The mobile phone market is fierce in the first quarter, who is "number one"?

2024-07-20

Recently, the first-quarter smartphone data has been released, and there have been significant changes in the domestic smartphone landscape. There are discrepancies in the "first place" for the domestic market in the data disclosed by three institutions.

According to the market share statistics from Counterpoint Research, vivo has become the top seller in China, followed by Honor and Apple, and then Huawei and OPPO. IDC data shows that Honor and Huawei are tied for first place in China's smartphone market, followed by OPPO, Apple, and vivo. Canalys data shows that Huawei's shipments rank first in the domestic market, followed by OPPO, Honor, vivo, and Apple.

From the industry perspective, the indicator Counterpoint uses is sales volume, which refers to the volume to the retail terminal; the indicators used by IDC and Canalys are shipment volume, that is, the volume shipped from the factory, also referring to the volume to the highest-level agents. Moreover, there will be some ranking differences in the same shipment volume, because each research institution uses different data channels and resources, and there will be statistical errors.

Despite the differences formed due to the statistical export issues, three trends can be observed.

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First, the domestic mobile phone market is recovering.

The "long winter" that lasted for three years is coming to an end, and many manufacturers have breathed a sigh of relief. Counterpoint's report shows that in the first quarter of 2024, China's smartphone sales volume increased by 1.5% year-on-year and 4.6% month-on-month, which is the second consecutive quarter of positive year-on-year growth.

The first quarter is usually a more competitive quarter, during the Spring Festival holiday, smartphone brand manufacturers have formulated various marketing and promotional strategies in advance. Relevant data points out that the average weekly sales volume in the four weeks before the Spring Festival increased by 20% compared to the normal week.

Second, Huawei is back, and Honor is growing rapidly.

In the statistical data of the three institutions, Huawei's market share is continuously rising. After 13 quarters, Huawei regained the first place in the Chinese mainland market in Q1. Canalys data shows that the shipment volume reached 11.7 million units.The growth of Huawei is largely attributed to the popularity of the Mate 60 and nova 12 series. The Huawei Mate 60 series, released last year, has been in a state of supply shortage for a long time, and it can even be said that it is the hottest smartphone of the entire year of 2023. The subsequently released nova 12 series accounts for one-third of Huawei's total shipments for the quarter.

In addition, Honor's performance is also commendable. After leaving Huawei, Honor almost started from scratch. CEO Zhao Ming once said in an interview: "There were countless possibilities for failure at that node, and many people thought Honor was done for." However, in the first quarter, Honor's market share increased by 13.2% year-on-year, and even in IDC's data, it tied with Huawei for first place (Huawei's market share is 17%, and Honor's market share is 17.1%).

Thirdly, Apple and OPPO have shown a significant decline.

Huawei's ultra-high-speed growth will inevitably lead to a loss of market share for other manufacturers.

As the once "king" of smartphones, the iPhone used to require consumers to buy at a premium from "scalpers" after the launch of a new model. However, the current trend of market share decline is evident. Apple's market share plummeted by 19% in the first quarter, marking its worst performance in China since 2020.

It is worth noting that OPPO, which won the top spot in China's market shipments in the first and second quarters of last year, showed a year-on-year decline in the first quarter of this year, with a range of about 14% to 15.5%. Last year, OPPO made a bold move to abandon its chip business and cut off the XR segment, betting most of its efforts on AI.

01

The high-end smartphone market is brewing a storm

In the past five years since 2019, in the Chinese mainland mobile phone market, the share of the price range above 600 US dollars has always been led by Apple and Huawei.In the first quarter of this year, the market share of high-end smartphones priced above $600 in China reached 24.5%. In terms of market share, Apple ranked first, with its share dropping from nearly 70% in the same period last year to around 56% this year; Huawei ranked second; and Honor ranked third, mainly relying on its Magic6 series and folding screen, with the brand's high-end market share approaching 10%.

The high-end smartphone market has always been the only part of the smartphone industry that is growing in the opposite direction. Attacking the "incremental" high-end market has become a common choice for global smartphone brands.

In today's world where everyone is competing for the "first place," the high-end smartphone market structure is undergoing subtle changes.

Cook has always emphasized that in the high-end smartphone market of Chinese cities, the iPhone 15 and iPhone 15 Pro Max are among the best-selling products.

This Spring Festival, Apple's official website in China rarely launched a "New Year's time-limited discount," which included products such as mobile phones, computers, tablets, watches, headphones, and Apple Pencil, with the iPhone 15 series being reduced by 500 yuan. Even so, Apple is still declining. According to Apple's latest financial report, in the first three months of this year, the company achieved a revenue of $90.753 billion, a year-on-year decrease of 4%; as its third-largest market, the Greater China region achieved a revenue of $16.372 billion, a year-on-year decrease of 8%.

Counterpoint Senior Analyst Mengmeng Zhang said, "First, it faces fierce competition from the resurgent Huawei in the high-end market, and is also squeezed in the middle by the aggressive pricing of companies such as OPPO, vivo, and Xiaomi. Although the iPhone 15 is a great device, it does not have significant upgrades compared to the previous generation, so consumers are temporarily satisfied with the older generation of iPhones." In addition, The Wall Street Journal also said that Apple's mobile phones in China are losing their high-end appeal.

The domestic high-end smartphone competition pattern has already been shaken with the return of Huawei.

According to Huawei's annual report, in 2023, Huawei's global sales revenue returned to the 700 billion yuan mark (704.2 billion yuan), with a net profit of 87 billion yuan, an increase of 144.5% year-on-year. Among them, the terminal business sales revenue was 251.5 billion yuan, a year-on-year increase of 17.3%.

Huawei's mobile phone shipments in 2023 are about 35 million units, an increase of about 5 million units compared to 2022. In the industry's view, according to the average price of 6,000 yuan, the business increased by about 30 billion yuan, becoming the main force to reverse the growth trend of Huawei's terminal business revenue.

Not long ago, the appearance of Huawei Pura 70 was officially launched in the form of a "pioneer plan" again. The Pura series has become the newly upgraded brand of Huawei's P series.In the past, many people believed that the Mate series was superior to the P series. However, with the increasing demand for imaging capabilities among consumers, the P series has been upgraded to the Pura series. This signifies that Huawei aims to regain a high-end market share through a dual-flagship strategy with both the Pura and Mate series.

In terms of sales, the introduction of the Pura 70 series also means that Huawei's market share in China is more secured. It not only caters to the crowd with higher demands for imaging but also compensates for the sales issues of the Mate series during the transition period. After launching the Pura 70 series, Huawei has essentially achieved full coverage of the high-end market. This implies that Huawei's dominance in the domestic high-end market will be further strengthened.

02

Can AI Create a Gap?

From the focus of major manufacturers, smartphone manufacturers are still exploring new applications in AI. IDC believes that the implementation of large AI models remains the key for Android phones to differentiate from iOS in the high-end market.

What exactly is an "AI phone"? There is still no conclusion to this question. However, mobile phone manufacturers are all betting on AI.

Faced with a sharp decline in market sales, OPPO released an internal letter titled "The Arrival of the AI Phone Era, the Mobile Phone Industry Will Enter the Third Stage," proposing the slogan of AI phones. OPPO founder Chen Mingyong stated that the group will focus its research and development efforts and resources on AI.

On March 11, OPPO's first AI phone equipped with the Andes large model, the Find X7, was launched. On the product sales page of OPPO's official flagship store on JD.com, keywords such as "Tianji 9300, Super Light and Shadow Triple Main Camera, Long Battery Life, and 5G Photography" were placed in the key positions at the bottom of the image, while the "AI phone" was placed at the last position.

However, from the market feedback, the market effect of OPPO's AI phones is not as fierce as that of Honor.In March, Glory proposed an AI-enabled full-scenario strategy, further clarifying its strategic direction in the field of AI and defining the four-layer AI architecture of intelligent terminals.

Data shows that thanks to the addition of AI functions, the first quarter shipments of the Magic6 series exceeded the sum of the first two quarters of the previous generation's first sales; the Glory Magic V2 equipped with platform-level AI and other folding screen family products have seen an increase of up to 675.4% year-on-year since last year.

Huawei and Apple are also making efforts in AI.

Huawei announced that the HarmonyOS 4 system has fully accessed the Pangu large model, becoming the world's first mobile terminal operating system with embedded AI large model capabilities, with the first batch of supported models being the Mate 60 series.

Earlier, Apple CEO Cook revealed at the annual shareholder meeting in February that Apple is making a large investment in the generative AI field and stated that Apple will "break new ground" in the generative AI field.

The latest news is that Apple has reached an agreement with OpenAI and will use its technology in iOS 18 to upgrade Siri's conversational experience. The new version of Siri driven by generative AI will be unveiled at WWDC. This has caused quite a stir in the industry.

Insiders say that Apple's Senior Vice President of Software Engineering, Craig Federighi, and Vice President in charge of AI business, John Giannandrea, spent several weeks testing ChatGPT last year, and then realized that compared to the leading generative AI technology, Siri "looks outdated."

According to an engineer who once worked in the Siri team, the Siri team did not receive the attention and resources obtained by other internal teams of Apple. The company's software and hardware departments operate independently, with limited shared information. However, AI products must be deeply integrated with products to be successful.

03

ConclusionThe fluctuation of data, on one hand, reflects the brand appeal of Huawei and Apple in the high-end market, and on the other hand, it also shows that Android smartphone manufacturers are still breaking through and catching up in the Chinese market.

From a global market perspective, the polarization of mobile phone prices is becoming more and more intense. The entry-level market is already saturated, and Xiaomi and Transsion have launched new products. At the same time, Vivo, OPPO, and Samsung hope to gain a larger share in the high-end market by investing in marketing and exploring new growth paths. In addition, in the high-end market, the competition between Apple and Huawei is becoming increasingly fierce.

The gap in market share between manufacturers is gradually narrowing. This means that exploring growth opportunities in different channels is crucial for seizing short-term opportunities, which will greatly test the manufacturers' capabilities in multi-channel management, price control, and inventory management.

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