Summary of Key Points
Shen Wei, the founder of vivo, has built the brand into a leading domestic player in the smartphone industry through a pragmatic approach of "planting the right seeds to reap the right fruits." However, as the market reaches a saturation point and traditional hardware improvements and camera enhancements no longer yield significant gains, Shen Wei must lead vivo towards an AI transformation. This transition is fraught with challenges: while AI technology has great potential, it has yet to be transformed into a viable selling proposition that drives sales. Moreover, vivo relies more heavily on the smartphone market than its competitors, making this transition particularly arduous.
I. Shen Wei's Philosophy of Cause and Effect: Not Metaphysics, but Practicality
When Shen Wei talks about cause and effect, he doesn't mean adopting a passive attitude; rather, he advocates for doing things to perfection first, and the results will follow naturally. For example, when vivo entered the smartphone market in 2012, it faced competition from Motorola, Samsung, and domestic brands like "Zhonghua Cool联." Instead of simply focusing on high specifications, Shen Wei targeted the young audience's desire for music playback by launching the world's thinnest X1 phone, equipped with a professional Hi-Fi chip, turning it into a portable music player. This move quickly opened up a market niche for vivo.
Later, vivo invested heavily in camera technology, collaborating with Zeiss to develop advanced algorithms that made its X series a powerhouse for concert photography and night shots. These efforts ultimately led to vivo becoming the number one seller in China in 2021, serving 500 million users globally. In short, Shen Wei's philosophy is to focus on creating products that meet user needs, and sales will follow.
II. The Peak of the Old Era: Slow Sales Growth and Pressing Profit Margins
The good times for vivo are coming to an end:
- Losing the Domestic Market Lead: After Huawei's return, vivo dropped from the number one position in China for four consecutive years and fell to fourth place in the first quarter of 2026, behind Huawei, Apple, and OPPO. Its shipments decreased by 6.6% compared to 2024.
- Global Market Contraction: Goldman Sachs predicts a 10% decline in global smartphone shipments in 2026, with all manufacturers competing for existing users and engaging in increasingly fierce price wars and feature differentiation.
- Rising Costs: The cost of components such as storage and screens has risen sharply. vivo, which focuses on mid-to-low-end phones, is under significant financial pressure. In March 2026, it had to raise prices by 100-700 yuan across its range, but this increase led to lower sales, squeezing its profit margins.
- The Arrival of AI: Vivo's past successes in camera and audio quality may become less valuable with the advent of AI, which offers more convenient image editing and zooming options. The strategies Shen Wei has pursued over the past three decades may no longer be effective in the new era.
III. The AI Transformation: A Major Investment with Unsettled Returns
Shen Wei recognizes the potential of AI as the next breakthrough, investing 23 billion yuan to build a team of 1,000 experts and develop the "Blue Heart" large model. This model is impressive because it can run locally on smartphones without internet connectivity and can recognize screen content, extract information, and automate tasks (such as booking flights). However, these AI features are currently just additional perks; vivo still focuses on camera and design in its new products, with all AI features available for free, indicating that the technology has not yet been turned into a profitable selling point.
IV. The Challenges of Transformation: A More Aggressive Transition for vivo
vivo faces greater transformation pressure than competitors like Xiaomi, OPPO, and Apple:
- Lack of Diversified Revenue Streams: While Apple has ecosystems like the iPad and Mac, and Xiaomi is expanding into automotive, vivo relies almost entirely on smartphones for its revenue. If its AI transformation lags, it will have no other options.
- Uncertain Future of AI: No one is sure how AI will integrate with smartphones—whether they will be used as tools or completely transform the device itself. vivo must continue to invest and experiment until the technology becomes profitable.
At the annual meeting, Shen Wei emphasized the importance of focusing on user needs, suggesting that regardless of external changes, vivo should continue to improve its AI capabilities to make them an essential part of the user experience. However, the duration and success of this transformation are uncertain.
Conclusion: The Zen-like Attitude Masks Real Anxiety
Shen Wei's calm demeanor often hides his anxiety. With the traditional smartphone market reaching its limits and AI still in its early stages, vivo is at a critical juncture. For the company, transformation is not just about making a strategic choice but about survival. Failing to adapt to the new era could mean being eliminated by the market. Shen Wei's patience reflects the struggles of all smartphone manufacturers as they transition from one era to another.