It's the winter of discontent for handset manufacturers

Winter has descended, figuratively speaking, for China’s smartphone vendors. Domestic handset sales are slowing — even dropping -— after years of rapid growth.

“Only vendors that have reached a certain size can cope to contend with a shrinking Chinese market. Some smaller players are going to be forced out,” said Jia Mo, an Canalys analyst based in Shanghai. “Even top brands are adapting to the new business environment.”

At new product unveilings this month and last, top brands like Huawei, Xiaomi, Vivo and Oppo have talked about overseas expansion and business diversification. It may help them limp through the stagnant domestic market as everyone awaits the introduction of fifth generation (5G) phones, industry officials said.

In the first quarter, China’s smartphone sales fell 27 percent from a year earlier to 81.9 million units, according to the China Academy of Information and Communications Technology, a research arm under the Ministry of Industry and Information Technology.

That was in line with the calculation of 91 million units by Canalys, which estimated a domestic decline of 21 percent, even less sales compared with the first quarter of 2014.

It seems the old consumer craze of grasping at every new model to get “tech-savvy” features like Siri-style artificial intelligence assistants, improved fingerprint recognition or less bezel space on screens may be ending, analysts said.

Top-tier players will maintain their market shares, but smaller firms likely will be squeezed out, according to Wu Qiang, Oppo vice president.

Huawei agreed that the number of market players will be whittled, with at least six major players now, including Apple, Samsung and top Chinese players, left standing.

The introduction of 5G services, which offer much faster Internet access and various new applications, is expected to improve the industry landscape, but that’s still several years away.

China is going to issue 5G licenses in 2019 and 2020.

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Overseas expansion

Top Chinese smartphone vendors have “explosive opportunities” in overseas markets, said Zhao Ming, president of Honor, a sub-brand of Huawei.

“We have seen Honor’s sales double in some overseas regions,” Zhao told during a conference in Shanghai at the release of the new Honor 10 model and the first own-brand laptop. “It’s impossible to achieve the rate in the domestic market.”

Honor sold more than 1.5 million Honor 9 models in the first 50 days after they hit markets that included Asia and Europe.

Honor 10, with artificial intelligence features and improved cameras, will pace the brand’s global expansion, Zhao said, predicting “200-300 percent growth” in some overseas markets.

Indeed, markets abroad are proving a savior to the domestic industry.

In the first quarter, sales of Xiaomi in India soared 155 percent to surpass Samsung as the No. 1 player in that market.

In third and fourth positions were Oppo and Vivo, Canalys said.

India’s smartphone sales last year grew 14 percent to 124 million units, making it the fastest growing of the top 20 smartphone markets globally, according to research firm International Data Corp. It is now the world’s third-biggest smartphone market.

Oppo upgraded its research network recently to set up centers in the United States and Japan, in addition to existing sites in Beijing, Shanghai, Shenzhen and Dongguan.

Transsion, a lesser-known Chinese brand, has become a top seller in Africa by offering entry-level phones that cost as little as US$20. The company has been called the “king of African phones,” with about 30 percent of the continent’s market. That compares with a 22 percent share for Samsung.

Ti Gong

Business diversification

To make up for a saturated, sluggish home market, China’s smartphone companies are expanding their business scope beyond handsets to realms such as wristbands, computers, Echo-like speakers, headsets and game devices.

Honor, which unveiled its first laptop recently, said almost 10,000 of the new computers were sold within 18 hours.

Xiaomi has established a full eco-system for “smart” homes, covering over 500 kinds of devices such as wristbands, TVs and routers. Such products are good money-spinners.

Canalys’ Jia said the profit margin of Xiaomi wristbands, which cost only about only 100 yuan (US$15.8), is higher than that of the company’s entry-level phone brand Redmi.

Xiaomi, now the world’s No. 4 smartphone brand, has become the world’s top Internet of Things platform, covering 100 million smart devices and 190 million active monthly users, according to Lei Jun, chief executive of the company.

Meanwhile, Vivo has set up a center with Tencent to do research on games, covering hardware, game experience and e-Sport.

Meizu, which released a new flagship model Meizu 15, also has introduced two Bluetooth-feature headsets costing up to 999 yuan.

Major smartphone brands established an industry alliance called Quick App to better distribute and manage mobile applications. Besides hardware sales, application distribution and ranking create income for handset vendors.

Ti Gong