoTSurveyConversionrateofR2XIoTproductstoR2X'ssmartphoneis~92%,only8%usersshow"nointerest"%WillnotpurchaseR2XDonotownbuthaveinterestDonotownbutwillpurchaseAlreadyOwnedR2X’sSmartphoneTotal[Q29]:DoyouhaveinteresttobuyR2X'ssmartphone?(N=371)PotentialofIoTuserconversionintoR2X'sSmartPhonecustomerIoTconversiontoSmartPhoneSource:BCGSmartphonesurveyin15Q3;BCGanalysis92%Survey19%oftotalsurveytargetboughtproductsonXoritsR2XApp,SPandbandandaccessoriesaretopitems%oftotalsampleBoughtbeforeVisitedbutdidn’tbuyKnowbuthaven’tvisitedthewebsite/appHaven’theardofthatTotal[Q30]Haveyoubeento/SPApporbuythingsthere?

19%consumershasboughtthingson/App(N=1,334)[Q31]WhatdidyoubuyonX/App?Besidessmartphone,22%haveboughtsmartbandon/App(N=253)%OthersaccessoriesR2XothersmarthomeApplianceR2XTVR2XOTTboxR2XSmartphoneR2XRoutersR2XSmartbandSource:BCGSmartphonesurveyin15Q3;BCGanalysisIoTSurveyExecutivesummaryoffocusgroupBrandimageR2X'sbrandimageisgoodamongusersRankedasleaderoftier2brand,andonlyApplelistedastier1bymostusersClosetoSamsung,andsimilartoHuaweiR2X'sbrandassociatedwithmanygoodaspectsYouthInnovativeHighvalueformoneyHightechnologyIntelligence...MifunsMifunsarepassionateonR2XbrandandproductsManyrankedR2XasfirsttierbrandCriticalwhencommentingonotherbrandsDefensivewhenotherscriticizeR2XMifunsareactiveinternetusersandfondoftechnologyFollowtrendofdev.oftechnologyEagertotrynewthingsFamiliarw/spec.ofsmartphoneProduct(SP+IOT)R2X'sSPnotperfectEvenMifunscriticizeone.g.overheated,slowafterlongusage...ManyswitchedtoOPPO,vivoandHuaweiduetoproductissuesValueformoneythreatenbyMeizuR2XIOThassynergywithSPManypurchaseR2XIOTbecauseofSPSomeusersdon'tevenconsiderotherbrandsContent&serviceR2Xuserstendtousepre-installedappstore,gamecenter,videoapp,searchengineConvenientandsafeGoodcontentqualityR2XusersnotuseR2Xpayment,financeandlifeO2OappsUnwillingtoswitchfrompopularappsPoorqualityofservice,andsafetyconcernSwitchbarrierofO2OandfinancialservicelowerthanpaymentDiscount/higherreturncantriggerswitchSource:focusgroupinterview,BCGanalysisFocusgroupAdvantages/disadvantagesofR2XsmartphoneBrandImageOSProductfunctionAdvantageDisadvantageYouth,highvalueofmoney,diversityoftheproducts,high-tech,innovation,intelligenceSocialimpactsfromfriends/familyPeoplearoundmearerushingtobuyit,easytobeaffectedBetterUIdesgincomparedtootherAndroidphonesUnwillingtoswitchtoHuaweiafterusingMIUIUsefulfeaturetolocateandfindlostphoneQuickiterationofupdateswithnewinterestingfeaturesHardtoobtainthephoneinhungermarketingandflashsalesDistractedbytoomanyfieldswithoutfocusUnwillingtopaybeforereceivingthephoneLackofpromotioninofflinestoresLackofofflineservicestores,andpoorservicequalityinofflinestoresOftenoverheatedBecomeslowerafterlongtimeusageNotcompatibletosomeappsCannotplugcardsofallthreeTelecomserviceproviderssimultaneouslyUserswithfreemobilecardofferedbyChinaTelecomcannotusethecardScreeneasytobreakandexpensivetofixNoNFCfeatureSource:FocusGroupinterview,BCGAnalysisFocusgroupReasontochoose/notchooseR2X'scontentandservices(1/2)R2XappstoreR2XgamecenterR2XvideoWhychooseR2X'sapps?Whychoosemajorappsinthemarket?R2Xmoresafethan3rdpartyR2XwithelegantdesignwithouttoomanyadvertisementR2XversionappswithbettercompatibilityandperformanceinR2XcellphoneAutoupgradingofappsEasytodownloadanduseR2XVideocombinesresourcesofiQiyiandTudouR2XVideoismoreeasytocachevideosManyappsarenotfreeonMiAppstorewhilefreeon360MiAppstoredoesn'thaveenoughappsMoreconvenienttoconnectphonetoPCusing360Incidentallyuse360becauseofitspopularantivirusappsSomegamecenterhavecrackversionofgameswhichdonotcostanymoney GetusedtoiQiyiiQiyihasalotofpromotionthisyearSomevideoscanonlybewatchedoniQiyiSource:Focusgroupinterview,BCGAnalysisFocusgroupWhychoosemajorappsinthemarket?Reasonstochoose/notchooseR2X'scontentandservices(2/2)R2XpayR2XlifeO2OserviceFewpeopleareusingR2Xpaysohardtotransfermoneytofamily/friends/shopsNoneedtouseR2XpaysinceAlipayissafeenoughandTenpayisconvenientBaduserexperienceonR2XpayManypurchasenotsupportedbyR2XpayStronguserstickinesstooldapps,easytogetstartedonoldappswhileR2XserviceneedstimetolearnR2XO2OserviceoftensuspendedtemporarilyR2XO2OhaslimitedcouponsR2XfinanceWhychooseR2X'sapps?SafetyconcernofproductsonR2XfinanceNoclearstatementofprofitandriskonR2XfinanceSource:Focusgroupinterview,BCGAnalysisR2XusersseldomuseR2Xpay,financeando2oservicerightnowLimitedopinionsonwhytochooseexceptR2XgivingbigdiscountandhigherreturnontheservicesFocusgroupReasonstopurchase/notpurchaseR2X'sIoTproductsTVOTTBoxSmartdevicesSmartbandAccessoriesReasonstobuyR2X'sIoTproductsReasonsnottobuyR2X'sIoTproductsComparedtoSamsung,R2XisnotmatureinTVR2X'sTVdoesn'thavelivebroadcastLackofpopularprogramsNoUSBinterfaceonOTTboxNodifferencetoothersmartOTTboxNoneedtobuythesmartbandsincesmartphonehaspedometerfeatureappsR2X'scameracanuseitsrouters'largememoryWanttoconnecteverythinginthehouseTrustinR2X'sbrandandqualityR2X'smobilepowerpackhasbetterqualitythanotherbrandsSelfiestickisuserfriendlyR2XOTTboxisstableRiskconcernofprivacydisclosureafterconnectingdifferentdevicesVeryinterestingproductVerycheap,sonoharmtohaveatryImpactfromfamily/friendsSource:Focusgroupinterview,BCGAnalysisFocusgroupAgendaMainDeck:Content&serviceandIoTLifecyclevalueofanewR2XSPuser:fromRMB1273to1429

Assumingphonelifecycle=2yearInternetfinanceGamingIOTTotalvalueadded1,000OtherC&SPhoneHWEcosystemARPU2HW%ofvaluecontribu-tion1Grossprofitmargin100%0~5%~16%80~90%~2%50~80%100%0~5%~30%0~5%~5%80~90%~4%50~80%~43%8~15%