| Vendor | Worldwide Q1’23 shipments (million) | China Q1’23 shipments (million) | China as % of WW |
|---|---|---|---|
| Samsung | 60.3 | – | – |
| Apple | 58.0 | 13.3 | 23% |
| Xiaomi | 30.5 | 8.5 | 28% |
| Oppo | 26.6 | 12.6 | 47% |
| vivo | 20.9 | 11.3 | 54% |
| Others | 73.4 | 12.2 | 17% |
What’s wrong with this picture? We often overlook the fact that Samsung is not in the Chinese market, and that if you compare like for like, have Apple head-to-head with Samsung where they are actually in competition, and Apple’s smartphone business doesn’t seem unassailable. For one thing, Samsung’s numbers for smartphone sales are significant purely because it has neither the software infrastructure, distribution channels, and brand cachet of Apple, and it doesn’t have China, yet it is outselling Apple by 38% everywhere else. That’s with an 18% drop in YoY shipments.
Let’s be clear on one thing, Apple’s performance in China is similar to that of LVMH. LVMH is the world’s largest collection of premium brands and the economic recovery in China, post-pandemic and lockdowns, is doing wonders for its bottom line, and making Bernard Arnault, its CEO, the richest man in the world.
LVMH said first-quarter sales grew by 14% in Asia, excluding Japan, compared with an 8% decline in the fourth quarter of last year, and the group said it expected China to drive growth in 2023.
Reuters
Samsung is not going to be able to do its own LVMH. That ship has sailed, and while I am an iPhone user myself, I think the significance of what Samsung is doing, without a Chinese market, should be clear. What Samsung – Oppo, vivo, and the rest, too – must do is to leverage the smartphone display. Not head to head but through foldables and flexible smartphone displays. Apple’s vulnerable to a change in consumer preferences, and foldables are an ideal opportunity for all other smartphone vendors to start moving consumers away from the traditional smartphone model that Apple pioneered. I get that it is early days, that there are many issues to be addressed, particularly in terms of the quality of foldables, but the market is ready for something, anything, that will change the smartphone experience.
The other area of engagement is on gaming and visual processing. Games, streaming, and interactivity are differentiators for Android phone vendors because Apple has never been good at games. It will only take one game, running on Android, with commensurate graphics performance on a Samsung smartphone display, for example, to change consumer expectations of what a good phone is or isn’t. Android phone makers are stuck with the software infrastructure that Google provides, and it can be vanilla at the best of times, but there’s something to be said for finding Apple’s weak spots and hitting them hard.
On the other hand, more feature rich devices from homegrown companies in China also have a chance at denting Apple’s armor because Chinese consumers may gravitate toward local brands when given the opportunity. Everything revolves around the displays of the smartphone where Apple’s competitors can move quicker to differentiate and have a greater level of control over outcomes. Not that Apple is going to suffer, but Apple was once a niche brand in the PC industry, much loved by designers and creatives, but never considered serious for productivity or gaming. It is still not really an IT product in any sense of the word. It’s a fashion statement. Fashion can be fickle. Maybe that’s why Apple is so desirous of seeing its mixed reality headset become as significant as the iPhone was in its early days. Maybe Apple sees the writing on the wall for high-margin, premium smartphones.
Nevertheless, Apple has demonstrated the ability to innovate and adapt in the past, which may contribute to its continued success. But, let’s ease up on the notion that Apple deserves a pat on the back based on the quarterly data from Canalys (reviewed below). The company is proving to be recession proof, like LVMH, and the Chinese market has given it a big boost, but over the course of the next two years, I believe, the smartphone industry is going to reshape itself, and that Apple will not be nimble enough to keep up, particularly as new form factors find their footing, form factors like foldables. And I certainly don’t buy into the hype around its mixed reality headset.
The Global Smartphone Market in Q1’23
Reviewing the latest data from Canalys, global smartphone shipments fell by 13% to 269.8 million units in Q1’23, with Samsung shipping 60.3 million units to reclaim the top spot, followed by Apple with 58.0 million shipments. Xiaomi defended its number three position with 30.5 million shipments while Oppo and vivo completed the top five, shipping 26.6 million and 20.9 million units, respectively. Canalys expects the smartphone market to gain momentum in the second half of the year as channel inventories reach healthier levels, but maintains its forecast of marginal declines for 2023.
| Vendor | Q1’23 shipments (million) | Q1’23 market share | Q1’22 shipments (million) | Q1’22 market share | Annual growth |
|---|---|---|---|---|---|
| Samsung | 60.3 | 22% | 73.7 | 24% | -18% |
| Apple | 58.0 | 21% | 56.5 | 18% | 3% |
| Xiaomi | 30.5 | 11% | 39.2 | 13% | -22% |
| Oppo | 26.6 | 10% | 29.0 | 9% | -8% |
| vivo | 20.9 | 8% | 25.1 | 8% | -17% |
| Others | 73.4 | 27% | 87.6 | 28% | -16% |
| Total | 269.8 | 100% | 311.2 | 100% | -13% |
Samsung’s performance shows early signs of recovery after a tough end to 2022, driven by product launches, which drove an increase in sell-in volume. Meanwhile, Apple had robust performance, particularly in the Asia Pacific region, due to sustained investments into offline channels. The mid-range price segment has started to recover following huge declines last year, with vendors leveraging trade-down opportunities with strong value-for-money offers for consumers with limited spending power. Canalys maintains that the market remains challenging and expects vendors to approach the market with profitability targets, lean operations, and inventory clearing as top priorities.
The Chinese Smartphone Market in Q1’23
The smartphone market in Mainland China experienced a year-on-year decline of 11% in Q1’23, with shipments dropping to 67.6 million units, the lowest Q1 since 2013. Apple was the top vendor with a 20% market share, shipping 13.3 million units, followed by Oppo (including OnePlus) with 12.6 million units and a 19% market share. Vivo and Honor secured third and fourth places with shipments of 11.3 million and 9.7 million units respectively, while Xiaomi stabilized its market position in fifth place with a shipment of 8.5 million units. The pandemic has affected consumer behavior, leading to rational attitudes towards the consumption of electronic goods.
| Vendor | Q1’23 shipments (million) | Q1’23 market share | Q1’22 shipments (million) | Q1’22 market share | Annual growth |
|---|---|---|---|---|---|
| Apple | 13.3 | 20% | 13.7 | 18% | -3% |
| Oppo | 12.6 | 19% | 13.9 | 18% | -10% |
| vivo | 11.3 | 17% | 12.2 | 16% | -7% |
| Honor | 9.7 | 14% | 15.0 | 20% | -35% |
| Xiaomi | 8.5 | 13% | 10.6 | 14% | -20% |
| Others | 12.2 | 18% | 10.2 | 13% | 19% |
| Total | 67.6 | 100% | 75.6 | 100% | -11% |
Vendors are launching products with breakthrough specifications such as flagship chips, large storage, imaging performance and fast charging, among others, as experienced in Redmi K60, OnePlus Ace 2V, realme GT Neo5 and other new products. To avoid price wars, vendors should focus on providing differentiated value propositions, enhancing user experience and improving brand loyalty. Although there will not be a significant recovery of the Chinese smartphone market in 2023, there are signals of consumer confidence returning, which will be a good time for vendors to implement their latest branding and product strategies.
