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Smartphone market in China worth US$ 207B in 2018

The smartphone manufacturing in China has grown by 28.2% to total the revenue to $207 bn in 2018. During this growth, the number of businesses has grown by 4.2% while the number of employees has grown by 23.0%.

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Definition / Scope

  • China has developed into being the world’s second-largest economy and has boosted its presence in many industries. One of the most significant boom in China has been the boom in Mobile Phone market.
  • China has one of the world’s most unique market where a phone company can easily become global sales leader through sales only in the Chinese Market. It is a country where upstart can shoot up and become a leader in no time.
  • As per the US-based market analyst International Data Corporation (IDC), four local major vendors - Huawei, Oppo, Vivo and Xiaomi - dominated China's mobile phone market, responsible for 74.5 percent of the total market share in the first quarter of the year 2017.[1]

Market Overview

As forecasted, the Chinese Smartphone market has declined in 2018. Following a decline in the last quarter, smartphone makers continued to decline in the Q3 2018. According to the recent report from China’s Ministry of Industry and Information Technology, the domestic mobile phone market declined by 11.7% compared to the same time last year. Moreover, the market marked a decline of 19.7% on a quarter-on-quarter basis.[1]

The top 5 smartphone manufacturers captured 86% of the total market share in Q3 2018, an increase from less than 80% in the same time frame last year. Huawei has the highest market share of 23% and has fixed its place as a market leader in terms of both sales and growth. Vivo, stands in the second place with 21% market share.[1]

  • In China, 635 new phones were launched since the start of 2018. Out of these, 144 models were 2G compatible, and 488 models were launched with 4G support. [1]
  • Since the beginning of 2018, the smartphone shipments totaled to 305 million that has declined by 17% year-on-year basis. Out of the total 305 million sales, over 276 million units were domestic brands while Apple generated most of the remaining sales.[1]
  • Smart phones have autonomous operating systems and has scope for the installation of third party software applications. They also have the ability to connect to wireless internet networks. The major operating systems for smart phones are Symbian, Meego, Android, Windows Phone and iOS.[1]
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Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Market Drivers

The following market drivers that are contributing to the growth of the global mobile phone market:

  • Changes in Consumer Segment: The target market of the Smartphone is young generation. With a shift of sales to this segment, the sales has increased drastically over the last decade.
  • Innovation and Technology Enhancement: Technology has been developing rapidly over the last few years, the advent of touchscreen technology and integration of camera has been the most significant drivers of market growth.
  • Utility and lifestyle: The utility provided by smartphone makers is remarkable. It allows to keep in touch with everyone everywhere with internet facility. This has made it almost inevitable for everyone to own a smartphone.
  • Price: Smartphones are readily available in the market for as low as USD 30. This has been a major driver for cause for increasing sales of smartphones.

Market Restraints

Even though domestic brands has gained market share, the smartphone market has become stagnant and purchases actually decreased. Slowing market growth has been a tough market restrain in China as most of the population already own a smartphone. Moreover, Consumers in China are starting to wait for a longer time for significant features upgrades to buy a new smartphone that has resulted in a slowdown in sales in China.[2]

Industry Challenges

  • Innovation and adjusting the Pace of Innovation

There has not been any major revolution in the smartphone industry for notable amount of time. All the expected features such as bigger screens, faster processors etc. have seemed to bored the consumers. Hence, the toughest challenge for mobile manufacturers is to innovate and bring out new breakthrough technology. Moreover, the launch of right features at the right time has been another challenge for mobile manufacturers as some manufacturers in hold back in launching a certain feature or technology. For example, the iPhone X introduced an OLED, bezel-less design, wireless charging and facial recognition after all other brands rolled out the same technology a year back. [3]

  • Lack of Universal Standards

There are no set mobile phone tech standards that manufacturers have mutually set yet. For example, a consumer complaint regarding screen brightness or color vibrancy of screens may be hard to evaluate without testing as each manufacturer has different set of features. There must be a way for consumers to be to test smartphone functionalities and have these diagnostic features available widely.[3]

  • Security and Privacy Concerns

Security has been of major concern for consumers and manufacturers as privacy of consumers is significant in financial transactions as well as in any activity that requires logging in with password. Smartphones with biometric features have been launched lately that has minimized this issue to some extent.[3]

  • Battery Mortality Issues

Increasing the battery life my manufacturers is the demand of consumers. However, there are technical hindrances that limit this advancement and this has caused dissatisfaction within consumers.[3]

Technology Trends

According to 2018 Asia Consumer Trends article, consumers in China are interested in how AI can help improve their lives. Due of this arising interest, many smartphone manufacturers and application developers have been focused on incorporating AI into their products. For an example, smartphones with AI cameras that can adjust settings automatically and applications that can give you suggestions on how to sleep or eat better.[4] Also, there has been a trend of Dual Camera Smartphones evolving over the last few years. The industry growth for dual camera smartphones is expected to be 15% this year, a 10% increase from last year.[4]

Pricing Trends

Mobile phone in China are readily available in different prices depending on the quality and features they offer. For an example, Xiaomi pricing trend has been successful over the last couple of years. "In China, our strategic focus for 2018 is to strengthen our status in the high-end smartphone market," Chew Shouzi, Chief Financial Officer of Xiaomi, told reporters during a conference call on Wednesday. This contrasts Xiaomi's strategy of selling budget smartphones that enabled it to boom its sales in China, India and other developing in just a few years. Chew said “the company is making premium phones to meet changing tastes in China where consumers are now striving for more expensive goods. Such a change in consumer trends will lend support to the company's business in the coming year.[5]

Also, there has been an increasing demand for higher-end phones in China in the past few years. Consumers in China are purchasing fewer smartphones and yet the market is doing well. People are actually purchasing more expensive phones, at a slower pace. This is a result of the growth of the economy that has enabled consumers to purchase more expensive items.[5]

Other Key Market Trends

In the course of last 5 years, the Smart Phone market in China has grown by 28.2% to attain a revenue of $207bn in 2018. During this time frame, the number of businesses has grown by 4.2% and the number of employees has grown by 23.0%.

Market Size and Forecast

The smartphone manufacturing in China has grown by 28.2% to total the revenue to $207bn in 2018. During this growth, the number of businesses has grown by 4.2% while the number of employees has grown by 23.0%. [6]

4G smartphones accounted for 94.8% sales selling 37.012 million units. Whereas, 2G and 3G sales decreased to 10000 units and 0.8 million units respectively. The decline can also be seen on the 2G and 3G smartphone sales as they have slumped 22.6% and 529.9% respectively. In the same period, 2G sales remained 49,000 units, down 90% in comparison to the past year.[6]

With China smartphone market being gradually saturated, the growth is envisaged to slow down. It is forecasted that smartphone shipments in 2018 will show a slight decrease over 2017. In the long term, the research envisages shipments will increase by +1.2% CAGR between 2017 and 2022 to reach 468m in 2022. There will be a gradual decrease in share attained by the small brands. It is forecasted that the top five brands will constitute more than nine in ten smartphones shipped by 2022. Research shows that Xiaomi will attain the largest increase mainly due to changes in its business model, and will take a 22% market share at the end of 2022.[6]

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Technology Roadmap

As China has the world’s largest mobile market by subscriber and network size, China regards next-generation 5G networks that offer faster data rates, reduced latency, energy savings, cost reductions, higher system capacity and massive device connectivity as the key to its future success. China is determined to boost its infrastructure and make it ubiquitous. Further, China is aware of inevitability of technology advancement as it has been a technological leader itself over the last decade. Hence, it aims to garner Artificial Technology and incorporate with smart phones to the optimum level.

Competitive Landscape

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 focusing purely on new shipments. Cite error: Closing </ref> missing for <ref> tag

  1. Apple
  2. Huawei
  3. Xiaomi
  4. Oppo
  5. Unknown
  6. Mobicel
  7. BBK
  8. Samsung
  9. Meizu
  10. ZTE

References

  1. 1.0 1.1 1.2 1.3 1.4 1.5 https://www.counterpointresearch.com/china-smartphone-share/
  2. https://www.scmp.com/tech/china-tech/article/2134355/chinas-cutthroat-smartphone-market-coming-down-handful-major-brands
  3. 3.0 3.1 3.2 3.3 https://www.techopedia.com/5-issues-that-the-mobile-device-industry-needs-to-solve-pronto/2/32963
  4. 4.0 4.1 https://www.d8aspring.com/eye-on-asia/smartphones-in-china
  5. 5.0 5.1 https://asia.nikkei.com/Business/Companies/China-s-Xiaomi-targets-high-end-phone-market-amid-robust-sales
  6. 6.0 6.1 6.2 https://www.ibisworld.com/industry-trends/international/china-market-research-reports/manufacturing/electronic-communication-equipment-computer/smart-phone-manufacturing.html


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