FIH Mobile Ltd., has published its interim results for the H1 2019. Since HMD is/was one of the leading customers of FIH Mobile, and since FIH has significant investments in HMD, the interim report of FIH Mobile tells us a lot more about HMD, its business status and future plans.
Starting off, TNS Limited, which was mainly setup to take care of the sales, support, and distribution of Nokia-branded smartphones is no more (or at least no longer functioning the same way). FIH Mobile decided to discontinue distribution operations of TNS. That forced HMD to to build its own supply chain and distribution network. The disturbance in supply led to a reduction in sales of Nokia smartphones and hence a slump in overall market share of HMD Global in H1 2019. It is worth noting that during the founding of HMD and agreements with HMD, there is a clear clause that HMD could takeover TNS if it finds fit. So, it is very likely that a part of TNS’s headcount and resources is now under HMD Global.
For TNS, coupled with the refocusing, the Group implemented cost down exercises to lower its overhead and operating expenses to maintain a healthy cash flow to keep its ability to sustain in the highly competitive mobile phone market. Accordingly, TNS decided to discontinue its distribution business at the end of 2018 and cut the headcounts and consequently terminated the customer and distributor agreements of distribution business.
FIH’s report also highlights that HMD now has the capability to sell worldwide. This change enables HMD to manage the full value chain after factory, including the aftersales in a more efficient manner. So, we can also see some improvement in customer support and service at HMD going forward. HMD is already handling the support for several months now, and I believe they have managed it well so far.
Multiple ODMs: We already know that FIH Mobile is not the sole manufacturer of Nokia-branded smartphones. HMD switched to a multi-ODM strategy in May 2019. The Nokia 2.2 is being manufactured by Huaqin while Wingtech is doing the Nokia 3.2 and Nokia 4.2. Adding to that, TSMT handled the manufacturing of Nokia 3.2 and Nokia 4.2 in India. The multi-ODM strategy allows HMD to bring devices to the market faster while also getting competitive prices.
Betting big on Android One: HMD continues to be optimistic about its software offering – Android One with three years of assured security updates and feature updates for two years. It is surprising since HMD agrees that the software-innovation is what we’re moving towards and yet sees its offering as competitive. HMD’s take on Android might be good, but not so innovative. They will have to take some steps sideways since the competition is investing big to deliver a more fulfilling, integrated, and feature-enriched Android experience.
At the same time products are more and more differentiated on software than hardware. New innovations in the industry will be more software led. HMD’s promise of always up-to-date Android is unique. It enables HMD to define products where Android services are flawlessly integrated into hardware experience. Good example of that is dedicated hardware key for Google Assistant in 2019 portfolio — aimed at offering a unique user experience to Nokia phone fans.
Series B funding round: HMD Global started off with a series B funding round in H1 2019, and if they manage well, we should soon see a press release from HMD regarding the new investments it received. Main purpose of Series B round is to collect funding to deliver a growth plan and strengthen the balance sheet.
FIH Mobile has invested $64.5 million in HMD so far . The investments constitute to 10.10% of total shares issued by HMD. In 2018, HMD had 7.9% of issued shares with an investment of $62 million.