DisplaySearch: Smartphone Growth Moves Out of China

NPD DisplaySearch’s Q3 smartphone results – specifically regarding top Chinese vendors – indicate the outlook for the market as a whole, writes Tina Teng in a blog post (http:/ /

Smartphone shipments reached 305 million units in Q3, up 8% YoY. As regional markets continue to shift, market share rankings are also changing. The top players, Samsung and Apple, remained the same, even though Samsung’s relatively low 6% QoQ growth meant that it struggled to maintain momentum. Xiaomi passed Huawei and Lenovo to take the third place spot, with almost 23% QoQ growth. Lenovo shipped 17.5 million units (11.5% QoQ growth) to take fourth, as it finalised its acquisition of Motorola Mobility. Huawei, though, fell 18.4% QoQ to 16.8 million shipments.

Both Huawei and Lenovo are highly dependent on the Chinese market. The companies are attempting to expand outside of their home market, but Chinese shipments still represent 60% of Huawei’s product mix and 80% of Lenovo’s. Growth is shifting to APAC markets as China cools; part of the reason for Xiaomi’s success, as it expanded into southeast Asia in Q3, where DisplaySearch has seen rapid smartphone growth – especially in India – since Q2.

Chinese brands are shifting their focus to southeast Asia and India: both to exploit under- served markets and to unload inventory that built up after subsidy cuts in China. However, these are challenging markets; new entrants need to build brand awareness; establish sales channels; and understand local requirements.

The market shift has led to a ‘price war’ in the short term. While Lenovo’s shipments were up 30% YoY in Q3, revenue fell 6%. Smartphone ASPs fell roughly 30%; Teng suggests that this indicates around 80% of smartphones were sold for below $70. Flipkart, an eCommerce site in India, is offering 65% of its non-iOS smartphones for under $163. Strict cost management and design/ feature trade-offs will be necessary to succeed, but will make product differentiation more difficult.

Things don’t look positive as Teng writes, ‘Global brands participating in the mass-market segment will lose share, suffer profit pressure and expose themselves to intellectual property theft once again as they move outside of the Chinese market’.