Vivo leads, Apple falls: The changing face of China’s smartphone industry

China’s smartphone market has dramatically transformed, with domestic brands now reigning supreme in the world’s largest mobile market. For the first time in recent times, Apple has been edged out of mainland China’s top five vendors list.

According to the latest market research firm Canalys report, local Chinese manufacturers have achieved an unprecedented feat, securing all five top positions in the second quarter of 2024.

The Chinese smartphone market showed signs of recovery, growing by 10% year-on-year (YoY) in Q2 2024, with total shipments exceeding 70 million units. This growth is a positive sign for the industry, aligning China’s market with global recovery trends.

Vivo has emerged as the clear leader, reclaiming the top spot with a market share of 19% and shipments of 13.1 million units. This represents a remarkable 15% YoY growth for the company. Vivo’s success is attributed to its strong performance in offline channels and robust online sales during the “618” e-commerce festival, a major shopping event in China.

OPPO secured the second position with 11.3 million units shipped, holding a 16% market share. The company’s performance was buoyed by the successful launch of its new Reno 12 series. HONOR maintained its position in the top three, shipping 10.7 million units and achieving a 4% year-on-year increase. This puts HONOR’s market share at 15% for the quarter.

Huawei’s comeback and Xiaomi’s return

In a surprising turn, Huawei has made a strong comeback, securing the fourth position with shipments of 10.6 million units. This represents a significant 41% YoY growth, although the company’s momentum has slowed slightly compared to previous quarters. Huawei’s resurgence in the Chinese market is particularly noteworthy given the challenges it has faced in recent years due to US sanctions.

Xiaomi rounded out the top five, shipping 10 million units and achieving a 17% YoY increase. This marks Xiaomi’s return to the top five, leveraging the buzz surrounding its first electric car, the SU7, to drive sales of its K70 and flagship 14 series smartphones.

Apple’s unexpected decline

Apple’s absence from the top five is the most striking development in the Q2 2024 results. The iPhone maker fell to sixth place with a market share of 14%, representing a 2% decrease from the same quarter last year. This decline comes despite Apple’s efforts to maintain a strong presence in the Chinese market, which has long been a crucial region for the company.

Canalys Research Analyst Lucas Zhong commented on Apple’s situation: “Apple is facing a bottleneck in mainland China. The vendor’s current channel strategy maintains a healthy inventory level and aims to stabilise retail prices and protect margins of channel partners.”

Market dynamics and future outlook

The dominance of Chinese brands in their home market reflects the increasing competitiveness of local players and their deep understanding of Chinese consumer preferences. Canalys Research Manager Amber Liu noted, “The Chinese market is finally aligning with global recovery speeds. This was largely driven by the supply side, which leverages nationwide sales events such as ‘618’.”

Liu also highlighted the strategies employed by vendors with comprehensive smart device portfolios, such as Huawei and Xiaomi, who are “enhancing their offline channel advantage by expanding their channel partners and promoting the up-sell and cross-sell of products within their smart device ecosystems.”

Looking ahead, Canalys Senior Analyst Toby Zhu predicts a modest single-digit recovery for the year despite the strong growth in Q2. Zhu identified three key trends that will shape the market in the second half of 2024:

1. The launch of Huawei’s HarmonyOS Next aims to position itself as a third major mobile OS alongside Android and iOS.
2. Increased investment in AI infrastructure by local players, developing in-house models and AI applications as critical competitive advantages.
3. It intensified overseas expansion by Chinese brands, driven by fierce domestic competition.

Overall, the Chinese smartphone market’s evolution presents challenges and opportunities for global and local players. As domestic brands continue to innovate and expand their market share, international companies like Apple must reassess their strategies to maintain their foothold in this crucial market. The coming months will be critical in determining whether the current market dynamics represent a temporary shift or a long-term realignment of the Chinese smartphone landscape.