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Chinese manufacturers’ woes drag back global smartphone shipments

Tough quarter for Chinese market, with economic downturn and people worried about falling disposable income and unemployment, has global ramifications for smartphone industry pinning hopes on Q2 fulfilling pent-up demand after lockdowns

The continued slump in the Chinese domestic smartphone market, the return of Covid lockdowns in key areas and generally increasingly intense competition have caused significant headwinds for the global smartphone industry in the second quarter of 2022, according to industry analyses from Canalys and Omdia.

Canalys calculated that during the quarter, smartphone shipments in mainland China fell by 10% year on year in Q2, with just 67.4 million units shipped. Back in first place, Vivo shipped 13.2 million units, followed closely by Honor with 13 million. Oppo (including OnePlus) remained in the top three, shipping 11.8 million units. Xiaomi came fourth with 10.6 million units, and Apple was fifth with 9.9 million.

“The nationwide outbreak of Covid-19 has caused the government to impose strict lockdowns in major Chinese cities, such as Shanghai, Shenzhen and Beijing,” said Canalys analyst Toby Zhu. “Given the domestic economic downturn, people are worried about falling disposable income and unemployment. Fragile consumer sentiment has put pressure on vendors trying to grow. They were banking on the high-profile ‘618’ e-commerce sales in Q2 to fulfill pent-up demand after the lockdown, but even the biggest promotions were unable to return the market to Q2 2021 levels.”

Although Vivo was market leader with 13.2 million shipments in Q2 to take a 20% market share, this represented a 28% annual fall in shipments. Honor took 19% of the market with 13 million shipments, up 88% on an annual basis, followed by OPPO and Xiaomi, which shipped 11.8 million and 10.6 million products for 18% and 16% market shares, respectively. Oppo saw a 30% year-on-year fall and Xiaomi was down 16%.

The study noted that Honor and Apple achieved the best year-on-year growth among the top suppliers, with the former consolidating its top five position in just one year. However, Canalys said 2022 would be a critical time for Honor to show it can survive in a harsh environment. Apple has also been enjoying resilient demand in the high-end segment, despite severe lockdowns in its key cities. The company’s active marketing during the promotional period was said to have been a key contributing factor. 

“High-end Android launches from local brands are in full swing, such as the Vivo X80 series, OPPO Find X5 series, Honor Magic 4 series and Xiaomi MI 12 Ultra, though there is a decline in overall demand,” said Canalys analyst Amber Liu. “Local vendors are focusing on optimising the smartphone experience via chipsets, cameras, batteries and operating systems, as they find moving to the high end the only route to profitability and sustainable growth.

“Meanwhile, they are also pushing an ‘everything connected’ strategy, with smartphones at the centre. A strong position at the high end is vital for local vendors’ user base growth and customer retention.”

Looking globally, Omdia reported that second-quarter 2022 global smartphone shipments totalled 293.7 million units, a decrease of 3.2% annually and a 4.6% decrease compared with the previous quarter. Although the growth rate from the same period the previous year was significantly reduced from 13% in Q1 2022, the analyst said shipments decreased to 601.4 million units in the first half as the negative growth trend was maintained for two consecutive quarters.

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The global market was being driven in Q2 by Samsung, with shipments of 62.2 million smartphones, followed by Apple, which shipped 48.9 million units. The shipments of these two companies increased by 8.7% and 12.9%, respectively, compared with the previous year.

Even though Apple's market share fell from 18.3% in the first quarter to 16.6% in the second quarter this year, it was up 2.3 percentage points from 14.3% in the second quarter of last year. Demand for the iPhone 13 series continued to be strong compared with its predecessor, the 12 series. Examining drivers for Apple’s growth, Omdia noted that the company’s consumers, who are particularly loyal and high-income customers, were relatively less affected by the economic downturn than mid-range brands were.

“The increase in Samsung’s shipments is thanks to strong sales of low-end models, such as the Galaxy A13, and its flagship Galaxy S22 series,” said Omdia senior research manager Jusy Hong. “There were also no special issues in production and parts supply this year, unlike the significant decrease in shipments due to the lack of components supply and the lockdown of major production bases during the pandemic in the second quarter of last year.”

Omdia’s study revealed that Xiaomi, Oppo and Vivo all recorded a decline of more than 20% in the second quarter, as in the first quarter. Xiaomi shipped 39.4 million units in the second quarter, notably falling below 40 million. Oppo and Vivo shipments increased slightly quarter-on-quarter but were still down 20.9% and 21.5%, respectively, compared with the same period last year. This was said to be indicative of the problems Xiaomi and Oppo have experienced, with a shortage of components last year and significantly increased their purchases to secure parts.

Honor actually experienced rapid growth in the market, with shipments in the second quarter totalling 5.1 million units – steady since the fourth quarter of last year. As Honor was still focusing on the Chinese domestic market, its shipment increase has resulted in decreased shipments of others, such as Xiaomi, Oppo and Vivo.

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