Chinese Smartphone Market Declines To Levels Not Seen Since 2013

Many smartphone makers have seen China as their key market for growth over the last few years. Chinese consumers have been gobbling up smartphones despite the booming black market in the country for devices like iPhones. That black market is so robust that smugglers had taken to flying iPhones in by drone. Canalys has some numbers that look at the Chinese smartphone market and they aren't good.

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Smartphone shipments in China had their worst ever decline in Q1 2018, with shipments down 21% annually to 91 million units. Shipments haven't been that low since Q4 2013. The numbers also show that eight of the top ten smartphone vendors in China saw shipments decline. The hardest hit were Gionee, Meizu, and Samsung with respective sales chopped to less than 50% of the numbers seen in Q1 2017.

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Even among those that grew, the growth was very modest. Huawei, for instance, saw shipments grow only 2% but that was enough to maintain its lead in the marketplace with 24% of the overall Chinese market (over 21 million smartphones shipped). Oppo was the second-place brand in the market with Vivo taking third place. However, both of those companies took a beating with massive declines in the market with Oppo seeing a 10% decrease in shipments to 18 million units and Vivo shipping 15 million units. Xiaomi was the only bright spot in that market with 37% growth to 12 million units. That number allowed it to boot Apple out of fourth place in the market.

The top four vendors in the smartphone realm were responsible for 73% of Chinese market smartphone shipments and include Huawei, Oppo, Vivo, and Xiaomi. "The level of competition has forced every vendor to imitate the others’ product portfolios and go-to-market strategies," said Canalys Research Analyst Mo Jia. "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. While Huawei, Oppo, Vivo and Xiaomi must contend with a shrinking Chinese market, they can take comfort from the fact that it will continue to consolidate, and that their size will help them last longer than other smaller players."

The biggest loser in the quarter was Gionee, which saw shipments drop 70% to 1.6 million units shipped. The market is expected to return to growth in Q2 with flagship devices from Oppo, Vivo, and Huawei set to launch. "The inventory issues that Oppo and Vivo suffered in Q4 and Q1 are now behind them," said Jia. "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."