China smartphones Q2 2017: Samsung, Apple Slip as Domestic Brands Rule

Smartphones shipments in China grew a modest 3% annually during Q2 2017 (Apr-Jun), registering second consecutive quarter of annual growth this year. The Chinese market showed a positive uptick in demand as well as supply during the June ending quarter. June seasonally is a strong month for China as it is usually buoyed by portfolio upgrades from major brands such as Oppo, vivo and Xiaomi. The top four Chinese brands now capture close to 69% of the market as these brands have raced ahead of international and other local brands with expansive distribution reach and exciting portfolio.

Huawei and vivo were the fastest growing brands followed by OPPO and Xiaomi, together cementing the top four spots and extending their lead over Apple and Samsung by a widening margin. Apple’s performance continue to be seasonal, while Samsung is losing out to the Oppo-Vivo onslaught in offline. Xiaomi made a surprise comeback after being on decline for a few quarters against Huawei Honor.

Exhibit 1: % Smartphone Shipment Growth for OEMs in Q2 2017

As predicted, last quarter, the Chinese smartphone market saw a healthy sell-out through April, May of the second quarter with some level of inventory correction allowing the Chinese brands to ship more smartphones in June with a revamped portfolio.

Exhibit 2: % OEM Smartphone Shipment Share in Q2 2017

Source: Market Monitor – Q2 2017preliminary estimates

Huawei continued to capture the top spot this quarter ahead of rivals OPPO and vivo, shipping higher volumes into the channels. Huawei’s nova, enjoy series along with flagship P10 were in strong demand during the quarter.

OPPO and vivo were able to also grow significantly over last year with strong performance in mid-tier with A and Y series respectively as well as with F/R and V/X series in high-tier respectively. Each of the series are well positioned in the fast-growing $100-$199 (600-1300 rmb) and affordable premium $300-$399 (2000-2700 rmb) segments catering demand from tier-1 cities to tier-4 towns.

Meanwhile, Xiaomi saw a positive uptick growing 20% YoY and almost doubling the volumes sequentially after a dip in Q1 2017 when the vendor’s volumes reached almost 2013 levels. The key reason behind the comeback can be attributed to strong demand for its latest flagship Mi 6 and low-tier models such as Redmi 4X as well as focus on diversifying distribution channels.

The days of easy growth are over for Huawei, OPPO, vivo and Xiaomi in China. The competitive landscape is converging as all the top four Chinese brands have reached a steady and dominant position in a very slow growing market. The race for the top two spots is always up for grabs as one misstep can push a brand easily two spots behind.

The comeback of Xiaomi from the declining spiral has made the market further competitive and almost a zero-sum game. The dip in performance by either of brand could affect their global performance. As a result, China dependent brands such as OPPO, vivo and Xiaomi will be aggressive in expanding their reach beyond China during the second half of this year. India, South Asia and Africa will be the key focus geographies to drive additional scale and market share to make up any dip in domestic market.

Market Monitor : Q1 2014 :: Smartphones Now 95% of Total Handset Revenues

Adding to our recently published insights on how smartphone volumes grew almost 30% annually during Q1 2014, latest research from Market Monitor quarterly tracker program highlights how the smartphone industry has grown in terms of value (or revenues).

Some insights from the research report:

  • The total global smartphone industry revenues reached the first quarter highest to US$74 Billion
  • Smartphone revenues now accounts to 95% of the total handset shipment revenues globally, highest ever. Feature phones are moving towards oblivion (pretty quickly).
  • Apple captured more than a third of those revenues with Samsung closely behind Apple with revenue share, together capturing more than two-third of global smartphone revenues as well
  • If we leave out Samsung, Apple generates more revenues than all the global smartphone brands combined
  • Xiaomi is now the fifth largest smartphone brand in terms of revenues overtaking likes of Nokia, Lenovo, Motorola, Coolpad and Huawei and on track to challenge LG & Sony for the third spot confirming its volume market share gains during the quarter, thanks to its smartphone models entering the global best-sellers list during the quarter
  • China now corresponds to almost a fourth of the global smartphone revenues more than the US market compared to Q1 2013 where it lagged behind US in terms of value size but now due to unprecedented growth of smartphone volumes and at a bigger scale it has surpassed US
  • Japan generated the highest ever smartphone Average Selling Price (ASP) in the world followed by US making them the highest ASP, high value markets in the world. To no one surprise, Apple is the smartphone leader in both these markets in terms of volumes and value skewing the ASPs towards high end and thanks to generous operator subsidies
  • In terms of single model revenues, Apple iPhone 5s was the top-selling model in terms of revenue share followed by Samsung Galaxy Note III globally in Q1 2014

Smartphone Value Share Apple SamsungSource: Market Monitor Q1 2014 Report

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