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Oppo warns to expect more frequent chip supply shortages

China smartphone maker aims to join world's top three within a few years

An Oppo store in Shanghai. The brand is aiming to take market share from embattled rival Huawei.   © Getty Images

TAIPEI -- Oppo, the world's No.4 smartphone maker, has said the world could face a so-called new normal of chip supply shortages over the next few years as demand is driven higher by 5G and other data-driven technology.

"Demand is explosive. The world's demand for computing power is so strong and the consumption of data is enormously growing. ... Production capacity is constantly running behind," Scott Zhang, Overseas Business Lead for Oppo, told Nikkei Asia in an interview.

"Nowadays," he added, "not only the tech industry but also automotive players are fighting over chip and component resources. ... The stress on the supply chain is a global phenomenon now and has become a key challenge that all industry players need to face and solve."

Zhang said his company has stepped up efforts to strengthen relations with key suppliers for its flagship phones and seek multiple sourcing for its mid-end phones to ensure supply continuity.

It is aggressively booking key components to make sure it has sufficient supply to keep pace with the global economic recovery and the 5G handset boom, he said.

Sources have told Nikkei that by the end of last year Oppo ordered components and parts for up to 170 million units for 2021, which is more than 45% higher than last year. Zhang declined to specify the company's shipment plan for this year.

Zhang said it was hard to say when the supply crunch will be solved.

"I hope the situation will ease a bit in the second half of this year," the executive said. "The pandemic indeed affected our performance and the overall [smartphone] industry last year. But we foresee the market will return to growth this year."

Zhang added that his company aims to become one of the world's top three players, especially in the high-end smartphone market, in the next three to five years.

On Thursday, Oppo introduced its latest 5G flagship phone series. The Chinese company has invited Grammy and Academy Award-winning composer Hans Zimmer to help compose ring tones and enlisted Academy-award winning actor Eddie Redmayne to be its global ambassador as it steps up efforts to promote its brand internationally.

Oppo suffered a 4% decline in sales in 2020 when it shipped 115.1 million units, according to research company Canalys.

But it has made major breakthroughs in Europe, where it is now the region's fifth largest smartphone player, having grown 225% from a year ago, according to IDC.

The company has also made major progress in Japan, where it has tied up with key operators. Its shipments tripled from a relatively small base, IDC data shows.

In China, Oppo even became the top smartphone maker this January, research company Counterpoint said.

It is also the fifth largest smartphone player in India, a key market for handset makers, according to IDC. It had an 11% share in 2020. Realme, Oppo's sister brand for budget handsets, became India's fourth-largest player last year.

Ben Wood, chief analyst with CCS Insight, said Oppo has been making good progress in recent quarters, overtaking Huawei to become the fourth biggest phone maker behind Apple, Samsung and Xiaomi.

"The Find X3 Pro, and the other products coming from Oppo, signal its intent to keep building global market share, grabbing share vacated by Huawei and taking the fight to rivals," Wood said. "Its biggest headache remains Xiaomi, which seems happy to sacrifice margins for market share gains.

"Ultimately it might come down to how much Oppo and parent company BBK are prepared to invest to close the gap with Xiaomi in a desire to grab the top three spot."

Joey Yen, an analyst with IDC, said: "Last year we saw smartphone sales with online e-commerce channels jump a lot to account for a total of 26% of global smartphone sales due to coronavirus lockdowns, from about 20% in 2019 ... that was a disadvantage for Oppo, which is good at brick-and-mortar retailing strategies."

However, Yen said, the overall smartphone market is undergoing a major reshuffle due to the U.S. crackdown on Huawei. "Every key player," she said, "has a chance to reposition itself."

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