Feb. 8 (NBD) -- Chinese mobile phone maker Gionee is facing financial difficulties.
According to a statement released Wednesday by O-film Tech Co., Ltd. (hereinafter referred to as "O-film"), one of the key suppliers of Gionee, the smartphone vendor has been in arrears with payment of 626 million yuan (99.6 million U.S. dollars) to O-film as of February 6, 2018.
Gionee also said it has no plan to make the payment in the short run, O-film claimed.
Gionee says production and sale proceed as usual
Liu Lirong, chairman and president of Gionee, said in a previous media interview that the company's capital chain broke because of excessive input in marketing and investment.
According to him, the company's marketing expense surpassed 6 billion yuan (955.1 million U.S. dollars) in 2016 and 2017, while investment expenditure exceeded 3 billion yuan (477.5 million U.S. dollars) in the past three years, leaving company in severe financial strait.
During the capital chain crisis, only O-film suspended the supply to Gionee, and the suspension has lasted 45 days, Liu said. Influenced by this, Gionee's capital recovery was heavily affected in December 2017 and January 2018, with at least 3 billion yuan (477.5 million U.S. dollars) being deferred in payment. The smartphone maker has been seeking to get through the crisis by hiving off some assets, but will not deal with the debt to O-film at this moment, he stated.
Liu has been looking for buyers for Gionee Technology Building as well as its stake in Tencent Holdings Ltd.'s online banking affiliate WeBank.
According to information obtained from the local industrial and commercial bureau, Gionee holds a three percent stake of WeBank. An informative source said in March 2017 that WeBank's valuation has reached over 60 billion yuan (9.6 billion U.S. dollars). This indicates Gionee's stake in WeBank will be worth around 1.8 billion yuan (286.5 million U.S. dollars).
Currently, Gionee's production and sale is proceeding as usual, and the company is still working on the asset sale, the mobile phone producer told NBD Wednesday. However, no more details were disclosed.
Chinese smartphone market sees first-ever annual decline
Gionee's plight is an epitome of the slowdown of China's mobile phone industry.
The niche segment is experiencing the unprecedented shakeup, and a reshuffle is expected to see.
According to the Singapore-based market research firm Canalys, the Chinese smartphone market suffered its first-ever annual decline last year, with shipments down by 4 percent year on year to 459 million units. The drop was partly due to the worst performance in the fourth quarter of the year, when smartphone deliveries plunged by 14 percent year on year to 113 million units.
Consumers now feel no need to buy better phones, as even entry-level smartphones have a complete set of functions and the lifecycle of smartphones are much longer than before, said analysts.
Canalys predicted China's smartphone industry will remain stagnant before 5G becomes popular.
As domestic market is almost saturated, some domestic smartphone makers have been seeking opportunities in overseas markets.
According to a report by GSMA's renowned in-house research team GSMA Intelligence last year, 5 billion people around the globe now have a mobile phone, which means one third of the world's population don't own a phone.
Beijing-based Xiaomi led the Indian smartphone market with shipments close to 8.2 million units in the fourth quarter of 2017, beating the long-time market leader Samsung for the first time ever and taking up 25 percent market share there, according to market research company Counterpoint. Chinese counterparts Vivo, Oppo and Lenovo rounded out the top five.
Counterpoint analyst commented Chinese smartphone makers stood out in the market with an aggressively-priced, broad portfolio taken to market with an effective channel expansion strategy.
In addition to India, Russia is also an attractive market for domestic mobile phone manufacturers.
Chinese smartphone vendors accounted for 32 percent market share in Russia in the third quarter of 2017, a report by Counterpoint says.
One industry expert told China Daily that Huawei is expected to overtake Apple to be Russia's second largest smartphone vendor this year. Xiaomi is also a competitive player there, he noted.