New flagship launches in 2H17 will drive growth in the China smartphone market

- The latest IDC Quarterly Mobile Phone Tracker reveals that 111.8 million smartphones were shipped to China in Q217, and that year-on-year (YoY) growth was flat this quarter.

- IDC expects smartphone shipments in 2H17 to be higher than that of 1H17 as companies such as Apple and other Chinese players push some of their flagship products.

- Apart from Huawei's P10 which boosted shipment growth, its Honor branded phones continued to remain popular and made up more than half of Huawei's overall shipments.

Huawei is the top smartphone vendor in China for Q217, followed by OPPO and Vivo.

The latest IDC Quarterly Mobile Phone Tracker reveals that 111.8 million smartphones were shipped to China in Q217, and that year-on-year (YoY) growth was flat this quarter. After a vibrant Q416 which saw OPPO, vivo and Huawei launching popular flagships that helped to drive replacement growth, the market has started to slow down, IDC says.

Reasons for the slowdown include leftover inventory from the previous quarter, as well as key flagships from OPPO and vivo being launched only towards the end of Q217Q2 and beginning of Q317. The research firm expects smartphone shipments in 2H17 to be higher than that of 1H17 as companies such as Apple and other Chinese players push some flagship products. This will help to drive some numbers, IDC said.

Highlights for Q217 include:

Huawei

While Huawei's P10 which boosted shipment growth, its Honor branded phones also remained popular and made up more than half of overall shipments. The company's “6.18” event also helped to boost its sales; several Honor branded phones even made it to JD’s list of top 10 models during the sale.

OPPO

OPPO's aggressive marketing efforts continued to pay off, and its R11 will continue to be an extremely important model for OPPO in the coming quarters. Other than its outstanding camera, its curved edges that makes it easy to hold and use is well liked by consumers. Though the R11 was launched only in mid-June, OPPO managed to ship over 2 million phones within that short timeframe. Despite it being the third shipping quarter of the R9s/R9s Plus, they continued to be popular models in the market and made up half of OPPO’s overall shipments in Q217.

Xiaomi

Xiaomi rebounded and finally saw a YoY growth this quarter. It resolved the initial supply issues it had with its products and has increased its offline presence with more Mi Home stores now available in the market. It was also the top smartphone company that saw the most sales on JD.com during the “6.18” online sales in June.

IDC's predictions for 2H17 include:

Demand for next iPhone

While Apple continued to see YoY decline in the market in Q217, IDC believes that there is a lot of pent-up demand and anticipation for Apple's 10-year anniversary iPhone, which will be launched towards the end of the year. This will definitely help Apple see growth in China this year, IDC said, as the iPhone is still seen as a status symbol in China. As such, individuals will likely demand the the latest iPhone because it will be obvious at-a-glance that they have it, given that the iPhone 8 is expected to look significantly different from the 7s series, and will have significant changes to its specifications. In fact, IDC predicts that the iPhone 8 will be more popular than the 7s series.

Front cameras

With selfie culture remaining strong in China, more companies will start launching phones with dual front and rear cameras, and this could soon become the new minimum requirement for phones from manufacturers in China.

Marketing

More companies are starting to only highlight the strengths of their cameras through their marketing messages (e.g. OPPO and it’s ‘20MP front and back camera’ for its R11), and IDC expects this to be a key feature that companies will continue to focus on for the coming year, be it from the innovation or marketing standpoint.

Average selling price

IDC expects the Android average selling prices (ASPs) to continue to rise around 10% YoY in a year’s time. This is a reflection of a shift towards the higher end models as consumers seek to upgrade their phones with better quality and specifications.

Midrange growth

“With consumers seeking better experiences with their smartphones, we expect the mid-range (US$200 < US$400) smartphone segment to gain a bigger share of the market across the next few years, as more users upgrade their phones. This will soon become the primary segment in China. Smartphone companies should focus on increasing most of their volumes from this segment, paying attention to specifications that are important to consumers such as processing speed, camera and battery life. They should also ensure that their phones are designed to look like premium models and are significantly different from previous iterations,” says Tay Xiaohan, Research Manager with IDC Asia/Pacific's Client Devices team.