China Smartphone Shipments – June – Recovery?
In June smartphone shipments in China increased 34.6% m/m and 9.2% y/y to 28m units, the first positive y/y comparison since December of last year with 98.2% of those phones being smartphones. 5G shipments were 23m or 82.1% of the total, up 29.9% m/m and 16.2% y/y. 34 new models were released in June, with 28 being smartphones and 25 being equip for 5G (73.5% of new models). Domestic brands shipped ~24.5m units or 87.5% of the total, up 47.6% m/m but down 0.4% y/y.
The increase in June shipments is certainly a step toward at least some recovery from the dismal shipment metrics seen in China since January, which we believe reflects both the Chinese New Year holiday period and the aggressive lockdowns that were initiated by state and local governments. We expect there was considerable pent-up demand at the consumer level and for brands whose production was limited during the quarantines. We expect smartphone shipments to level off for the remainder of the year, albeit at a lower average level than last year, as can be seen in the charts below.
While certainly a recovery from the last few months, it is difficult to see a demand based recovery in the Chinese smartphone market as there is little new in the way of features and new form factors (foldables) are still a very small portion of unit volumes. The driver for any smartphone sales on the Mainland has certainly been 5G as China continues to push forward with base station installations outside of COVID hot zones and with 5G smartphones represented 3:1 in new models, all brands are making sure they have at least a number of offerings for potential new customers or 4G converters. All in it was certainly the best month in the quarter, but the long-term chart tells the story of consumers unwilling to spend for upgrades that don’t appreciably move the needle and higher brand costs make the steep discounts needed to get Chinese consumers to open their wallets are hard to come by this year.
Chinese smartphone producers, both OEMs and assemblers have been facing volume challenges for a number of years as the Chinese smartphone market peaked in 2016 and has been on the decline since. As volumes were reduced manufacturers searched for products that could help them fill lines that were now running at low utilization rates. Due to the attraction of the smartphone market, which has among the highest unit volumes of all major CE product categories, phone manufacturers were not willing to give up on the smartphone market, despite the slowdowns and were willing to take smaller and lower profit margin orders over the last few years than they would have in the 2017’s and 2018’s, but competition, even for these smaller orders became so intense that manufacturers began to look for other CE products that could help them maintain high levels of utilization.
While volumes for such ‘non-phone’ products (tablets, laptops, etc.) were not as high, the initial margins were enough to be profitable and fill the lines, however over the last year the competition for these products has become so intense that unit pricing wars have begun to push smaller producers and assemblers out of the ‘non-phone’ market, leaving them without alternatives to fill production gaps. We make the assumption that this will cause some to finally give up the ghost and the market will tighten a bit, but until then it seems that smaller Chinese smartphone producers are going to be fighting a losing battle amongst themselves.
The increase in June shipments is certainly a step toward at least some recovery from the dismal shipment metrics seen in China since January, which we believe reflects both the Chinese New Year holiday period and the aggressive lockdowns that were initiated by state and local governments. We expect there was considerable pent-up demand at the consumer level and for brands whose production was limited during the quarantines. We expect smartphone shipments to level off for the remainder of the year, albeit at a lower average level than last year, as can be seen in the charts below.
While certainly a recovery from the last few months, it is difficult to see a demand based recovery in the Chinese smartphone market as there is little new in the way of features and new form factors (foldables) are still a very small portion of unit volumes. The driver for any smartphone sales on the Mainland has certainly been 5G as China continues to push forward with base station installations outside of COVID hot zones and with 5G smartphones represented 3:1 in new models, all brands are making sure they have at least a number of offerings for potential new customers or 4G converters. All in it was certainly the best month in the quarter, but the long-term chart tells the story of consumers unwilling to spend for upgrades that don’t appreciably move the needle and higher brand costs make the steep discounts needed to get Chinese consumers to open their wallets are hard to come by this year.
Chinese smartphone producers, both OEMs and assemblers have been facing volume challenges for a number of years as the Chinese smartphone market peaked in 2016 and has been on the decline since. As volumes were reduced manufacturers searched for products that could help them fill lines that were now running at low utilization rates. Due to the attraction of the smartphone market, which has among the highest unit volumes of all major CE product categories, phone manufacturers were not willing to give up on the smartphone market, despite the slowdowns and were willing to take smaller and lower profit margin orders over the last few years than they would have in the 2017’s and 2018’s, but competition, even for these smaller orders became so intense that manufacturers began to look for other CE products that could help them maintain high levels of utilization.
While volumes for such ‘non-phone’ products (tablets, laptops, etc.) were not as high, the initial margins were enough to be profitable and fill the lines, however over the last year the competition for these products has become so intense that unit pricing wars have begun to push smaller producers and assemblers out of the ‘non-phone’ market, leaving them without alternatives to fill production gaps. We make the assumption that this will cause some to finally give up the ghost and the market will tighten a bit, but until then it seems that smaller Chinese smartphone producers are going to be fighting a losing battle amongst themselves.
China Smartphone Shipments & Y/Y ROC - 2019 - 2022 YTD - Source: SCMR LLC, CAIST
China 5G Smartphone Shipments & Share - Source: SCMR LLC, CAIST
China - 5G Smartphones - Share - Total Shipped & New Models - Source: SCMR LLC, CAIST
China Smartphone Shipments - Long-Term - Source: SCMR LLC, CAIST
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