Chinese Consumers have Shunned the iPhone and Other Smartphones
Apple had warned: the end of the year was bad for the iPhone. iPhone shipments plunged nearly 30% in the fourth quarter in China, in an overall market decline of 11%. Huawei instead has achieved an excellent quarter. But the recession is here and could last.
Apple delivered about three million fewer iPhones in China in the fourth quarter of 2018 than in the previous year, according to estimates by Strategy Analytics. Apple has sold 10.9 million iPhones in China over the period, 28% less than the 14 million delivered late 2017. For the whole of 2018, iPhone shipments reached 34.2 million units, against 36.7 million a year ago (-7.3%).
Apple is down
However, the entire Chinese market has stalled. Deliveries of smartphones in the country fell 11% year-on-year, dropping from 121 to 108 million units in the fourth quarter. A surprise for builders and Apple, who waited for January to correct its sales forecast? Probably not. This is indeed the fifth consecutive quarter of decline in smartphone shipments in China.
In 2018, annual deliveries of smartphones to the world’s largest market by volume declined by 11%, from 460 million in 2017 to 408 million units. The recession is underway, and Apple has obviously downplayed until recently the consequences for its sales.
“China smartphone shipments declined 11 percent annually from 121.3 million units in Q4 2017 to 107.9 million in Q4 2018. The Chinese smartphone market is in recession and has declined for five consecutive quarters. The smartphone market is suffering from longer replacement cycles and weak consumer spending. Smartphone shipments declined 11 percent annually to hit 408.5 million during full-year 2018. The past year has been exceptionally tough and one the smartphone industry will want to forget,” said Yiwen Wu, Senior Analyst at Strategy Analytics.
And Apple could not ignore it. According to the Strategy Analytics, iPhone shipments to China have declined year-on-year in eight of the last twelve quarters. The latest models have not stopped the bleeding – although they may have mitigated it.
Huawei takes the lead
The trend could, however, continue for the Cupertino firm, at the risk of benefiting its rivals. Because the recession does not hit all the builders. Of the five major players in the market, only Huawei and Vivo increased their shipments to China.
Huawei, the market leader, saw its shipments rise from 24.3 million in the fourth quarter of 2017 to 30 million in 2018. As for its annual deliveries, they grew by about 15 million units to reach 105 million smartphones.
“Huawei shipped 30.0 million smartphones and captured a record 28 percent market share in China during Q4 2018. Huawei’s growth soared 23 percent annually and it is now the clear market leader. A strong product portfolio, famous brand, and extensive retail channels were among the main success factors,” said the report.
The top five brands now account for an impressive 9 in 10 of all smartphones shipped in China. Many smaller vendors below the top five, like Meizu, are struggling to keep up and profits are diminishing.
“OPPO clung on to second place with 21 percent smartphone market share in China during Q4 2018. OPPO’s shipments fell 2 percent annually but still grew faster than average. Huawei is piling pressure on OPPO in mid-tier and offline retail channels across major cities such as Shanghai. OPPO is trying to fight back, by targeting more online channels with improved models such as the K series. Vivo sits in the third position with 21 percent market share and is very close to overtaking OPPO. Vivo’s 8 percent annual growth rate is bettered only by Huawei. Vivo is growing online with the Z series, and launching more premium models from its NEX range that aims to differentiate by tech innovation,”
Recession could last in China
If China benefits significantly from the development of the now second largest manufacturer in the world, the deterioration of this market could penalize it this year. Huawei remains very dependent on China, where the manufacturer sells 50% of its smartphone locally.
The recession registered in the Chinese market could ultimately undermine Huawei’s ambitions to permanently supplant Apple and move closer to Samsung, two rivals who currently face difficulties.
Apple is expected to release its first quarter results on January 29th. The US giant has recently revised down its revenue forecast of $9 billion, citing disappointing sales in China.