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China Smartphone Market Declined for the Fourth Consecutive Quarter in Q2 2018

Huawei was the fastest and lone brand registering a positive 22% YoY growth leading the market with an all-time-record share. Huawei’s sub-brand honor also individually surpassed Xiaomi in overall volumes during the quarter, leading the e-commerce channel share as well.

Beijing, Hong Kong, Seoul, San Diego, Buenos Aires, London, New Delhi – July 31st, 2018

According to the latest research from Counterpoint’s Market Monitor service, smartphone shipments in China declined 7% annually but grew sequentially. The top five brands captured a record 84% of the market.

Commenting on the overall market, James Yan, Research Director at Counterpoint Research commented, “The Chinese smartphone market has been declining YoY since Q3 2017. This is the first time that any large smartphone market has seen this kind of correction with four consecutive quarters of decline. This is mainly because, consumers have been holding onto their smartphones for a longer period as the incentive to upgrade and perceived differentiation for the new launches has so far failed to convert some of the consumers to upgrade.”

Mr. Yan further added, “OEMs are working hard to differentiate with innovative industrial design or Color-Material-Finishing as we could see in models such as OPPO Find X or vivo Nex or Huawei P2- Pro respectively to drive up the upgrade rate. Further, proliferation of features such as 3D Face Unlock, Artificial Intelligence or on-device Machine Learning and possibly Gigabit LTE this year to mid-tier and 5G in coming years could drive a wave of upgrades. Though meaningful feature addition, which brings in significant use-case transition as we witnessed with 3G to 4G technology or 16:9 to 19:9 displays could drive the next upgrade wave. Everyone is in search of similar inflection points.”

Exhibit 1: China Smartphone Market Share Q2 2018

china smartphone market share

Source: Counterpoint Research Market Monitor Q2 2018

Commenting on competitive dynamics during the quarter, Research Analyst MengMeng Zhang, noted, “Huawei reached its highest ever market share in China driven by the strong performance of its sub-brand Honor which is now contributing to more than half its volumes. Honor is adopting a multi-channel distribution strategy like Xiaomi in China after being previously rooted strongly only in the online e-commerce segment. Honor is benefitting from a broad and refreshed portfolio across different price segments to compete head-on with the likes of Xiaomi.”

Ms. Zhang further commented, “During the quarter, OPPO and Vivo also expanded their presence in the premium segment by launching devices like the Find X and Nex. The premium segment is likely to get competitive in the later part of 2018 with Apple’s refresh of its portfolio and Huawei about to launch its latest flagship Mate series.

Xiaomi’s market share declined annually in China while its performance outside China remained strong. To expand its presence and grow market share in China, it has been ramping up its offline channel distribution in China, including launch of Mi Homes which will enable users to experience the Xiaomi portfolio. However, its impact on sales volume in the short term is limited.”

Associate Director, Tarun Pathak, commenting on smartphone sales channel dynamics, noted, “Smartphone sales through e-commerce channels have been healthy thanks to the regular promotions such as JD.com’s 618 or Alibaba’s 11.11. The overall share of smartphone volumes through e-commerce channels has been growing steadily, though lower contribution than India but greater than USA.

Huawei, thanks to its sub-brand Honor became the leading and most popular brand surpassing the e-commerce pioneer Xiaomi in the e-commerce segment in China thanks to strong performance. Honor captured over a fourth of the total smartphone sales during the 618 festival in June 2018 which boosted Honor+Huawei past Xiaomi. Honor alone is now a bigger brand than Xiaomi in China. This is a big challenge for Xiaomi moving forward considering its major efforts are on channel expansion beyond online channels.”

Exhibit 2: China OEM Smartphone Volume Market Share In Online Channel Q2 2018

china oem smartphone volume share online channels

Source: Counterpoint Research Market Monitor Q2 2018

Commenting on Apple’s performance and opportunity, Research Analyst, Flora Tang, highlighted, “Apple shipments remain flat YoY in China. During the quarter, share of online sales for Apple grew both sequentially and annually due to comparatively higher discounts available on online as compared to offline channels. E-commerce is now a key part of Apple’s channel strategy in China, contributing to almost a third of its total sales in China. Riding on the trend it was the third largest brand in terms of sales volume during the 618 festival. iPhone X and iPhone 8 Plus surprisingly remained one of the popular and top selling models in China during Q2 2018”

Exhibit 3: Best Selling Smartphone Models in China Q2 2018

china top smartphones list

Source: Counterpoint Research Market Monitor Q2 2018

  • OPPO and Vivo secured one spot each on the bestselling models list with their flagships, the R15 and the X21.
  • Sales for OPPO and Vivo’s latest flagships have performed better compared to its last generation due to more differentiations in terms of design, i.e. notch cutting and under-display fingerprint sensor.
  • Apple iPhone X continue to surpass iPhone 8 sales in China due to decline in price and offers running during the quarter.
  • Honor 7C was the fifth best selling model during the quarter. One of the key reasons for the success of Honor 7C was its aggressive pricing (RMB 1100) & sales during 618 festival.

The comprehensive and in-depth Q2 2018 Market Monitor is available for subscribing clients. Please feel free to contact us at press(at)counterpointresearch.com for further questions regarding our in-depth, latest research, insights or press enquiries.

The Market Monitor research is based on sell-in (shipments) estimates based on vendor’s IR results, vendor polling triangulated with sell-through (sales), supply chain checks and secondary research.

Analyst Contacts:

James Yan闫占

+86 15810182576
james@counterpointresearch.com

@james_a3

Tarun Pathak
+91 9971213665
tarun@counterpointresearch.com

  @Tarunpathak

Mengmeng Zhang

+86 18611804269
mengmeng@counterpointresearch.com 

Flora Tang

+852 5545 2529
flora@counterpointresearch.com

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Counterpoint research is a young and fast growing research firm covering analysis of the tech industry. Coverage areas are connected devices, digital consumer goods, software & applications and other adjacent topics. We provide syndicated research reports as well as tailored. Our seminars and workshops for companies and institutions are popular and available on demand. Consulting and customized work on the above topics is provided for high precision projects.

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