Loss-making Chinese smartphone maker Coolpad removes CEO days after CES trade show

  • Loss-making group derives about 90 per cent of revenue from the US
PUBLISHED : Monday, 14 January, 2019, 6:03am
UPDATED : Monday, 14 January, 2019, 3:14pm

Chinese smartphone maker Coolpad Group terminated the services of its chief executive, Jiang Chao, just days after the executive gave media interviews at the CES trade show laying out his turnaround plan.

The board of the Hong Kong-listed company met on January 11 and passed a resolution to remove Jiang from all his duties in the company and its subsidiaries, including his positions as chief executive director, vice-chairman, chief executive and board committee roles, according to a filing to the stock exchange.

No reason was given in the filing for the termination. The company appointed Ma Fei as chief financial officer, without saying who will take over as chief executive. Neither Jiang nor Coolpad immediately responded to texted requests for comment.

Coolpad was once a leading player in the Chinese domestic market before intense competition forced it to seek greener pastures elsewhere. That turned out to be the US, where the Shenzhen-based company now derives about 90 per cent of its revenue.

Coolpad will continue to expand in both the North and South American markets, as well as some European countries, Jiang Chao said in an interview in Las Vegas on January 9. China remains off the road map because of rampant intellectual property infringement and excessive marketing, he said.

It is unclear whether Jiang knew of his impending termination by the company at the time of the interview. With the latest development, it is also not clear whether Coolpad will stick with Jiang’s plan or change strategy.

Coolpad claims Xiaomi is dragging out patent dispute to buy time for initial public offering

All of the top Chinese smartphone vendors are “marketing companies” and compete on lavish advertising campaigns and low prices rather than on technology, Jiang said in the interview. The exception is Huawei Technologies, which he said is also a “tech-oriented” company.

To prove his point, Jiang said Coolpad retains a 1,000-strong research and development team despite the business downturn over the years.

“Until these issues have eased in China, we are not planning a return,” Jiang said, adding that Coolpad only wants to be present in markets that embrace sound regulation and healthy competition, where profit margins are also higher.

Competition in China’s smartphone market is famously cutthroat, with dozens of brands vying for market share by cutting prices and copying features from competitors as soon as something proves popular. Hong Kong-listed Coolpad, once among the three biggest smartphone vendors in the China in 2012 and 2013, has been in retreat in China as local brands like Xiaomi, Oppo, Vivo as well as Huawei gained most the market.

Among the new products it showed in Las Vegas was a smartwatch aimed at children between four and nine years old that allows calls and texts to be made to pre-approved contacts. The watch also doubles up as a tracker, with parents able to see the exact location of their child through an app.

Coolpad was locked in a patent dispute with Xiaomi last year, accusing the latter of using certain patents belonging to its Yulong unit without license or compensation. It was also embroiled in several other lawsuits with similar claims that other vendors were stealing its skills.

LeEco unit Coolpad hit with lawsuit to repay US$11.8m loan

Jiang claims that the brand owns more than 10,000 patents and said that IP infringements were endless in China and relevant judicial decisions are not enforced most of the time.

“For companies like Coolpad, which has a better relationship with local US carriers, its business could be more stabilised in the US than in China where it needs spend more resources to educate the users and expand their business channels,” said Jia Mo, a Shanghai-based analyst with research agency Canalys.

Coolpad will be focusing on providing budget handsets priced below US$200 through US carriers to tap those who are sensitive about prices, according to Jiang.

The company will also provide more internet of things-related product terminals that are backed by artificial intelligence, to ride on the growing popularity of smart home appliances.

Jiang also forecasts that the company’s revenue in 2019 could be three or four times of that of last year, without being more specific. The company was profitable for most years until 2016. Its stock has not traded since end of March 2017.