Smartphone Shipments Plunged in China, and it’s Hurting (Almost) Everyone
Tuesday, January 29th is a day that Apple is hoping comes and goes at a much quicker pace than most others on the calendar. That’s because today (the 29th) the company will report on its 2018 fourth quarter revenue, which is expected to be an incredibly disappointing one. Apple even warned the industry as much when they cut their revenue guidance for the quarter just a few weeks ago—the first time the company has had to do that in some 15 years.
The problem for Apple, which perhaps comes as no surprise to most, has been sluggish iPhone sales during what’s supposed to be their most profitable quarter. I have my own opinions on just how big of a problem the iPhone has become for Apple—it’s really turned into something of a crutch for the company over the past half-decade—and the need to reinvigorate their product portfolio, or to find that next-big-thing is very apparent. But in the case of this most recent quarter, or even this past year, Apple’s struggles aren’t theirs alone. The smartphone industry as a whole has been slowly grinding to a halt as consumers hold onto their devices longer and as innovation in the space seems to be peaking.
If you need more substantial evidence, just look to the smartphone market in China. In 2018, unless your name was Huawei or Vivo, your company saw your total smartphone shipments contract last year. But it wasn’t just by a little bit. In Q4 alone in China, there were 107.9 million smartphones sold, down from 121.3 million units the year prior—an 11 percent decline. That pace was essentially the same throughout the rest of the year. For the year, China saw 408.5 million smartphone shipments, down from 459.6 million in 2017—down a little more than 11 percent.
Credit: Strategy Analytics
While the attention today and for the rest of the week is going to be on Apple and its poor performance in a market that it’s placed a ton of emphasis on, the bigger picture here is that the strategy around smartphones needs to be re-looked at. Fatigue is a very real thing that consumers are suffering from with this space, and brands can’t continue to think that throwing extra camera sensors, bigger screens, or even foldable displays is really the way to go.
Just look to Huawei and what they’ve been able to do in China—or even a brand like OnePlus, which has become one of the fastest growing smartphone brands globally. What those brands push are smartphones that carry a lot of the same features and functions as other premium-priced models out there without the premium price tag attached to them. Sure, the $1,000-plus phones have a certain segment of the consumer population drooling and willing to open up their wallets. But an even larger chunk won’t even waste their time looking at those models, instead opting for something that’s a little more budget-friendly.
Price is just one aspect of all of this, but it’s the one aspect that carries the most weight and often is the determining factor in a consumer’s decision to buy. It’s easy to estimate that if prices would just come down the smartphone market would find a way to correct itself. But brands need to buy into that way of thinking and admit to themselves that this ultra-premium-price strategy is one that’s worth giving up on.