After a decade of frantic growth, China’s smartphone market is hitting a speed bump as COVID-19 rocks the world’s second-largest economy.
According to research firm Counterpoint, smartphone shipments in the country fell 14% year-on-year by 2022, reaching a decade-low. According to Canalys, it was also the first time mobile phone sales in China had fallen below 300 million units in a decade. Even in December, which historically sees seasonal increases in sales, China recorded a 5% quarter-on-quarter decline in smartphone shipments.
The three-year strict “zero COVID” policy that disrupted businesses and dampened consumer confidence, coupled with macroeconomic headwinds, marked the end of China’s years of double-digit growth. Problems mounted when the abrupt easing of COVID-19 restrictions in early December resulted in a surge in cases, adding further strain to the declining economy. China’s GDP grew 3% last year, the lowest in decades except 2020.
Alibaba’s annual shopping bonanza in November offered some clues to China’s waning purchasing power. The event, often compared to Black Friday and seen as a gauge of consumer hunger in the country, has not disclosed its final sales number in 2022 for the first time since its foundation in 2009.
There was one winner in this bleak time. Apple ended the year with an all-time high market share of 18% thanks to “its aggressive promotions” and “resilient” demand in the high-end segment in China, according to Canalys. The rise also coincides with Huawei’s fall from favor in the premium handset market as US sanctions closed access to high-end chipsets.
Apple’s relationship with China remains delicate. As well as being one of the largest markets, the country has been the manufacturing backbone that has created the most valuable company in the world. In recent years, COVID-related disruptions, such as a rare worker protest at a major Foxconn plant that slowed production, have prompted the hardware juggernaut to rethink its supply chain strategy. The Wall Street Journal reported in early December that Apple was looking to relocate some of its supply chains from China to other parts of Asia, including Vietnam and India.
India, in particular, is expected to play a greater role in Apple’s supply chains as the company plans to expand its manufacturing capacity in the country to produce 25% of all iPhones by 2025, JP Morgan analysts said.
In the fourth quarter, Apple, Vivo, Oppo, Honor (which spun off from Huawei following US sanctions against its parent company) and Xiaomi were the top smartphone brands in China.