OnePlus has been OPPO’s sibling brands for years and benefitting from OPPO’s strength in component procurement, R&D, and product development.
Now it has become a sub-brand of OPPO, how does the change impact OPPO’s performance in Q3?
- The first benefit is on the hardware revenue side. The merger of OnePlus brand immediately boosted OPPO’s total smartphone shipments by roughly 9% this quarter. Meanwhile, OnePlus also lift up OPPO’s total ASP.
- The second benefit is on the regional presence side. OnePlus is well-accepted in India, Western Europe, and North America. After OnePlus joining in the camp, the new OPPO’s regional presence was immediately strengthened and has become more balanced.
- The third benefit is on the brand uplift side. Our tracking shows that OPPO and OnePlus combined accounted for 8% volume share in global smartphone premium segment (wholesale ASP above USD 300) before the merger, barely surpassing Xiaomi become the third largest vendor in the segment in Q2 2021. OPPO seems to have special expectation on OnePlus for domestic market. OPPO China announced the dual-flagship strategy this quarter. OnePlus will complement Find series to strengthen the vendor’s offering in premium segment.
- The fourth benefit is on the internet service side. OnePlus is merging its OxygenOS with OPPO’s ColorOS. This will increase the scale and improve the profile of ColorOS userbase. In its recent developer day, OPPO revealed that the monthly active users of its ColorOS had totalled 460 million by October 2021, roughly +24% YoY up from a year ago. With OnePlus branded devices preloading ColorOS, the number of ColorOS will continue to increase, which represents some extra revenue stream to OPPO.
Despite of all these benefits, there are negative impacts as well: oppo oneplus merge
- First is on the profit side. OPPO’s profit margin is diluted by that of OnePlus, as OnePlus has lower profit margin than OPPO before the merger blaming to the size effect.
- Another negative impact is on the cannibalization part. OnePlus’s line-up has higher cost performance ratio than that of OPPO. The potential cannibalization risk much depends on whether OPPO will share offline channel with OnePlus.
The slow-down and the turbulence caused by internal re-org and the intensified competition in online channel combined have weakened OnePlus’s performance this quarter. We are pessimistic about its performance in Q4. OPPO needs extra resource and patience to achieve all the targeted synergy from the merge with OnePlus.