As per the latest research from Counterpoint’s Market Monitor, the demand for smartphones in China grew a healthy 8% annually and 7% sequentially in Q3 2016. The world’s leading smartphone market is undergoing a shift in competitive environment with rise of local brands such as Oppo, Vivo and LeEco.
Commenting on the findings, Research Director, James Yan, highlighted, “Over the last twenty four months, there has been a close race but tough fight for the top three spots in China smartphone market.This quarter for the first time ever, we have seen new market leaders for the top two spots. Oppo and Vivo became the number one and two smartphone brands in China capturing 17% and16% share respectively. The two brands sharing the same owners BBK group, now control almost one third of the China smartphone market. This is a tremendous performance from Oppo and Vivo.”
Mr. Yan further adds, “Shipments for Oppo’s smartphones grew +82% annually whereas Vivo recorded the highest growth in China during the quarter as the demand for its shipments rose 114% annually, more than doubling its volumes. Oppo’s performance was as a result of strong demand for its flagship Oppo R9 which became the top selling model in China for the entire quarter surpassing the popular iPhones which held the top spot for years. Oppo’s low-end A59 and A37 models are also driving strong sales in tier-3/4 cities adding to the overall uptick. Vivo also saw healthy demand for its flagship X7 series across offline retail helped by aggressive outdoor promotions, official sponsorships (e.g. NBA), celebrities (K-Pop stars) and effective social media marketing.
The focus on traditional offline retail and wider distribution network which still constitutes three-fourth of smartphone demand has been key to Oppo and Vivo success”
Exhibit 1: % Smartphone Shipments By OEMs in Q3 2016
Commenting on competitive landscape, Senior Analyst MengMeng Zhang, noted, “The previous market leader Huawei saw a modest growth of 4% but still recorded a stable performance capturing 15% share. Huawei’s upcoming flagship Mate series refresh should drive some uptick in premium segment with opportunity to fill in the gap left by Galaxy Note 7 and thus should drive halo effect for the mid-tier Honor and Nova series to maintain its spot in top three rankings.
Xiaomi suffered as its shipments were down 22% annually with demand mostly skewed towards low-end models such as Redmi 3s. Xiaomi needs a hero flagship device in premium to drive mindshare to compete with much more focused R&D and manufacturing driven brands such as Oppo, Vivo, Apple and Huawei. Also, lack of presence in offline space has been one of the determinants for Xiaomi’s slowing growth as its e-commerce driven business model has hit a ceiling.”
Exhibit 2: Growth Metrics for Smartphone Brands in China
Research Director, Neil Shah adds, “The growth of Oppo and Vivo has been mostly in low to high-tier where it has been successful to take share away from Samsung, Lenovo, Coolpad and to some extent Apple (older models). However, with Samsung’s losing mindshare and marketshare, there is a big opportunity in premium segment ($600+ wholesale) where Apple has the lion share with Huawei the only formidable brand left. This is the area which Oppo and Vivo would exploit next year or so to cement their leading spots in China market building on their growing brand equity, head-turning industrial design and wider distribution network.
Apple had a slow first nine months this year but the iPhone 7 series should help it regain lost marketshare as the demand for iPhone 7 series is tracking better than iPhone 6s series according to our recent channel checks. Apple while will grow share sequentially in upcoming Q4 2016, but the full year 2016 shipment volumes is tracking below its peak and Apple needs to offer something cutting edge to appeal maturing Chinese smartphone users which are quickly warming up to local brands such as Oppo, Vivo, Huawei and LeEco”
Exhibit 3: Oppo & Vivo Outdoor Promotions and Retail Branding
Counterpoint Technology Market Research is a global research firm specializing in Technology products in the TMT industry. It services major technology firms and financial firms with a mix of monthly reports, customized projects and detailed analysis of the mobile and technology markets. Its key analysts are experts in the industry with an average tenure of 13 years in the high tech industry.