image

Smartphones

Did ‘billion-dollar’ gambling loss in Saipan imperil Chinese smartphone maker Gionee?

  • Gionee, which ranked behind Apple in sixth place for handset sales in China as of last year, is now on the verge of bankruptcy restructuring
PUBLISHED : Wednesday, 28 November, 2018, 5:02am
UPDATED : Wednesday, 28 November, 2018, 6:09am

The founder of Shenzhen-based Gionee, a Chinese smartphone brand on the verge of bankruptcy, has admitted he may have used company assets to gamble at a Hong Kong-listed casino in Saipan, but denied a reported loss of 10 billion yuan, saying it was only a fraction of this amount.

“I did participate in gambling in Saipan, but how could I possibly lose that much (10 billion yuan)? If it is true, shares of Imperial Pacific [the casino owner] should have surged,” Liu Lirong, Gionee’s chairman and chief executive, said in an interview with Securities Times in Hong Kong at the weekend, responding to recent reports that his gambling loss of 10 billion yuan (US$1.44 billion) had resulted in the collapse of Gionee.

When asked how much he lost gambling, Liu told the Securities Times reporter, “a bit more than 1 billion yuan”.

Gionee, which ranked behind Apple in sixth place for handset sales in China last year, is now on the verge of bankruptcy restructuring as suppliers have halted component sales after failing to receive payments for several months, according to the report. Liu admitted in the interview that Gionee’s total debts amount to 17 billion yuan, with 10 billion yuan of this owed to banks, 5 billion yuan to upstream suppliers and about 2 billion to advertising agencies.

As the “absolute authority” at Gionee – a company he founded – for 16 years, Liu said in the interview that he may have confused his private assets with those belonging to the company as he has borrowed frequently over the years for personal reasons.

China’s No 5 phone maker fires half its factory workers

The media relations team at Gionee has been disbanded although a spokesman still working for the company did not reply to a WeChat request for comment on Liu’s interview with Securities Times. Neither did Hong Kong-listed Imperial Pacific International Holdings Ltd respond to an email request for comment on Liu’s interview.

Founded in 2002, privately held Gionee was once a mainstream brand in China and some Southeast Asian countries, selling about 40 million handsets in 2016. It successfully launched a range of cost-effective handsets backed by advertising campaigns endorsed by top celebrities.

Although Gionee’s handset sales started to decline in 2017 because of pressure from market leaders, such as Huawei, Oppo and Vivo, the Shenzhen company still managed to launch eight, full-screen Android smartphone models at one time during a product event in November 2017.

The product launch was Liu’s last public appearance. He told the audience that Gionee had become the world’s first smartphone supplier to equip all new handsets with full 18:9 aspect ratio displays.

This is China’s answer to the iPhone X – at a tenth of the price

Liu denied in the interview that Gionee’s troubles were primarily the result of his gambling. He said the company had been losing money since the beginning of 2013, with average losses of no less than 100 million yuan per month between 2013 and 2015, and the monthly loss further widened to no less than 200 million yuan in the past two years.

In April, Gionee cut its factory workforce by half amid financial woes triggered by an expensive marketing war with deep-pocketed rivals. Gionee, with about 6 per cent market share in China, has been the most active in marketing and promotions among the smaller Chinese smartphone brands, but overextended itself after spending a combined 9 billion yuan (US$1.4 billion) in marketing and investments over the past three years.

Smartphone sales in China are currently dominated by four brands – Huawei Technologies, Oppo, Vivo and Xiaomi – which owned a combined 78 per cent market share in the third quarter, amid an 8 per cent decline year-on-year in overall market size during the quarter, research agency Counterpoint said in a report in late October.