China’s Smartphone Market Suffers Biggest Decline Ever

Canalys reported on Thursday that smartphone shipments in China fell to 91 million units in Q1 2018, the market’s biggest decline ever. The market research company said the drop was due to fatigue over constant competition amongst smartphone makers.

Fierce competition

“The level of competition has forced every vendor to imitate the others’ product portfolios and go-to-market strategies. But the costs of marketing and channel management in a country as big as China are huge, and only vendors that have reached a certain size can cope," said Mo Jia of Canalys.

Jia added that the bigger firms such as Huawei, Oppo, Vivo, and Xiaomi would survive longer due to their size. This is not great news for the smartphone makers, however, as Canalys reported that most of them saw substantial annual declines.

Oppo and Vivo saw declines of around 10%, Gionee, Meizu and Samsung of 50% and Gionee of 70%. One company, however, managed to grow despite the overall market trend.

Xiaomi saw its shipments rise by 37% to reach 12 million units. “Xiaomi is the only vendor in the top-5 that is focused on the sub-RMB1,000 (about US$160) price segment and it owes close to 90% of its shipments to Redmi,” said Canalys Research Analyst Hattie He.

Despite the growth, though, He said Xiaomi is having to contend with a low-cost image. The analyst added that the firm is trying to upgrade its profile with the introduction of higher-end products such as the Mi Mix 2S and the Mi 6X.

Some hopeful news

Canalys did provide some hopeful news, stating that the market is expected to return to growth in Q2 with the launch of new devices by Oppo, Vivo, and Huawei. In addition, the inventory problems face by Oppo and Vivo in Q4 and Q1 have now been resolved.

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“New smartphones will definitely entice people to upgrade, but vendors are more careful of avoiding oversupply in the channel. China’s smartphone market may see a short period of stagnancy as vendors refocus on research and development, relying on new use cases to excite refreshes rather than spending heavily on the channel and marketing,” Jia added.

Canalys also reported that Apple slipped from fourth to fifth place stating the company’s decline was bigger than expected. This is a result of Apple's focus on very high-priced products such as the iPhone X. Prices like this will serve as a deterrent to Chinese customers no matter how strong and worldly the Apple brand is.

This is the second year in a row that China has witnessed a decrease in smartphone sales. Last year the market plunged for the first time ever, dropping 4% to 459 million phones.