Chinese Smartphone Sales Collapse In "Biggest Decline Ever"

Smartphone shipments in China experienced their most significant decline ever in Q1 2018, crashing more than 21 percent annually to 91 million units, according to the Singapore-based research firm Canalys. Since 2013, Chinese smartphone shipments have far exceeded 100 million units quarterly. The last time the headline number fell below the 100 million unit benchmark was Q4 2013.

According to the report, published Thursday and which echoed a similar recent finding by the IMF, the eight-year-long smartphone bubble has come to an end in yet another warning sign of the ongoing demise of the "synchronized global growth" narrative.

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To wit, eight of the top ten smartphone vendors experienced a significant decline in sales. Apple lost considerable ground in China, as it was removed from the number four vendor spot by local brand Xiaomi, which bucked the trend and saw 37 percent growth in shipments to 12 million units sold.

"Xiaomi was the only company to buck the trend, growing shipments by 37 percent to 12 million units, and overtaking Apple to take fourth place."

Huawei (including Honor) managed to remain in the top vendor spot with shipments increasing by 2 percent, while "maintaining its lead and consolidating its market share to about 24 percent by shipping over 21 million smartphones," said Canalys.

The report detailed how China’s smartphone segment is becoming increasingly dominated by four domestic vendors, including Huawei, Oppo, Vivo, and Xiaomi, which accounted for more than 73 percent of Chinese shipments in Q1 2018.

Ahead of the Apple’s earnings report on May 1, Canalys’ report about Apple’s dwindling market share in China could be a bad omen.

What's worse for the consumer-tech giant, the Canalys data corroborates a report from Bloomberg, which revealed how five of its largest device assemblers reported a sharp slowdown after peaking in the second half of 2017. Nevertheless, the peak coincides with Canalys’ report of crashing smartphone sales in China.

Meanwhile, vendors outside the top five spots, including Apple (sixth spot), saw their market share slide to 19 percent in the prior quarter, a sign that there could be some market-share consolidation in the offing, according to the report.

"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, an analyst at Canalys.

"While Huawei, Oppo, Vivo and Xiaomi must contend with a shrinking market, they can take comfort from the fact that it will continue to consolidate," he added.

Canalys

One reason for the decline could be smartphone makers focus on the high-end market. As Canalys Research Analyst Hattie He said, "Xiaomi is the only vendor in the top-5 that is focused on the sub-RMB1,000 (about $160) price segment." Xiaomi posted double-digit growth, with sales up 37 percent, partly reflecting a lackluster performance in 2017. Xiaomi’s success is contributed to its low-cost devices.

The inventory issues that Oppo and Vivo experienced in the fourth and first quarters "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," he said, adding that the smartphone market "could experince a short period of stagnancy" as vendors resort to device improvements rather than broad marketing campaigns.

To sum up, the tech sector’s importance to Asia’s economy remains paramount. Which is why collapsing smartphone sales in China could have a serious impact on the "synchronized global growth" narrative that has dominated economic analysis in recent years. At least, that was essentially the IMF's view when it pointed out that the recent peak in global smartphone sales could seriously hamper growth in Asia, where supply chains and economies have been transformed by the smartphone boom.

All of this begs the question: will falling smartphone sales be the canary in the coalmine as the "global growth" narrative downshifts into recession?

Comments

FireBrander Row Well Number 41 Fri, 04/27/2018 - 19:14 Permalink

About 3 years ago, an independent film on the terrible working conditions in China; they're on a train loaded with workers on their way home.

This young man (whom apparently builds Apple products) speaks up and says, paraphrasing, "it's not fair that I work so many hours for so little money while apple is so rich".

Apparently Tim didn't see the video or he could give a shit less.

In reply to by Row Well Number 41

gdpetti FireBrander Sat, 04/28/2018 - 11:12 Permalink

Yes, one or the other... oblivious or with intent... as all empires operate... hard to tell which it is.... aware or not?

Otherwise, this story is merely pointing out the natural cycle of any product that reaches maturity... and sales stagnant into old age... remember desktops? not many buy laptops anymore, as most only surf and share pics etc... and phones with nice cameras are all they really need. Haven't all of us purchased products thinking we need more, only to later realize we need less?

THen, the question is: What's next?

In reply to by FireBrander

Endgame Napoleon Donald J. Trump Fri, 04/27/2018 - 18:45 Permalink

Given how many Chinese people Apple trained by taking production to China, I wonder which one of those 4 Chinese companies makes products most resembling the Apple product. American-owned companies of all types, not just Apple, cannot justify training American citizens, but in non-diverse countries with lots of cheap labor, the training burden is just inherently lower.

In reply to by Donald J. Trump

JLarryL Fri, 04/27/2018 - 17:05 Permalink

Inevitably, we approach peak smartphone. Devices are becoming commodities. And, if you think about, Apple's business is basically one design offered in various sizes and capabilities. Could be peak Apple too.

hongdo JLarryL Fri, 04/27/2018 - 17:59 Permalink

It's peak hype.  For years I used a little black book for calendar and phone numbers, worked fine.  Then I switched to smartphone for maps, phone, contacts, calendar, music, camera.  Great in principle but not in practice.  Legitimate calls and alarms are swamped by robo calls.  Photos are not that great.  GPS maps need connectivity.  Unless you back up religiously, you will eventually lose everything.  I now use separate GPS, phone, camera, music, reading, and internet systems with a big solar battery charger.  Mostly I just ignore everything.  If it's important they will call back.  More work than it is worth.

In reply to by JLarryL

Twee Surgeon Fri, 04/27/2018 - 17:07 Permalink

I had a Pager back in the stone age, they were as neat as shit, until they weren't. Just a big spy blob following you, keeping you on the leash of the boss man. Cell phones can only do so much and a lot of 'New Tech" can get old fast, it has a shelf life.

We keep cell phones for work, other than that, we would go low tech. Much cheaper and less intrusive. Fashions change.

adr Fri, 04/27/2018 - 17:08 Permalink

Apple is toast in China. The Chinese wants Chinese made products sold by Chinese companies. Not Chinese made products sold by American companies.

Ford decided selling Chinese made cars in China is more important than selling American made cars in America.

roddy6667 adr Fri, 04/27/2018 - 21:43 Permalink

For several years GM has made and sold more cars in China than in America. They also made more profit in China even though they had to split the money with a partner company. That says a lot about the manufacturing climate in America. Now Ford is trying to make a profit by  copying GM.

The reason are complex. Regulations and taxes are at the top of the list. Labor costs are not the main reason. A Chinese auto worker gets paid an amount that buys a nice upper blue collar lifestyle there. The worker enjoys job security, good working conditions, health insurance, a pension, owns his home, has nice consumer goods, takes vacations, and dines out regularly. He also is able to save at least a third of his pay for the future. To duplicate this in America, the factory would have to pay a worker $40-50 and hour with generous benefits.

You always see union propaganda that states what a Chinese worker makes, but it denotes it in US dollars. This is totally irrelevant. The Chinese worker does not take his pay on payday and fly to America to spend it. What matters is what it buys in China. 

In reply to by adr

east of eden Fri, 04/27/2018 - 17:09 Permalink

Some of you will say 'yeah', good on the chinks'. But before you say that, recognize that it has only been Chinese money that has kept the world economy afloat for the last few years.

If they are starting to have 'problems' with affordability, or anything else, it is not good news for any stock market around the world. Maybe that is a good thing. Not sure.

DEMIZEN roddy6667 Sat, 04/28/2018 - 09:17 Permalink

consumer electronics is sort of stalled, money moved to armament and infrastructure i figure. still, there are some smart robots pets development, smart homes, smart kitchen. cloud 3.0 coming, 5g internet etc...

beside voice huis the next thing for smartphone and home entertainment is eye controlled HUIs, computers and phones will track your retina  and combine with another facial input sensor.

Youll be able to look at the link in or icon and open it with any recognized facial expression like an eyebrows move.  consumer electronics giants are working on it, but not market ready yet.

In reply to by roddy6667

buzzsaw99 Fri, 04/27/2018 - 17:19 Permalink

i'll bet they don't cost $1000 in china.  stupid americans will pay any price for the latest icrap.  if it is ten times more than the rest of the world pays that's fine by them.