2018 reports show 14% fall in China's smartphone market

It has been surveyed that in 2018, smartphone shipments in China fell to their lowest, at 396 million units. That consumers keep their smartphones for longer is one factor for the slowdown, but it has been further amplified by the economic slowdown in China and consumers’ weakened purchasing power. The latest quarter, Q4 2018, marked a 15% year-on-year drop, and the seventh consecutive quarter of decline.

As shipments tumble, the market is rapidly consolidating. The top five smartphone vendors’ market share has increased from 73% in 2017 to 88% in 2018. Among them, Huawei and Vivo bucked the overall market decline, and grew 16% and 9% respectively. Oppo managed to hold onto second place, falling 2% but growing its market share. Xiaomi ranked fourth, as a disappointing second half caused its full-year shipments to fall by 6%. Apple stayed in fifth place with a 13% decline in 2018. It still out-performed the market, but this was the worst growth rate as it was the third consecutive year of shipment decline in China.

According to researchers, Huawei achieved a record market share of 27% in 2018, with 105 million shipments. Its dual-brand strategy has been a huge success, with sub-brand Honor helping it cover a broad range of price bands. China continues to be a strong foundation for Huawei and its launchpad for overseas expansion as it aims to challenge Samsung for global leadership in 2019.

Vivo’s market position has changed significantly. The stabilizing US dollar exchange rate will help Vivo, which has a greater reliance on its domestic market than its rivals in the top five.

Xiaomi developing rapidly in overseas markets, failed to grow in China. Xiaomi’s challenge in 2019 will be to accurately position the two brands, in terms of product, pricing and channels, so that they complement and do not cannibalize one another. If each brand can redefine its positioning well, each will achieve greater market share in 2019.

Having the toughest year of the top five, Apple’s shipments failed 13%, as customers were deterred by the high pricing of its new iPhone. In addition, models such as iPhone 7 and 8 did not see significant uplift in China, even after prices were lowered after the launch of the iPhone XS. It is vital for Apple to maintain or grow its installed base of iOS users. Apple must re-examine its China strategy, and find a way to revive its high-end brand imagine, in order to align with the purchasing behaviour of local middle-class and upper-class demographics.

Consumption in China is shifting towards high-end and higher quality. As a result, the average selling price of smartphones is expected to exceed US$400 in 2021. Competition in the upper mid-range and high-end segments will intensify, and vendors will focus on bringing the latest technology to consumers to justify higher price points.