China Smartphone Market Expected to Grow YoY in H1 2025: Five Shifts Reshaping the Competitive Landscape

National subsidies bolstered early demand but the market faces rollout hurdles.
Apple was the top performer during the 618 season with iPhone Pro price cuts and subsidy eligibility.
Xiaomi unveiled its first self-developed AP, Xring O1, reinforcing its premium push.
AI remains a central theme, but OEMs are emphasizing practical use cases more.
Component prices mostly softened in H1 2025 from the last Q4 except for memory; prices tend to increase in H2, posing new challenges for value-tier products.

China’s smartphone market is projected to grow 1.4% YoY in H1 2025, providing a stabilizing force for the global smartphone outlook amid broader uncertainty.

Beneath the headline numbers lies a series of rapid shifts in technology, policy, and brand strategy. Counterpoint’s bi-monthly China Smartphone Technology Intelligence Tracker identifies five key developments that reshaped the market landscape in H1 2025 – from national subsidies and AI rollouts to evolving supply chain dynamics – designed to help you connect the dots and stay ahead of the curve.

National Smartphone Subsidy Faces Implementation Challenges but Likely to Sustain Through H2

China’s central government launched a ~$41.4 billion (RMB 300 billion) subsidy program to stimulate consumer purchases of electronic products, including smartphones priced under $828 (~RMB 6,000). While the first tranche of funding significantly boosted Q1 sales, implementation challenges have since emerged.

The program’s complexity has deterred participation from smaller vendors, giving an advantage to larger retailers with the resources to navigate the system. As a result, Huawei and Xiaomi have been able to capitalize on the program more effectively.

Despite administrative hurdles and a recent slowdown in subsidy disbursement, the program is expected to continue through the remainder of 2025, and may even extend into 2026, based on our supply chain checks. However, as China’s smartphone market matures, the marginal effectiveness of such large-scale incentives appears to be diminishing.

Apple Tops 618 Shopping Festival Thanks to Major Price Cuts

During this year’s 618 promotional season(Week 22: May 26-June 1 to Week 25: June 16-22), Apple claimed the top spot and grew 8% YoY thanks to aggressive price cuts on the iPhone 16 series. These reductions made the iPhone 16 Pro eligible for China’s national smartphone subsidy program. This marks one of the largest official price cuts for iPhone Pro models in recent years. After subsidies, the iPhone 16 PCro 128GB was available at more than 30% below its original launch price.

Xiaomi Unveils Self-developed Application Processor

Xiaomi launched its first self-developed application processor (AP), the Xring O1, after nearly four years of R&D and an investment of over $1.8 billion. The Xring O1 debuts in the Xiaomi 15S Pro and its tablet lineup.

According to our industry checks, about one-third of Xring O1 shipments will be allocated to the Xiaomi 15S Pro, with the remainder used in tablets. The next generation of the Xring chip is already in development, and shipments are expected to double those of the O1.

Xiaomi’s smartphone momentum continues to strengthen, and its brand image has also received a significant boost from its electric vehicle (EV) initiatives. With premium smartphone buyers in China skewing toward the younger demography, Xiaomi’s strong connection with the youth may help it further grow its premium market share.

AI Still Trending, But Smartphone OEMs Take a More Practical Approach

AI remains a hot topic in China, but smartphone OEMs have become more pragmatic in their approach. In 2023 and 2024, nearly every major OEM promoted AI integration in their flagship models.

This aligns with the situation in the Chinese market, where 76% of surveyed smartphone users reported being familiar, very familiar, or extremely familiar with AI technology, according to Counterpoint’s Generative AI consumer research in H1 2025.

However, in 2025, OEMs reduced their emphasis on on-device AI at launch events, recognizing that these features alone may not drive consumer interest.

AI remains central to OEM strategies. The focus has shifted to enhancing real-world usability. For example, OPPO launched “Xiaobu Memory,” a feature that allows users to take multi-media notes, enhancing memory recall and boosting user retention.

Competition from internet giants is intensifying. Tencent, for instance, announced during its earnings call that it plans to integrate AI agents into its WeChat super app, connecting users across its full ecosystem – from payments to ride-hailing to food delivery. Some internet firms are also exploring the feasibility of launching their own smartphones.

The rise of AI is prompting many stakeholders to rethink how devices serve as key customer touchpoints.

Smartphone Supply Chain Remains Stable in H1 2025, but Headwinds Loom

According to our industry interviews with supply chain participants and OEMs, most key component prices gradually declined in H1 2025 compared to Q4 2024. However, memory – particularly DRAM – was an exception.

We expect smartphone OEMs to face greater cost pressures in H2 2025, especially for mid- and low-end product lines. This is driven by multiple factors, including the launch of new components, continued increases in memory prices, as well as the impact of global rare earth shortages in Q2, which have temporarily shifted some manufacturing to China.

In 2025, we expect China’s smartphone market shipments to grow by less than 1% YoY. The national subsidy program is expected to provide a strong cushion for the market, though economic headwinds persist. The premium segment will likely remain a bright spot in the world’s largest smartphone market.

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