Major shake-up seen as Chinese smartphone market contracts for the first time ever

The world’s largest smartphone market has shrunk for the first time last year, with shipments down 4 per cent to 459 million units in 2017, according to research firm Canalys.

PUBLISHED : Friday, 26 January, 2018, 1:41pm
UPDATED : Friday, 26 January, 2018, 11:21pm

China’s consumers bought fewer smartphones last year, the first time that the world’s biggest market has shrunk and a harbinger of more intense competition as handset makers fight for sales in a saturated market.

Smartphone shipments fell 4 per cent to 459 million units in 2017, dragged down by a weak fourth quarter, according to Canalys, the industry research firm. Huawei Technologies maintained its No. 1 ranking, with Oppo and Vivo coming in second and third, respectively, while Apple overtook Xiaomi to take fourth place.

The decline in overall market shipments is providing added impetus for Chinese smartphone brands to step up their overseas expansion. One of those countries is India, where about one in every two smartphones sold are made by Chinese manufacturers and Xiaomi seized the sales crown from Samsung.

“The declining Chinese market will have a detrimental impact on those Chinese vendors that have been heavily relying on their home market,” said Hattie He, an analyst at Canalys Research. “It will affect their cash flow and profitability, limiting overseas expansion and bringing into question future survival. The threat to vendors such as Gionee and Meizu is now closer than ever.”

Smartphone sales in China doubled each year between 2010 and 2012 before slowing down in 2013.

Looking ahead, the pace of new phone launches is set to slow further in China, with the industry regulator receiving 17 per cent fewer registrations for new 4G smartphone models in the last quarter.

Huawei, which bucked the fourth-quarter slump in shipments, shipped 90 million handsets last year. The Shenzhen-based telecommunications giant, which had its US expansion plans foiled by a late pull-out by would-be partner AT&T, has gained market share from brands such as Gionee and Meizu in the smaller cities, according to Canalys.

Huawei’s budget brand, Honor, which serves consumers willing to pay US$200 to US$300 for a mobile phone, is stepping up its expansion plan and will target 20 overseas markets including the US, India and Russia.

Oppo chief executive officer Chen Mingyong said that the Chinese brand will soon launch products in Japan and Europe, after establishing its presence in China and India, according to Chinese reports.

“There is little room left for the smaller vendors,” said He. “The leading players will make aggressive plans to maintain or grow their market share. We can expect a major market shake-up in China in 2018.”