Chinese Semiconductor Outlook Part II: The Smartphone Market in China

Chinese Semiconductor Outlook Part II: The Smartphone Market in China

Market research firm, Canalys released their newest findings on the smart phone market in China this Monday stating that Xiaomi and Huawei, both Chinese companies, together count for one third of the market. Apple surprisingly fell to third place, followed by Samsung and Vivo. Apple’s stock then fell 12% and broke below 200-day moving average .

Although market data is subject to analyze methodology and interpretation, other research firms share the same viewpoint as Canalys. Counterpoint Research also found that Xiaomi is taking the 1st place in China smart phone market with 15.8% market share, followed by Huawei with 15.4%, and Apple is third place with 12.2% .

Without the boost of a new product, Apple is clearly falling behind its Chinese counterparts who make low-priced Android smart phone with similar features. However, if we take a look at the bigger picture, the market outlook does not look promising for smart phone vendors in China. After 6 years of aggressive growth, the number of smart phones shipped in China in Q1 2015 fell by 4.3% . On a quarter over quarter basis, the market contracted 8% on the back of a large inventory buildup at the end of last year . The numbers are relatively small, but it indicates the beginning of market naturalization in within the smart phone market in China.

There are a few obvious reasons. First of all, with smart phones entry the China market over 6 years ago, it is hard to expand the first time buyer. According to a recent study by Nielson, the smart phone penetration is estimated to reach 73% among Chinese consumers by the end of this year . The functions are now very similar among the smart phones in the market that consumers are not likely to replace their devices every 2 years. To grab the attention of Chinese consumers, vendors need to focus on new functions and features.

Secondly, unlike the US where the smart phone market is dominated by Apple and Samsung, China’s smart phone market has various local vendors. Out of the top 17 smart phone makers globally, 10 are based in China . In addition to the Apple and Android operating platforms, they have also developed their own OS such as Kylin OS by Huawei. “Competition among major brands has never been so intense.”said Jingwen Wang, analyst at Canalys . There will also be more price competition among brands to win over customers who are price-sensitive.

So, what are the future trends for the smart phone market and vendors in China?

  • International expansion: the flat domestic market is not going to satisfy the vendors. We are seeing Chinese companies aggressively expanding into other developing markets, such as Xiaomi in India and Brazil.

  • OEMs and ODMs will be more sensitive on price: the price challenge in the end market will have a chain reaction with the whole supply chain. Looking for the best priced components and JIT (just in time) will be the priority for OEM or EMS sourcing professionals within China’s smart phone market. Cost savings programs from experienced independent distributors, such as Advanced MP Technology will bring great value to the vendors.

  • More focus on wearables: Xiaomi launched its wearable product wrist-band, Mi Band, in China last August and now it’s the second most shipped wearable around the world. With the flat smart phone market, we are expecting to see more mobile vendors break into the wearable market in China.

The developing smart devices market including smart phones, wearable, and IoT devices in China offers countless potential for OEM, EMS, OCM and distributors. Advanced MP Technology has been involved with electronic industry in China for the past 10 years and has the industry experience and networks to support our customers’ needs.