Smartphone Market in China Predicted to Recover Moderately in H2 2023 Despite Challenges

The Chinese smartphone market is expected to experience a moderate recovery in the second half of 2023, according to a report by Canalys. Despite encouraging signs, the industry still faces several challenges in the short term, as pointed out by IDC report, a global market intelligence firm.
Canalys Analyst Toby Zhu emphasized that government-led incentives and increased entry-level smartphone subsidies from operators should boost consumer electronics demand in lower-tier cities, benefiting local brands. Zhu further advised vendors to prepare for important product launches in the latter half of the year to capitalize on the early signs of recovery.

However, sluggish consumer demand continued to hinder sales growth, offsetting the efforts of smartphone vendors and e-commerce operators during the “618” online shopping festival, leading to a decline of more than 5 percent in sales. IDC warned that the challenging environment is likely to persist.

Adding to the complexity, Huawei’s resurgence has triggered heightened competition in the high-end segment, posing an additional challenge for top-tier vendors in the smartphone market in China. Will Wong, Senior Research Manager for Client Devices at IDC Asia/Pacific, predicted more intense rivalry, especially during the product launch period and the Singles’ Day shopping festival.

Canalys estimated that smartphone shipments in Mainland China experienced a 5 percent drop, amounting to 64.3 million units in Q2 2023.

During this period, Vivo managed to regain its lead, securing an 18 percent market share and shipping 11.4 million units, supported by successful new product launches. OPPO (including OnePlus) closely followed with an 18 percent market share, driven by a strong online performance and improved channel capabilities. Apple secured the third position with 10.4 million iPhones shipped, closely followed by HONOR with 10.3 million shipments. Xiaomi saw a sequential improvement in market share, securing 13 percent and retaining fifth place.
Canalys Analyst Amber Liu noted that Chinese consumers are increasingly willing to invest in high-quality products, as the average selling price of smartphones exceeded US$450 last year and is expected to continue rising. Both Apple and Huawei experienced impressive growth with their flagship devices, indicating a sustained demand for high-end smartphones.

To cater to consumer demands, smartphone vendors are investing in more product innovations, particularly in foldable smartphones like the HONOR Magic V2, vivo X Fold2, and Huawei Mate X3, which have generated significant interest from consumers and channels alike due to their unique form factors and use cases.

Moreover, vendors are focusing on improving their channel capabilities and operational efficiencies amidst a challenging macroeconomic environment. Some vendors are expanding offline coverage, which is expected to become a key battleground in the coming quarters.

The IDC Worldwide Quarterly Mobile Phone Tracker reported that 65.7 million smartphones were shipped in China during 2Q23, marking a narrower decline of 2.1 percent compared to the same period last year. In the first half of the year, the Chinese market saw 130.9 million shipments, down 7.3 percent year-on-year.

Huawei made a noteworthy comeback, tying with Xiaomi in the top five rankings. The brand’s resurgence was attributed to a faster product launching pace and strong sales performance of its P60 series and foldable Mate X3 model. Interestingly, Huawei and Apple were the only vendors among the top five to experience positive growth, with Apple’s iPhone 14 series benefiting from price discounts that stimulated demand.

The smartphone market in China continues to navigate through challenges and opportunities, and the second half of 2023 promises to be an important period for vendors vying for dominance in this competitive landscape.