China begins losing smartphone buyers after 8 years of stunning growth

Chinese smartphone vendors begins losing buyers
People walk past a sign board of Huawei at CES (Consumer Electronics Show) Asia 2016 in Shanghai, China May 12, 2016 REUTERS/Aly Song

China, the biggest smartphone market in the world, has seen a considerably huge drop in smartphone sales in the fourth quarter of 2017, the first-ever annual decline and the first in eight long years. Amid the shrink, Apple had experienced an improvement in sales, claiming its spot back from Xiaomi.

China's smartphone market concluded 2017 with 4 per cent decrease from 2016 to 459 million units in 2017, says research firm Canalys. The decline "was partly due to China having one of its worst year-on-year performances in Q4 2017".

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Shipments in Q4 plummeted by over 14 per cent to just under 113 million units. Huawei remained on top of its game, growing shipments by 9 per cent against the overall market decline and shipping more than 24 million units in Q4 and a total of 90 million in 2017.

Canalys research analyst Mo Jia says Huawei's success is largely attributed to Nova and Honor line of phones which gained share from smaller vendors such as Meizu and Gionee. However, Jia thinks "internal cannibalization" could happen between Huawei and Honor as the latter performs so well in the market.

"Huawei's push into tier-three and tier-four cities has yielded positive results," says Jio in a statement. "Honor's performance has complemented Huawei's success, by contributing more than half of Huawei's total shipments. But competition between Huawei and Honor is getting fierce, and Huawei must deal with possible internal cannibalization."

Oppo and Vivo shipments fell by 16 per cent and 7 per cent, respectively, but both have remained on their second and third ranks. Oppo sold 19 million units, while Vivo sold 17 million.

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The fourth and fifth spots have been a push-and-pull between Apple Inc and Xiaomi throughout the year. The iPhone maker capped off the final quarter in the fourth spot, shoving the Chinese phone maker back to the fifth spot with a total of 13 million shipments worldwide.

apple builds data centre in china
People take a photo at the Apple Store in China Reuters

Canalys research analyst Hatti He warns smartphone vendors in China of the detrimental impact of heavily depending on local sales.

"It will affect their cashflow and profitability, limiting overseas expansion and bringing into question future survival," says He in a statement, adding that "there is little room left for the smaller vendors".

He believes leading smartphone players will be pulling aggressive plans in 2018 so a major shakeup is expected.

This article was first published on January 28, 2018