The Chinese smartphone shipments slowed down in 2017 with close to 468 million smartphones shipped. Most vendors focused on clearing accumulated channel inventory from a strong channel sell-in in 2016. The top four grew, while Apple’s performance was flat YoY
Beijing, Hong Kong, Seoul, San Diego, Buenos Aires, London, New Delhi –
Jan 29th, 2018
According to the latest research from Counterpoint’s Market Monitor service, smartphone shipments in China were down 1% annually in 2017, however, the sell-through was up 5% annually.
In 4Q 2017 particularly, the market was down 5% YoY but increased 5% QoQ driven by vendors launching big promotions for Singles’ Day in November and 12.12 in December.
Commenting on the competitive landscape, James Yan, Research Director at Counterpoint Research commented, “Compared to 2016, where the smartphone market in China enjoyed robust annual shipment growth of 8%, 2017 was a difficult year for vendors as we saw a slowdown in shipments in the world’s largest market. The slowdown in sell-in volumes in 2017 can be attributed to strong shipments in 2016 by growing brands such as Huawei, OPPO and vivo to match the aggressive marketing spend in the second half of 2016. Hence, during most of 2017 we saw a greater effort from these brands towards clearing the accumulated inventory with which they exited 2016 rather than focussing purely on new shipments.
Efforts from vendors to launch bezel-less models during 2017 has been a double-edged sword, as the new bezel-less full display form-factor started stimulating demand in the second half. But at the same time demand for the non-bezel-less display models started to slow. We expect the bezel-less form-factor will trickle down to the sub-1000-yuan (~$160) smartphone segment in 2018.”
Huawei secured the leading position in the Chinese smartphone market during the final quarter of 2017 (+8% YoY) and for the full year 2017 it registered 19% YoY growth. This allowed the world’s third largest smartphone brand to capture 19% share of the smartphone market, its highest ever for a full year.
Exhibit 1: China Smartphone Market Share Q4 2017 and CY 2017
Source: Counterpoint Research Market Monitor Q4 2017
Source: Counterpoint Research Market Monitor CY 2017
Commenting on the market leader Huawei’s performance, Mr. Yan added, “For Huawei, the bulk of the growth was driven by its sub-brand Honor which contributed to more than 60% of its shipments during the year. This made Huawei’s Honor brand the number one smartphone brand in online channels in China ahead of Xiaomi, during the full year. However, the growth of ‘Huawei’ branded phones slowed down as the mid-to high-tier phones faced tough competition from OPPO and vivo, and towards the end of 2017 from Xiaomi, with its increasing offline presence and promotional activities.”
OPPO and vivo were the second and third largest brands in China in Q4 2017 and for the full year 2017, capturing a combined more than a third of the smartphone market. For the full year 2017, OPPO and vivo were able to grow faster than the overall market and increased their market share to 18% and 17% respectively. However, during Q4 2017, we saw OPPO and vivo’s growth slowing down considerably, as they faced tough competition from Xiaomi and Huawei. On the other hand, Xiaomi made a strong comeback in 2017 with a more focused portfolio and aggressive channel expansion strategy beyond online channels to rekindle demand in its home market. Xiaomi’s marketshare jumped to 14% and it was the fastest growing brand (+31% YoY) during Q4 2017. This helped Xiaomi to grow its annual market share to 12%, inching past Apple.
Commenting on the performance of the next big three brands, OPPO, vivo and Xiaomi, Research Analyst, MengMeng Zhang, noted, “Thanks to strong smartphone growth in lower tier cities, OPPO and vivo’s expansive offline distribution network made them the fastest growing brands in China in 2016. Faced with slower growth lately, OPPO has sought to upgrade its brand image and expand its presence in first tier cities by opening super-flagship stores, though it also needs to focus on high and premium-tier phones to drive some halo effect.”
Exhibit 2: China Top Selling Smartphone Models in 2017
Source: Counterpoint Research Model Sales Tracker – China 2017
Ms. Zhang, added, “For Xiaomi, the brand’s portfolio strategy hit all the right notes with the right mix of attractive features at different price points, especially, with Redmi series being the key volume driver. Further, this was helped by a streamlined supply chain compared to 2016 to adequately meet the demand for its attractive low-cost volume driver models, supported with expanding offline channels. This also helped Xiaomi maintain some momentum in online channels, with stellar performance during Singles’ Day Sales in November. Xiaomi was also the sales leader on Tmall.com and the second runner-up on JD.com by sales volume. In addition, Xiaomi was able to grab the lost market share from other online smartphone brands such as LeEco and Meizu. 2018 will be a crucial year for Xiaomi as it looks to ramp-up more aggressively in its home market to match its performance in India and other new markets as it seeks to boost its valuation ahead of the brand’s rumored IPO.”
While the big four Chinese brands have completely dominated the market, together controlling almost two-thirds of the smartphone market, all eyes are on Apple to see if the new iPhone X can drive the “super cycle” Apple has been looking for in one of its most important markets, China.
Apple’s market share in China dropped for the first half of 2017 but started picking up during the second half of 2017. Apple’s strategy to sell competitively priced older iPhone models such as customized iPhone 6 32GB for the China market drove some uptick for Apple. In addition, we are seeing sales of the new iPhone X and some 8 series models beginning to gain some traction during Q4 despite the high-ticket prices.
Commenting on Apple’s performance and opportunity, Associate Director, Tarun Pathak, highlighted, “China saw some strong traction for the iPhone X demand in December but still lower than expected, mostly due to supply issues or the high price. The Chinese holiday season in Q1 2018 will be a critical period, setting the tone for the vendor’s full year outlook.
Furthermore, China still has a large iPhone base on the older iPhone 6/6Plus models. These iPhone 6/6s users are potential upgraders this year. However, the high-ticket price for the X could sway most of them towards competing devices or settle their upgrades to the relatively cheaper iPhone 7 models.”
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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.
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