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China's Smartphone Shipments Slow Down Yet Brand Competition Intensifies

2016 is set to be a tough year in the Chinese smartphone market

24May

The smartphone business in China is currently in a hectic state. Emerging brands are capturing market share, while smartphone shipments have dropped thanks to toxic combination of a saturated market, economic slowdown, and inventory build-up.

There has been a significant fall in the number of smartphone shipments over the last year alone. In Q1 of 2016, the country saw 104.9 million shipped, down from 109.8 million in Q1 2015 - a fall of 5%. However, despite the slowdown in growth, China remains the world's largest smartphone market.

The smartphone market is hitting saturation point across the world. In 2014, Europe and North America saw unique subscriber growth of below 1%, indicating that there is now little room for growth. According to Nielsen’s latest Consumer Confidence Report and Nielsen Smartphone User Research Report in 2015, smartphone penetration was estimated to have reached 73% among Chinese consumers by this year, with that figure exceeding 90% in many urban areas.

In such a competitive marketplace, brands are having to work extremely hard to maintain their position. The Chinese smartphone brand Xiaomi fell 9% year-on-year in Q1, losing its position as market leader to the fast-growing Huawei, which managed to ship 16.6 million gadgets during the first quarter - 48% growth on Q1 of 2015. Huawei’s success has come largely because of its extensive distribution channels and popular models like the Mate 8, but experts do not expect the company’s growth to last long, citing fightbacks from flourishing OPPO and Vivo. OPPO is arguably one of the best performing brands this year and has overtaken Xiaomi to become the second largest smartphone vendor in China. The brand managed to capture 13% market share in the first quarter. Vivo, meanwhile, was number four in Q1, holding 12% market share in China, up 7% on the previous year. The brand shows strong retail penetration as well as increased brand awareness among mass-market consumers.

There is also still old foes Apple and Samsung to consider, though it seems that external factors hit them the hardest. Both companies have felt the effects of market saturation and the economic downturn in China, and it’s predicted that Apple will face its first sales decline in 13 years, despite selling a record number of iPhones in Q4 of 2015. Samsung too continues to suffer from its cheaper Chinese rivals, and Samsung mobile executive Lee Kyeong-the warned: ‘Competition among smartphone players will intensify even further as a consequence of market growth slowdown.'

The World Bank projects China’s GDP to expand at just 6.7% in 2016, the world's second-largest economy weakest growth in 26 years. The current environment is not comfortable for any business, but for IT related companies, it is worse as mobile handsets become more of a commodity than ever before. For anyone trying to predict who will end up leading China’s smartphone market, it is becoming a nigh impossible task. 

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