China Smartphone Market Declined by 15.7% YoY in 2017Q4 and 4.9% in 2017

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According to preliminary data from the IDC Quarterly Mobile Phone Tracker, the China smartphone market declined 15.7% year-over-year (YoY) in 2017Q4 and 4.9% for the whole of 2017.

“In 2017, the minor upgrades that Chinese smartphone companies made to their offerings were not enough to move consumers to splurge on new models, resulting in a general slowdown in the market. The smaller players continued to suffer as the top five players grew their market share. A key space to look out for in the coming year would be how the top smartphone companies seek to tickle the fancy of consumers through their >US$200 products to drive consumer upgrades,” says Tay Xiaohan, Research Manager of IDC Asia/Pacific's Client Devices team.

Key highlights for the quarter:

Dominance of Apple in the >US$600 premium segment. Apple’s share increased YoY and QoQ. Although the iPhone X was available in short supply initially at launch in early November, the supply constraints for this model eased towards the end of the quarter. Apple’s ASP increased by 23.9% YoY in 2017Q4 largely due to the shipments of the iPhone X.

Even though Apple’s shipments faced a slight YoY decline, it remains the only company that dominates the >US$600 premium segment in China. In 2017Q4, Apple alone made up 85% of the overall shipments in that segment. It has not been easy for the Chinese smartphone companies to drive higher volumes at higher prices but Apple is still clearly the market leader in this space.

While Apple has done well in the >US$600 premium segment in China, this model has done well mostly only in the Tier 1 cities. Though the iPhone X has already helped to increase the appeal of the iPhones, this model is still not within the reach of most consumers. If Apple were to launch new models this year that has comparable specifications and design to that of the iPhone X at a lower price, this would help to increase the overall addressable market for Apple, and can help to increase its share in the >US$600 premium segment of the market.

Huawei appears on the radar to compete with Apple in the >US$600 premium segment. Huawei grew in 2017Q4 largely due to the strong shipment for both its Honor and Huawei branded phones in the <US$200 segment. Its main strength is that it has the Honor, Huawei and nova branded phones that covers the different segments of the market. The Singles’ Day sale also helped to push its Honor-branded phones in the market.

While Huawei’s overall share in the >US$600 premium segment still remains low, it has grown from making up 2% of the shipments in this segment in 2016Q4 to 8% in 2017Q4. With its Mate 10 and Mate 10 Pro series being quite popular in 2017Q4, Huawei will be a potential competitor to Apple in the >US$600 premium segment in China. With Samsung's continued troubles in the China market, Huawei has successfully managed to break into the high-end Android vendor space, although price points of the flagship Huawei phones are carefully priced lower than the iPhone prices at launch.

Strength of OPPO and vivo in the mid-range. OPPO and vivo are focusing more on the mid-range segment, with a higher share of their portfolio focused on the mid-range segment compared to a year ago. The reduction in the number of OPPO and vivo models in the low-end segment also contributed to their YoY decline in 2017Q4.

While focusing more on the mid-range segment has hurt its overall shipment growth, OPPO and vivo’s overall ASPs have increased YoY. In terms of revenue, OPPO ranked second to Apple and was above Huawei. vivo follows at fourth place. Thus, while OPPO’s shipments may have declined, it is growing in terms of its overall revenue.

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