Brendan James: takeaways from the east, May 2019

There’s no sugar-coating reality, smartphone shipments are in decline worldwide. Even as markets everywhere are completely saturated, there is no let-up in sight for the release of new product. India is a yet-unsaturated market, and the gold rush is on to see who comes up on top. It won’t be easy, though. This is Takeaways From The East.

How bad is it? Globally, the industry experienced a 6.9% year-on-year decline. For each individual company it’s worse still: Samsung’s shipments dipped 8% and Apple’s suffered an alarming 20% fall (LG, though no longer one of the big makers, fell harder as they saw 40% of their share disappear over the same period). In China proper, the fall was less drastic at 5.8% YoY, but is nevertheless down 30.5% from the fourth quarter of 2018.

Explanations? Sure, there’s the post-holiday lull. The ongoing US-China trade war is another one of the usual suspects. But there are two interesting factors at play here. First, the numbers may not be accurate. Xiaomi is crying foul over the numbers being reported by research institutions, calling them “inaccurate and unfair”. The statistics in question - a reported market share drop of over 10% year-on-year against a self-stated slight decline of a few hundred thousand shipments - could fundamentally alter the way the company is perceived, so they’re right to be upset.

Second, it seems that Huawei is the single reason that the market decline isn’t worse than it already is. On one hand, if Xiaomi’s claims are true, they don’t move the needle. On the other hand, Huawei has experienced the biggest upswing of market share in their history, expanding their footprint by half over the past year to grab 17% of the marketplace. It should be noted that this was accomplished without presence in the coveted US market. Instead, Huawei has made their gains by giving consumers tantalizing products through their main brand as well as through their budget Honor sub-brand, targeting all possible price points. Phone replacement cycles are lengthening among consumers, and when it comes time to upgrade, Huawei has seemingly become the go-to brand.