China's fading smartphone empires

 

China's Golden Era of Smartphones Is Ending :


The world’s largest smartphone market is in deep trouble. China saw a 14.7% decline in phone shipments in the second quarter, according to research firm IDC. And multibillion-dollar pillars of the industry like Xiaomi Corp., Vivo, and Oppo all reported steep sales declines.

Many factors drove the fall, including a strict Covid Zero policy that torpedoed demand, but the more significant issue is one that’s long been feared by the country’s smartphone makers. China’s 10-year-plus smartphone boom, fueled by new buyers and ceaseless upgrades, is likely coming to an end.

Causes :

More recently, smartphone makers saw an opportunity as China pushed toward advanced 5G networks. But few saw the trouble already brewing.

A key problem is that China’s massive smartphone market has become highly saturated. The country had more than 1.6 billion active mobile phone accounts by the end of last year compared to its 1.4 billion population. The penetration rate is well above the global average and has led to fierce competition.

The need to replace phones has also dwindled. The life cycles of smartphones are getting longer and can be stretched when the economy isn’t doing well. The price of the 5G service has prompted many people in China to simply keep their adequate 4G subscriptions.

At the same time, China’s severe Covid restrictions have worked against every business. Lockdowns disrupted the retail, logistics, and sometimes manufacturing sectors. One executive whose company had stockpiled components told me they worried that weak demand would stick them with excess inventory. But another company that went easy on stockpiling feared that a lack of new products could lead to further declines in market share. No one is happy.

Final Verdict:

By next year, many analysts believe that demand will pick back up and the industry could regain traction. But few expect that smartphones’ empire-building golden era in the country will ever return.

Support Links:

https://www.bloomberg.com/news/newsletters/2022-08-12/china-s-smartphone-golden-era-is-fading-a-sales-sink

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