Chinese smartphone market is shrinking but we can’t agree on how much

A slew of Chinese smartphone numbers have been churned out by leading educated-guessers and the only thing they agree on is that it’s declining.

Counterpoint reckons Q1 2018 Chinese smartphone shipments declined 8% annually, but Canalys has a much bigger decline of 21%, while GfK is going for a more modest 6% decline. Counterpoint and Canalys will derive their intelligence from the supply-side – i.e. manufacturers, supply chain, etc, while GfK uses point-of-sale terminals to get a demand-side picture.

Regardless of the method there will be a fair bit of extrapolation, conjecture and intuition in all the numbers, which explains why they can sometimes be so far apart.

“2018 started on a slower note for the world’s largest smartphone market,” said James Yan of Counterpoint. “The slowdown can be attributed to lengthening smartphone replacement cycle for the Chinese consumers. Additionally, lack of product launches in Q1 2018 with OEMs focusing on inventory clearance, especially for non-bezel-less display devices, were other key factors impacting shipment volumes. Bezel-less devices are now popular in China and more OEMs are expected to launch sub-1000 RMB (~US$160) bezel-less portfolio to differentiate their offerings in the mid segment.”

“The level of competition has forced every vendor to imitate the others’ product portfolios and go-to-market strategies,” said Mo Jia of Canalys. “But the costs of marketing and channel management in a country as big as China are huge, and only vendors that have reached a certain size can cope. While Huawei, Oppo, Vivo and Xiaomi must contend with a shrinking Chinese market, they can take comfort from the fact that it will continue to consolidate, and that their size will help them last longer than other smaller players.”

“We start the year with a very different picture to the final quarter of 2017, when smartphone demand records were broken,” said GfK’s Arndt Polifke, commenting on the global picture. “In the first quarter of 2018 by comparison, there was a year-on-year decline in global smartphone demand. It’s perhaps no surprise as we hit saturation point in more markets. On the other hand, consumers are tending to choose higher-priced models as they embrace the latest innovations offered by smartphone brands. As a result, the average sales price grew by an astonishing 21 percent year-on-year to USD 374. This led to 18 percent revenue growth globally, which is exceptional for a maturing industry.”

GfK is the only one of the three to talk about value as well, and in its released confirms this global trend is playing out in China. Smartphone revenues there grew by 14% to $41.1 billion in spite of the volume decline. This seems to be down to the growing strength of the big smartphone brands, including Apple, and their ability to persuade Chinese punters to upgrade to more expensive devices.

Counterpoint China Q1 2018


Canalys China Q1 2018

Q4 2017 global smartphone sales value spiked thanks to the iPhone X

A couple of early looks at the Q4 2017 global smartphone market indicate the iPhone X sold well and dragged the average selling price up with it.

GfK, which derives its data from point-of-sale terminals, reckons global ASPs experienced a record spike in Q4, growing 11% year-on-year. This trend seems to have been driven mainly by Europe and Asia, with Central and Eastern Europe ASP jumping 28% and Western Europe seeing the average sale value increase by 17% despite a 3% decline in sales volume.

“Smartphone year-on-year demand growth moderated for the fourth consecutive quarter, rising only one percent to 397 million units in 4Q17,” said Arndt Polifke, Global Director of PoS telecom research at GfK. “However, sales value increased by 11 percent year-on-year in the quarter, which is exceptional growth for such a mature technology category. This came as the proliferation of smartphones with larger and bezel-less displays incentivized consumers to purchase more expensive devices.”

“The outlook for 2018 is positive as GfK forecasts global smartphone demand to rise by three percent compared to 2017, driven by Emerging Asia and Central and Eastern Europe,” said Yotaro Noguchi, product lead in GfK’s trends and forecasting division. “With saturation in developed markets, consumer retention will be a key focus for smartphone makers, which, alongside increased commoditization, will encourage greater innovation and differentiation in order to spur sales.”

GfK Q4 2017

GfK didn’t comment on vendors but it can’t be a coincidence that Q4 2017 also marked the first time the £1,000 iPhone X went on sale. Yes, there are other expensive flagship smartphones out there too, but that was the biggie. Some early vendor numbers from Canalys, which derives its data from further up the smartphone channel, indicate Apple managed to flog a nice lot of Xs – 29 million to be precise.

“The iPhone X performance is impressive for a device priced at US$999, but it is slightly below industry expectations,” said Ben Stanton, Analyst at Canalys. “Apple struggled with supply issues in early November, but achieved a massive uplift in production in late November and throughout December.

“This helped it meet and even exceed demand in some markets by the end of the quarter. One major benefit to Apple is that customers are increasingly realizing the residual value of their old smartphones, opting for trade-in programs to offset the high price of the iPhone X. But that big price tag, and Apple’s split launch strategy, still had an impact, and shipments were not the fastest ever for an iPhone.”

It should be noted that Apple has yet to publish its shipments numbers and doesn’t publicly break them out by model. One of the main roles for industry analysts is to be better guessers than everyone else, so this Canalys datapoint needs to be treated as guidance rather than definitive. Having said that history has shown that large numbers of people with find the money for the latest Apple shiny thing, regardless of the price tag, so there’s no reason to wholly distrust the 29 million figure.

Average smartphone prices reach record high – GfK

Market tracker GfK has released its latest global smartphone numbers and they reveal that prices are increasing at a significant rate.

Most smartphone tracking firms get their numbers from vendors or the supply chain, but GfK uses point-of-sale terminals to get a sense of what’s happening on the demand side, including sales value as well as volume. The latest numbers show value increasing more rapidly than volume, resulting in a jump in average selling price (ASP).

The first table below shows both sets of data for Q3 2017, split regionally and compared to the year-ago quarter. They haven’t done the maths for us but dividing the value by the volume yields the ASP and we can see that it was around $299 globally last year but has jumped 20 bucks to $319 this year.

gfk asp table quarterly

“Although unit sales may be down in some regions, the increase in ASP reveals the fantastic opportunity to grow the value of the smartphone market,” said Arndt Polifke, global director of telecom research at GfK. “This is welcome news for manufacturers, particularly in regions such as Western Europe where saturation has resulted in declining sales volumes year-on-year.

“The industry has clearly been switching its focus to drive sales value, and top tier global brands, such as Apple, Google, HTC, Huawei, LG, Moto, Nokia, Samsung and Sony, either already have, or will release, new premium models in an effort to upsell customers to their flagship devices.

“At the same time, premium features are increasing in importance to consumers, so we expect to see more emphasis on water and dust protection, battery power and memory, high resolution sound, camera and video capabilities, bezel-less design and even biometric sensors on new launches.”

As you would expect the annual numbers below also reveal an ASP increase. It’s also worth noting that the annual ASPs are higher than the Q3 ones. This is almost certainly due to the fact that Apple always makes its new, expensive phones available in Q4 so the ASP in that quarter is probably the highest.
gfk asp table annual