Smartphone Leaders in China: 2015 Analytics

by | Mar 18, 2016 | Chinese Market, Emerging Markets | 0 comments

China’s mobile phone market is the largest in the world. In 2015, it accounted for a third of all smartphone sales worldwide according to The Guardian, with 427.6 million smartphones shipped to China. It’s not surprising considering that 1.29 billion mobile users have been registered in China, and mobile is vital for China’s e-commerce.

In 2015, China’s mobile sales outnumbered the U.S. by 450%, and according to an eMarketer study, mobile spending in China was expected to hit a global record high of 49.7% of all e-commerce spending. And predictions for 2018 put mobile-commerce as 71.5% of all online retail.

While the mobile market in China is massive and continuing to grow, the growth of first-time phone buyers is decreasing and so is the number of people buying replacement phones. A year ago, the average phone replacement was purchased every 13 months, now that time is lengthening. According to Yibada, China’s smartphone market grew just 2% in 2015, its slowest rate in recorded history.

The growth of the mobile commerce market alongside the drop in smartphone sales presents an interesting dilemma for smartphone producers. Chinese e-commerce is poised for smartphone takeover, but it’s also getting more difficult to gain a foothold in the oversaturated mobile market. There are three key challenges that smartphone companies are facing in the Chinese market: the economic insecurity and falling share prices that are hurting consumer confidence and spending; the saturated mobile phone market; and the intense competition between affordable Chinese-based smartphone creators.

To survive in the market, mobile phone companies are jumping onto a few new trends:

  • Multi-Brand Strategies: Huawei and ZTE have positioned younger sub-brands Honor and nubia to chip away at Xiaomi’s user base. Lenovo has also gotten into the mix with an online-focused Shenqi division.
  • Higher Price Tier Competition: More brands are trying to compete with Apple in the mid to high-end segment of smartphones including Huawei, Lenovo, and Xiamoi.
  • Non-Traditional Channel Strategies: There’s been a reduction in operator subsidies meaning that vendors are expanding their channels into more vendor-branded retail shops, direct online sales, and eTailers.
  • Expansion Overseas: Since the market in China is slowing down, Chinese mobile phone vendors are looking overseas at India and other Southeast Asia companies for additional market.

So which mobile phone brands are performing the best in China? International brands such as Apple and Samsung are having a difficult time reaching the local markets in China, accounting for more than 56% of China’s overall mobile consumption, which is why they’re struggling to perform. Instead, Chinese-based brands are overwhelming the market and gaining new customers.

The top three companies are Xiaomi (15.2%), Huawei (14.7%), and Apple (12.5%). Beyond Apple, the remaining smartphone producers are all homegrown Chinese companies. Even Samsung, the world’s most prolific smartphone maker didn’t make it into the top five. So, who are the smartphone brands in China and what do they look like?

 

Xiaomi

Xiaomi is great at attracting first-time customers with phones under the $150 mark (its average smartphone sales price slipped to $149 from $189 in 2014), according to Counterpoint Research. However, it tends to lose its customers when it comes time to upgrade as they switch to Huawei, Oppo, or Apple.Chinese Smartphone Vendors

Prior to 2015, Xiaomi held the top spot in China for smartphones, but when it started to face hurdles in the market, it lost to Huawei in Q3 of 2015, only to regain it by Q15. In 2015, it had a worldwide target of 80 million smartphone shipments, which it missed by just under 10 million units. Its growth rate was just 17% in 2015, and it has yet to gain success in the global market.

Huawei

Huawei became China’s top smartphone vendor in Q3 of 2015 with an 81% year-on-year shipment growth though they lost the spot by Q4. They had the fastest growth rate at 51% with shipments increasing from 41.3 to 62.2 million year-over-year.

Huawei mainly builds telecoms network equipment, but it has also been focusing on building its smartphone business. In 2015, they sold 108 million smartphones, surpassing their target of 100 million shipments. In addition, the average sales price of Huawei increased to $306 in 2015, over $216 the prior year.

Apple

During the last quarter of 2014, Apple managed to reach its second highest market share ever in China, according to GB Times. However, it ranked third in overall shipments with just 49.5 million units shipped to China. However, unlike many of the other phone makers in China, Apple is still able to command premium pricing.

An entry-level iPhone 6S costs $649 (USD) in the U.S. but $833 (USD) in China. This might not seem like a big deal, but when the mean yearly income in China is $8,500, that’s more than a month’s wages. The reason the price point works for Apple is because of its perception. The iPhone is a status symbol. When a Financial Times writer showed up in China with an Android phone, he was told that he looked “like a poor man from the country.”

China smartphone shipments

Other Smartphone Companies in China

  • Vivo: Vivo ranked as the fourth largest smartphone market shareholder in China with 10% of the market and a 52% growth rate in 2015. It also has market share in Malaysia and India.
  • Oppo: Oppo is a rising Chinese smartphone brand having shipped 50 million handsets in 2015, up 67% from 2014. Overall, Oppo had a 49% growth rate in China, and it now ranks among the world’s top 10 smartphone makers. In terms of price, Oppo competes with Xiaomi, though it has had more success abroad in India, Pakistan, Sri Lanka, and Australia.
  • ZTE: Similar to Huawei, China’s second leading smartphone provider, ZTE also makes network equipment for which smartphones are becoming increasingly important. In 2015, the company grew 36% to more than 60 million handsets.
  • Lava: The only Indian company to make the list, Lava is one of the fastest-growing smartphone companies. Similar to its rivals, it uses Google Android but also uses Intel chips to power its phones. In 2016, it aims to expand to Mexico.
  • Samsung: In 2015, Samsung experienced a -53% year-on-year unit growth with only 9.6 million shipments in Q1 of 2015.
  • Lenovo: Between 2014-2015, Lenovo experienced a -22.1% year-on-year unit growth, and only sold 8.2 million smartphone units in the first quarter of 2015.

For 2016, Huawei is poised to become the leader in the Chinese market while other brands such as Oppo and Vivo also continue to grow in volumes as well as revenues.