China Smartphone Market Underwent Its Highest Ever YoY Decline of 8% in Q1 2018

According to the latest research from Counterpoint’s Market Monitor service, Chinese smartphone shipments slowed in Q1 2018 with YoY decline of 8% and sequential decline of 21%. The top five brands captured a record 82% of the market with other OEMs struggling to grow.

Commenting on the overall market, James Yan, Research Director at Counterpoint Research commented, “2018 started on a slower note for the world’s largest smartphone market. The slowdown can be attributed to lengthening smartphone replacement cycle for the Chinese consumers. Additionally, lack of product launches in Q1 2018 with OEMs focusing on inventory clearance, especially for non-bezel-less display devices, were other key factors impacting shipment volumes. Bezel-less devices are now popular in China and more OEMs are expected to launch sub-1000 RMB (~US$160) bezel-less portfolio to differentiate their offerings in the mid segment.”

Huawei continues to lead the Chinese smartphone market with 22% market share followed by OPPO and vivo with 18% and 16% share respectively. However, Xiaomi (+51%) and Apple (+32%) were the fastest growing brands among the top five.

Commenting on the OEM performance, Mr. Yan added, “Huawei’s Honor continues to do well in in China with almost 2/3rd of Honor sales coming from online channels. Additionally, the brand also carried out heavy promotions for its Nova series during the quarter, which drove volume. OPPO and vivo were the second and third largest brands in China in Q1 2018, capturing a combined one third of the smartphone market. However, during Q1 2018, we saw that OPPO and vivo’s growth slowed considerably, due to lack of a portfolio refresh. Both vivo and OPPO refreshed their portfolio towards the end of Q1, adding some new features that included an under the display fingerprint sensor and notch display. With initial demand for their refreshed X and R series going well, we expect both brands to improve in the coming quarters.”

Mr. Yan further commented, “Xiaomi was the fastest growing brand in China during the quarter. The growth was driven by Xiaomi’s expansion in the offline segment with aggressive promotions. It also refreshed its Redmi Note series and now has a very strong product portfolio in the mid segment, giving more choice to budget-conscious consumers. Apple grew 32% YoY in China due to strong performance of its iPhone X. While the promotions were not aggressive for the iPhone X, except in operator channels, its demand remains healthy in the market.”

Commenting on product launches during the quarter, Research Analyst MengMeng Zhang, noted, “One of the key highlights during the quarter was the launch of notch display devices. By the end of Q1 2018 four out of the top five smartphone OEMs had already launched their devices with notch displays in China. This has given early adopters an edge over competitors to differentiate in terms of product design. Going forward, we expect notch display devices to penetrate from the 3000 RMB (~US$475) segment that they are currently in, to sub 2000 RMB (~US$315) segment in the coming quarters. Apart from this, under the display finger print devices are likely to pick up too, with vivo already launching the feature in the X20 and X21 series.”

Commenting on Apple’s performance and opportunity, Associate Director, Tarun Pathak, highlighted, “Apple still holds a large user base in China who haven’t upgraded in the past two years. Apple is now back to YoY growth in the first quarter since Q1 2015, which is an indication that its older generation iPhone user base is now upgrading. This can set the set the tone for the vendor’s full year outlook. Furthermore, as Apple enters its seasonal cycle, promotions in the coming quarters will further drive upgrades.”