The smartphone market under a downturn will usher in the return of Huawei in the second half of 2023, which will also bring greater variables to the already fiercely competitive market environment. On January 29, it was reported that Huawei had registered the "Xingyao Mobile" brand trademark to position itself in the mid-range mobile phone market. However, the above news has not been confirmed by Huawei.
"At present, we have seen relevant information about Xingyao, but we have not received product information or notice of launching offline distribution. Regarding the issue of choosing between other brands, I have heard from dealers in other provinces, but currently (Huawei channels) there is no more action here." A core Huawei dealer in Guangdong told reporters.
But the counterattack of Huawei mobile phones has already begun. In the smartphone shipment data for the fourth quarter of 2023 released by multiple research institutions, the volume of Huawei mobile phones is rising significantly, with a quarterly increase of between 35% and 47%. However, judging from the full-year data, it did not make the top five list.
Changes in China’s smartphone market share in the past five years (table compiled by intern Hao Zizhu based on IDC data)
In comparison, Apple became the biggest winner in China’s smartphone market last year, ranking first for the first time. In the past five years, Apple's market share in China has increased from 8.9% to 17.3%, becoming Huawei's largest takeover of the high-end market. Honor has gradually regained its lost market share after breaking away from Huawei, and since the third quarter of last year, it has climbed to the top of domestic mobile phones.
"Due to the issue of launch time, the return of Huawei mobile phones did not have much impact on the overall market last year, but in terms of sales, Apple fell 9% year-on-year in the fourth quarter." An analyst from Counterpoint told reporters that in the face of fierce competition, Apple took price cuts in January to take advantage of economic recovery opportunities and offset the pressure from local mobile phone brand manufacturers.
Judging from the annual market share of several domestic mobile phones, the share is tight and the gap is not large. IDC China senior analyst Guo Tianxiang told China Business News that although China's smartphone market has returned to a growth trend, it remains cautiously optimistic about this year. Mobile phone manufacturers still need to maintain conservative and pragmatic operating strategies, control inventory, stabilize cash flow, and establish long-term development goals.
After 10 consecutive quarters of year-on-year decline, China's smartphone market rebounded in the fourth quarter of 2023.
IDC data shows that in the quarter, China's smartphone market shipped approximately 73.63 million units, a year-on-year increase of 1.2%. Market demand mainly came from high-end people in first- to third-tier cities.
"The peak of the last wave of replacement was in the second half of 2020. According to the three-year timetable, a new round of replacement cycle will enter from the second half of last year to the first half of this year." Guo Tianxiang told reporters that most of the products with better sales are concentrated in the flagship product series of each brand, while the sales of mid-to-low-end products, which are mainly responsible for the volume, have not improved significantly. The replacement demand of mid-to-low-end users who occupy the majority of the market share has not been fully released.
The growth of the high-end mobile phone market has made Apple the biggest beneficiary. In the past five years, Apple's market share in China was 8.9%, 11.1%, 15.3%, 16.8%, and 17.3% respectively. At the beginning of this year, Apple tried to further expand its market share by cutting prices.
"It has almost never been the case that the price of a new phone has been reduced across the entire series. There was no activity throughout last year." An Apple store salesperson previously told China Business News that price reductions for new iPhone series generally did not involve the Pro and ProMax versions. However, under the latest preferential policies, the price reduction of the 15 series products has reached 500 yuan, and some channel dealers have offered price discounts of up to 800 yuan.
IDC mentioned in the report that although Apple no longer has a clear advantage over Android flagship products, the overall comprehensive product strength of the iPhone is still one of the best. "It's just that the prices of Apple products are not as good as before, and channel delivery price adjustments are getting earlier and earlier." Guo Tianxiang told reporters.
In terms of domestic mobile phones, Honor, OPPO, vivo and Xiaomi rank among the top four in domestic mobile phone shipments. Although Huawei made significant momentum in the second half of last year, it still did not make the list for the whole year.
IDC said that following its recovery the year before last, Honor's share of the foldable screen products in the market above US$800 has significantly increased, and there are also a number of popular products in the mid-to-low-end market. The success of its product strategy and improved cooperation with channels helped it achieve the second position in total domestic shipments for the year. However, looking at specific shipments, the gap in annual shipments between several leading domestic mobile phone manufacturers is not large.
A set of data provided by Canalys shows that the current market share of Honor, vivo and OPPO is stable at 16%, with shipments between 40 million and 45 million units, almost neck-and-neck. In the shipment situation of the past five years sorted out by reporters, due to the spin-off, Honor's share fluctuated by more than 13 points, OPPO's share fluctuated by about 3 points, and vivo and Xiaomi's shares fluctuated by 5 points.
"With the increase in channel profits and the stimulation of manufacturers' highly competitive new products, China's smartphone market is expected to enter a moderate recovery track. In the next 10 years, the middle-class population in mainland China's market will increase, and the huge high-end market will still be a long-term strategic battleground for major domestic and foreign manufacturers." Liu Yixuan, research manager of Canalys, said that Huawei's re-entry into the battlefield will also intensify competition in the market and further intensify market innovation.
Liu Yixuan said that as the pressure brought by Huawei's return gradually reaches the mass market, maintaining cooperation with channels will also become an important strategy for other manufacturers to defend their market share.
Although the full-year pattern of China's smartphones has not changed significantly in 2023, starting from the fourth quarter, Huawei has gradually become louder and has become an unavoidable topic in the mobile phone market.
"Huawei has become the biggest dark horse this quarter, returning to the top five shipments in the Chinese market after 10 quarters." Canalys research analyst Zhong Xiaolei said that Huawei shipped 10.4 million units in the quarter, and its flagship new product shipments increased by 47% year-on-year, ranking fourth in the country.
Mobile phone channel dealer Wang Zhong went through the entire process of Huawei mobile phone distribution in the second half of last year.
"Huawei's sales counterattack has begun in August." Wang Zhong told reporters that at a core channel dealer meeting in August, it was clear that Mate60 would be launched in October, and a 5G version was promised to the channel dealers present. But only core KAs are eligible to distribute goods. Without considering premiums, the profit margin of the channel is about 13%.
Wang Zhong told reporters that after Huawei's Mate series, it will also have the Changxiang and nova12 series as supplements from October to December, and will focus on launching attacks on the market. There are both 4G and 5G versions. “The M series starts from the high-end and radiates downwards, while the Nova series moves upward from the mid-range, outflanking the current positions of OPPO, vivo and Xiaomi.”
In the short term, Huawei has indeed had an impact on the market. In the shipment volume announced by IDC, OPPO fell by 16.1% in the fourth quarter, vivo fell by 8.4%, Apple and Honor fell by 2.1% and 0.9%, and Xiaomi fell out of the top five. In the sales data released by counterpoint, Apple, OV and realme all experienced varying degrees of decline, ranging from 9% to 24%.
But as to whether Huawei can regain the high-end market from Apple, Wang Zhong believes there are still challenges. "At our level, we have at least a year to fight the 4G battle." Wang Zhong told reporters that in order to snipe other manufacturers during the National Day, Huawei had occupied some dealers' funds in advance, so that everyone's resources were tilted towards Huawei. However, from the perspective of stock distribution, Mate60 shipments were slow when demand was greatest. This was due to marketing and shortages, as well as to speeding up the digestion of 4G mobile phone inventory.
Wang Zhong told reporters that in the past three months, if low-line dealers want to get the Mate series, they need to "allocate goods" and sell some 4G mobile phones. In the information Wang Zhong showed to reporters, the types of these mobile phones include nova11, Hinoca11, etc. These sub-products require 100,000 yuan of his funds to "push orders" at a time.
A Qualcomm insider told reporters, "Huawei had a large storage capacity for Qualcomm's 4G chips at the beginning of last year. Our internal understanding is that even if there is a gap in the cooperation, this amount will be enough for Huawei to use within two years. However, the market heat of the Mate series in the second half of last year also caused sales pressure on Huawei's 4G mobile phones."
On the other hand, China's smartphone market has entered a mature stage, and Huawei is also facing attacks from other manufacturers.
Counterpoint said that, for example, Xiaomi and Honor have adopted active strategies (including marketing and distribution strategies) to increase sales. Xiaomi Mi14 series, Honor X50 series and Honor 100 drive the growth of their respective brands.
Liu Yixuan said that in order to defend market share, several major Android manufacturers are also building their own moats through self-developed operating systems and generative AI strategies. Since the second half of last year, the heads of different mobile phone manufacturers have made it clear that they are ready for Huawei's return.
"Honor can no longer be Huawei." Honor Zhao Ming said in an interview with reporters in early January this year that Honor has inherited some of Huawei's excellent genes, but today's two companies have significant differences in terms of market environment, product strategy, brand positioning and other aspects. "We need a strong opponent. Huawei's return will undoubtedly excite everyone. This year our goal is to maintain a growth rate of more than 150% in the European market."
"Based on current observations, as long as the product is good enough, sales will basically be good." OPPO chief product officer Liu Zuohu also told reporters before that in fact, the biggest impact of Huawei's return is Apple, at least in the past six months, this is the market result. "For the future, each company needs to find its own differentiated features. Currently, we still have many differentiated advantages in AI."
Analysts from the investment bank Jefferies said in a report that despite significant price cuts on many iPhone models, including the iPhone 15 Pro and Pro Max, on major Chinese e-commerce platforms, iPhone sales in the first week of the new year (2024) were still 30% lower than the same period last year. The 30% decline is significantly accelerated compared to Apple’s overall 3% decline in China in 2023. Jefferies analysts believe that Apple's sales decline is mainly due to fierce competition from local Chinese brands, especially Huawei, which has made a strong return to the high-end market.
In the long run, with the full production volume of Huawei mobile phones in the next two years, the domestic smartphone market will usher in more intense changes. As the offensive and defensive battles between various mobile phone brands begin, a new market pattern is also brewing.
(Reporter Lu Qian and intern Hao Zizhu also contributed to this article)