A growing tenet in what is today’s broad supply chain management capability umbrella is the ability to be able to integrate product and manufacturing process design with global-wide production capabilities, faster and cheaper than existing competitors. The notions of responding to local customer needs and desires are now often manifested by co-locating or virtually connecting product design with supply chain process capabilities and continue to become important differentiators for industry supply chains, and for industry disruptors.

These notions are now playing out in the global smartphone market with recent revelations that China based industry disruptors are gaining more global market-share by a strategy of a keen focus on local and regional consumer needs, and on a keen dependency on an integrated and demonstrated agile manufacturing region in China.

Information technology and consumer electronics quantitative market analysis firm IDC recently disclosed that a collection of Chinese smartphone manufacturers have now secured more than 40 percent of global smartphone market-share in the first quarter of this year, nearly double the number of five years earlier. That is a remarkable achievement.  A recent published report by The Wall Street Journal (Paid subscription required) brings forward two significant reasons for this achievement.

The first is the willingness of brand providers such as Transsion Holdings, maker of branded Tecno, itel, and Infinix phones, along with BBK Electronics, maker of branded Oppo and Vivo smartphones, to engineer product features of specific interest within local and regional markets. Localized features include dual SIM card slots, differing camera and imaging features that cater to local norms or demographics.

The second noted reason for success was a common dependence on China’s coastal Pearl River Delta high-tech manufacturing region, the original home to many electronics focused contract manufacturers, for deep supply chain process and manufacturing capabilities. More than 20 Chinese smartphone producers now have manufacturing and engineering dependence within this region.

The WSJ report declares: “The fight (among smartphone producers) is all about staying competitive in pricing and features, and Shenzhen is the battleground. Once known as a little more than a hub of contract manufacturing for Western technology giants, the region has given birth to an array of domestic upstarts by marrying low-cost production and high-tech engineering.

In other words, the region has now developed a collection of integrated product value-chain capabilities that are able to respond to market needs in a far quicker manner, and a more competitive product

Interesting enough, as our Supply Chain Matters readers are often aware, Apple has had a similar reliance on the Pearl River region, specifically Foxconn and other contract manufacturers for manufacturing engineering and production capability as well as new product time-to-market needs. Apple elected early on to maintain product design engineering in Cupertino, and to engineer its smartphones for general global user needs. The same could be stated for Samsung, which relies on China and Vietnam as manufacturing centers, but maintains centralized engineering. Both producers have since added local and regional engineering centers to identify local product functionality needs.

Once again, the name chosen as blog nameplate was purposeful, that indeed, supply chain capabilities do matter for successful business outcomes, and in today’s global markets, supply chain represents a far broader collection of functions and capabilities spanning the product value-chain.

Bob Ferrari

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