For the same thing, there will be two completely different transaction directions. The Internet is thinking that JD.com’s tens of billions of subsidies will hurt the brand’s profits in the long run, but semiconductors are looking for an inflection point in the cycle. JD.com is the main battlefield for 3C online sales, and the tens of billions of subsidies can help 3C manufacturers to destock and speed up the pace of chip replenishment.
Today I would like to talk to you about an event outside the cognitive boundary of a technology analyst, but it is something that Internet researchers are discussing every day recently: Jingdong’s tens of billions of subsidies.
First cut straight to the point, and present the conclusion:
JD.com is the main battlefield for 3C online sales. This tens of billions of subsidies can help 3C manufacturers destock and speed up the pace of chip replenishment. However, electronics/technology researchers have not noticed this matter due to institutional problems. The inventory of fabless companies will start to decline and return to the growth track, and the marginal improvement will drive the upward trend of the entire sector.
Next, the following three points will be analyzed in detail: 1) Why is there a difference in expectations? 2) The inventory of 3C and fabless. 3) What is JD.com’s tens of billions of subsidies? How much is the amount corresponding to 3C?
1) Reasons for the expected difference
As we all know, A-share public and private equity researchers have a strict coverage division mechanism. An electronic/semiconductor analyst will rarely set foot in companies in other sectors, and at most will only look at companies in Taiwan/USA Let’s do channel research, not to mention the Hong Kong and US stock Internet companies far away in the sky.— This is the hometown of Internet analysts.
In the eyes of electronic/semiconductor analysts, Internet companies are just a constituent stock of the Hong Kong stock index, and do not care about the actions of these companies. For example, the recent decline of Alibaba/JD.com/Netease, they may all be attributed to the deterioration of Sino-US relations or some people want to take profits, but few will understand the real driving factor of the decline-deterioration of competition/delayed income difference.When electronics analysts look at fabless, they stare at the weekly data of mobile phones, or ask semiconductor companies about their tone.
In the eyes of Internet analysts, of course, following the Internet is very tight. After all, no one wants to miss this year’s magnificent market. However, Internet analysts rarely think about the impact of changes in their own sectors on pure hardware. In the past, maybe because of the cloud, I still looked at data centers, but I didn’t dabble in 3C and chip-related hardware.When Internet analysts look at JD.com, they are all thinking about whether the competitive landscape of e-commerce will deteriorate.
Finally, in addition, the stock prices of fabless companies are still lying on the ground, no one is involved, and there is no enthusiasm, so few people are studying new marginal changes.
At this time, interdisciplinarity emerged.If JD.com can really help 3C manufacturers to destock this time, then this will become a significant alpha, because electronics analysts are completely unaware, and Internet analysts are not very good at studying JD.com’s impact on chips/3C .
And more importantly, the current trading rhythms of the two sides are different: the Internet side is thinking that JD.com’s tens of billions of subsidies will hurt the brand’s profits in the long run, but the semiconductor side is looking for the inflection point of the cycle and the marginal change in inventory. Therefore, for the same thing, there will be two completely different transaction directions.
Can it be done? How bad is the inventory situation now?let’s look down
2) High inventory, actively participate in tens of billions of subsidies
First, let us use a table to look at the current 3C/semiconductor inventory.
Almost all inventory & inventory turnover days reached their peak in 4Q last year. It is worth noting that,Since 4Q last year, Espressif and Hengxuan have begun to have a decline in inventory turnover days.
In such a situation of high inventory, I believe that brand manufacturers, or upstream chip manufacturers, are very aggressive and want to destock. And it happens that this is also the focus of the secondary market – when will demand recover? When will the stock be available?
Under such circumstances, JD.com, as the largest 3C network distributor in China, has provided a massive marketing window + traffic guidance, and 3C manufacturers will definitely try to make good use of this window. So what motivation does JD.com have to vigorously promote this tens of billions of subsidies?please watch the following part
3) The 3C battle that JD has to fight
In other words, JD.com’s most powerful category is still 3C, and other categories may not have obvious advantages over merchants’ bargaining power compared with Shake, Kuai, Ba, and Duo. So the reason why JD.com has the confidence to launch such a high-profile and exaggerated tens of billions of dollars The subsidy must also have received strong support from 3C merchants: supply, price reduction, and profit sharing. As for JD.com, in order to play its own advantages in the first wave, I guess the first wave will use its most differentiated category as a selling point to quickly revitalize traffic, that is, 3C.
For JD.com, this is also a battle that has to be fought: in the past two years, Pinduoduo has opened up the growth point of the sinking market by relying on the supply of a large number of Taobao white-label manufacturers and factory direct shipments. Later, it relied on tens of billions of subsidies to absorb high-end brands, such as Dyson and Apple, which increased the average consumption of users. While word-of-mouth is slowly growing, Pinduoduo continues to expand users in first- and second-tier cities, supplemented by the cost-effective advantage of large subsidies. Over time, the 3C market, which was firmly controlled by JD.com before, is being eroded a little bit. In 2021, JD.com will have approximately 5.7 active purchasers, while Pinduoduo will have as many as 869 million.
It is an established fact that Pinduoduo has surpassed JD.com in terms of scale, and JD.com also has internal problems that must be solved.
Throughout 2022, repeated local policies have greatly restricted free movement, which has caused serious damage to JD.com, which operates its own logistics and concentrates its main consumers in first- and second-tier cities.
Although JD.com achieved overall profitability in the third quarter of last year, the bad news is that JD.com has basically stagnated in growth over the past year.
In the first three quarters of 2022, the revenue growth rates of JD.com’s core digital home appliances were 14% (Q1), 0% (Q2) and 7.6% (Q3), respectively, all hitting new lows since 2019.
Therefore, I personally think that JD.com will use 3C as a bridgehead this time, starting from the field that occupies the deepest minds of users, supplemented by subsequent traffic imports, and then distributed to other categories, so as to retain traffic well.. We can look forward to the price reduction of 3C this time. There will be a price cut, which will definitely bring marginal growth in demand, and there will also be high-frequency data. At that time, electronic researchers will enter the logic of strong call demand recovery. Short-term data is good, and long-term logic cannot be falsified. Analogous to this year’s construction machinery, it will Ushered in a wave of rising short-term trading expectations.
But it has to be emphasized that while JD.com uses price leverage to revitalize the traffic in the profit field, we still need to pay attention to the long-term impact on brand profits. However, there is currently no impact data that can be tracked. When the valuation is low, this factor may have a small impact for the time being, but when the valuation is high, it is likely to be a fatal risk.
So, how strong is JD.com’s control over 3C? Let’s take a look at the specific proportion data of JD.com in the 3C category:
At present, JD.com’s 22-year 3C GMV accounts for about 40%, that is, about 1.2-1.5 trillion. The scale of potential leverage is large.
According to the “2020 3C Home Appliance Industry Consumption Trend Report” released by Nielsen, the epidemic has accelerated the shift of the 3C home appliance industry to online, and the overall online retail has surpassed offline for the first time. In the first half of the year, JD.com accounted for 28.9%, Suning.com accounted for 21.8%, and Tmall accounted for 14.2%. Two years have passed, and under the general trend of online retailing, JD.com will only account for a higher proportion, estimated to be around 30-35%.
Online sales of mobile phones account for about 35%. Although there are many giants, Jingdong should still be the main battlefield.
In summary, we can see that JD.com has a very strong control over the 3C channel. With the launch of this tens of billions of subsidies, the 3C market that JD.com can leverage is quite objective, and can actually affect the above-mentioned technology/3C companies destocking.
Finally, a brief summary of several points of view of the full text:
1) 3C/fabless de-warehousing has poor expectations. Tech analysts stare at the weekly mobile phone data posterior observation, but Jingdong’s 10 billion subsidy is a high-certainty expectation.
2) 3C/hardware manufacturers have enough motivation to reduce prices to remove inventory.
3) JD.com also has to carry the banner, and it is also necessary to fight the battle of tens of billions of subsidies.
The author of this article: Jack, the source of this article: Xueqiu Column of Jack Research, the original title: “The Neglected Ten Billion Subsidies of JD.com”
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