China Golden Era of Smartphones Is Ending, The most difficult times have hit the market for smartphones in the world’s largest country. According to the findings of a research company called IDC, phone shipments in China dropped by 14.7% in the second quarter. And multi-billion-dollar companies that were formerly considered to be the backbone of the industry, such as Xiaomi Corp., Vivo, and Oppo, have all reported significant drops in sales.
The decline was caused by a number of factors, including a stringent Covid Zero policy that stifled demand; however, the more significant problem is one that has been dreaded for a long time by the country’s smartphone manufacturers. It is likely that China’s smartphone boom, which has lasted for more than a decade and has been powered by new purchasers and constant improvements, will soon come to an end.
When we looked back ten years ago, China was really interested in being a mobile nation. It used state funds to install 4G base stations in practically every village, which allowed companies like Oppo and Vivo to offer chic-looking handsets to hundreds of millions of people living in rural areas, the majority of whom had never used a touchscreen before. Apple Inc., Samsung Electronics Co., and Motorola Inc. all targeted city inhabitants who are knowledgeable about technology with more expensive options. (Although the latter two were rapidly eliminated from the competition as a result of product defects, marketing blunders, and geopolitical pressures.)
In more recent years, companies that develop smartphones have noticed an opportunity presented by China’s push toward more powerful 5G networks. But very few people saw the trouble that was already developing.
One of the primary issues is that the enormous smartphone industry in China has become quite competitive. In comparison to its total population of 1.4 billion people, the country had more than 1.6 billion active mobile phone accounts as of the end of the previous year. The penetration rate is far higher than the norm for the world, which has resulted in intense competition.
The frequency with which one has to replace their phone has also decreased. The lifespans of cellphones are increasing longer, which means that their usefulness can be prolonged even when the economy is performing poorly. Due to the prohibitive cost of 5G service, many consumers in China have opted to simply maintain their existing 4G subscriptions instead. For instance, my granny, who is 93 years old and still uses her old Huawei phone every day, watches videos on it for hours at a time. There’s no reason for her to get a new phone right now given that the one she has is perfectly serviceable.
An analyst working for the research firm Canalys named Toby Zhu stated in a report that Chinese customers are not spending as much money on smartphones. Phone manufacturers had high hopes that large online shopping campaigns in June would help revive demand for their products, but the push did not succeed in returning the market to the level it was at the previous year. Even Apple, which is known for producing high-quality goods, has offered a significant price cut across the board for its iPhone product line in an effort to win over customers.
At the same time, China’s stringent limits on COVID have been detrimental to the success of every company. The retail industry, the logistics industry, and even the manufacturing sector were all impacted negatively by lockdowns. One executive of a company that had accumulated surplus components shared with me their concern that sluggish demand would leave them with an excessive amount of stock. However, there was another company that decided to cut back on their stockpiling because they were afraid that a lack of new items would cause additional drops in their market share. Nobody seems to be content.
Many observers anticipate that by the beginning of the following year, demand will begin to build up, and the industry may begin to regain traction. However, very few people believe that the golden age of empire-building smartphones in the country would ever return.