China’s smartphone industry’s godfather
BBK Electronics Corp is a privately held company based in Dongguan, founded and chaired by Duan Yongping. The company is behind the Realme, OnePlus, Vivo and Oppo smartphone brands.
In the last decade, smartphone brands from China have not only outdone sales in the Chinese market, but have also beaten major foreign competitors in many developed and emerging economies.
The success of these four brands – Realme, OnePlus, Vivo and Oppo – can be attributed directly to the investment-savvy guiding hand of Duan Yongping, a reclusive Chinese philanthropist, investor and billionaire entrepreneur.
Yongping founded and is still the chairman of BBK Electronics Corp, a privately held company that is now 24 years old and is based in the coastal city of Dongguan. BBK runs one of the world’s most sophisticated and biggest electronics supply chains behind producing a smartphone range aimed at the global market.
Yongping is viewed as the “godfather” of China’s smartphone industry for developing the Vivo and Oppo brands as big global competitors against its mainland rival Huawei Technologies, LG Electronics, Apple and Samsung Electronics. Realme and OnePlus look set to become the next big Chinese brands to conquer global markets and are backed by BBK, as well as by other investors.
Yongping was interviewed in 2017 by Bloomberg, and was recently identified as an early investor in China’s 3rd largest e-commerce company, Pinduoduo. The firm was founded by his protégé and friend, Colin Huang Zheng. According to the 2018 Hurun China Rich List, Yongping’s net worth is an estimated US$1.5 billion (10 billion yuan).
Yongping’s family lives in Palo Alto, California, and he recently had a conversation with Chinese students at Stanford University in that city. Yongping and his wife Liu Xin had set up the Enlight Foundation to provide undergraduate scholarships and graduate fellowships for Chinese students at the School of Engineering at the university.
Yongping first featured in the global news in June 2006, when he paid an amount of US$620,100 on eBay for a power lunch with Warren Buffett at a New York steakhouse. Buffett is a renowned billionaire investment guru and the chief executive and chairman of Berkshire Hathaway.
The South China Morning Post reported later that Yongping noted that he had learnt so much from Buffett and his philosophy of investment and he wanted an opportunity to thank him. Yongping took his wife and six friends, including Zheng, to the lunch.
Yongping was born in Nanchang on March 1961 and entered Zhejiang University in 1978, majoring in wireless electronics engineering.
Yongping taught at the Beijing Radio Tube Factory’s adult education center for a while, before pursuing additional studies at the Renmin University of China, in Beijing, eventually obtaining a Masters in Economics in 1989.
He then joined the Zhongshan Yihua Group in Guangdong, and managed to turn the ailing factory into a profitable business. He also created Subor Electronics Industry Corp, a unit to make cheap video game consoles, and served as its CEO.
Subor was very successful in manufacturing education consoles, cheap copycats of Famicom computers from Nintendo. The device was endorsed by Jackie Chan, the Hong Kong martial arts superstar, and was known as “Little Tyrant”. Its success led to Yihua achieving an annual profit of about US$148 million (1 billion yuan) in 1995, compared with the loss of 2 million yuan in 1989.
Yongping did, however ,have a public falling out with Yihua when they rejected his plan to spin off Subor and obtain a stake in the new company. He founded the BBK electronics firm in 1995 after leaving Yihua in August of that year, and held a 70% controlling stake in that company.
Yongping split BBK’s business into 3 divisions:
1. Communications under Shen Wei, making cordless telephones and mobile phones.
2. Audiovisual under Chen Mingyong, making DVD and VCD players.
3. Educational electronics under Huang Yihe.
BBK was successful early on with its DVD and VCD players and became the leading Chinese vendor of those devices.
Yongping introduced a partnership program in 1999, and this was eventually followed by the creation of independent businesses and the reduction of his share in BBK to 17%. This resulted in Chen Mingyong founding Oppo Electronics Corp in 2004, and Shen Wei founding Vivo Communication Technology in 2009. Both Pete Lau and Sky Li Bingzhong, founders of OnePlus and Realme respectively, previously worked at Oppo as vice-presidents.
Yongping said in the Bloomberg interview that although manufacturing mobile phones was not his sphere of expertise, he felt his company would do well in this market. This was proven to be true when sales of Chinese Android smartphones skyrocketed when 3G and then 4G mobile networks were deployed across China.
The demand for Chinese mobile phones doubled each year between 2010 and 2012 as 3G services were deployed across the country. This did, however, slow down in 2013, before faster 4G services were deployed.
China has the world’s largest smartphone market and internet population, resulting in about 300 domestic mobile phone companies operating in the country some three years ago. This did, however, drop to 200 last year due to ferocious competition and tougher economic times.
Bigger Chinese smartphone manufacturers have captured a big part of the domestic market by promoting aggressive, offering advanced features and designs, and offering a wide range of models at various price points to attract both affluent and younger buyers.
In 2018, Oppo and Vivo were China’s 2nd and 3rd biggest smartphone suppliers respectively, with a combined 40% market share. Although they were trailing Huawei, the market leader, they were ahead of Apple and Xiaomi. That year, domestic smartphone shipments dropped to 396 million units from 459 million in 2017.
Counterpoint Research estimates that Oppo and Vivo took 5th and 6th places respectively last year, with a combined 15% share of the global smartphone market. The top 4 vendors were Samsung, Apple, Huawei and Xiaomi.
In his talk with Stanford students last year, Yongping noted that BBK’s and sister brands Oppo’s and Vivo’s successes was no accident, although they were latecomers to the industry. He credited this to focusing closely on screening suppliers and partners, implementing changes when required, building an excellent reputation, and benfen, which translates loosely to honesty or integrity.
Yongping also revealed that although they previously described their products as providing good value at cheap prices, he eventually realized that they were simply making excuses for inferior products.
Nowadays, he focuses on making good products that meet users’ needs, whether in the high-end or low-end of the smartphone market, rather than on promotions and marketing.
Yongping emigrated to the USA in 2002 to be with his family, and noted that making speculative investments is a no-go. He only bets on things he understands and focuses on the business model and how it makes money.Source