Did The Chinese Smartphone Bubble Just Pop?

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by stockboardasset
The eight-year-long smartphone bubble in China has abruptly come to an end, in yet another warning sign that the global synchronized growth narrative is merely an illusion.
The Singapore-based research firm Canalys has confirmed that China’s smartphone market suffered its first ever annual decline, with shipments down 4 percent from 2016 to 459 million phones in 2017. Canalys blames the weakness on a terrible y/y performance in the industry during the Q4 2017 period, with shipments crashing by over 14 percent to around 113 million phones.
From 2010 through 2012, the Chinese smartphone industry had triple-digit growth between 104 percent to 150 percent per annum. After 2013 to present day, growth decelerated to an outright contraction.
Despite the mounting evidence of buyer saturation in China, Huawei increased shipments by 9 percent during the overall market contraction, shipping more than 24 million smartphones in 4Q 2017 and reaffirmed itself as the number one Chinese smartphone seller.
On the other hand, during the same period, shipments declined for both Oppo and Vivo by 16 percent and 7 percent, although, both companies remained in the top two and three spots in the region.
As Huawei cemented its lead as the top smartphone seller in the country, Oppo shipped 19 million smartphones, while Vivo shipped 17 million. How did Apple do? Well, the company was able to take fourth place, pushing Xiaomi back to the fifth spot with 13 million phones.

In total, Huawei sold 90 million smartphones in 2017, despite the overall industry showing its first signs of contraction. “Huawei’s push into tier-three and tier-four cities has yielded positive results,” said Canalys Research Analyst Mo Jia.
“Nova and Honor have successfully gained share from smaller vendors, such as Gionee and Meizu. 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.”
Canalys Research Analyst Hattie He said, “The declining Chinese market will have a detrimental impact on those Chinese vendors that have been heavily relying on their home market. It will affect their cashflow and profitability, limiting overseas expansion and bringing into question future survival. The threat to vendors such as Gionee and Meizu is now closer than ever.” With Lenovo and ZTE refocusing on the Chinese market in 2018, competition will intensify among vendors outside the top five.”
“There is little room left for the smaller vendors. The leading players will make aggressive plans to maintain or grow their market share. We can expect a major market shake-up in China in 2018,” he added.
To sum up, the cellphone bubble is cracking in China and threatens to unleash a deflationary trend for prices. As much as Canalys believes in market saturation in China, there is also the understanding of Moore’s Law. Technology in smartphones has rapidly increased over the past few years, that consumers are not buying new smartphones at a frequency like they were. Bye-Bye +$800 phones, Hello $200 phones.

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