China smartphone vendors' shipments started weakening in mid-May with the upstream supply chain also seeing orders turning week despite the fact that several China-based smartphone players are still able to deliver over 10 million units each quarter, according to Digitimes Research.
Among the players, those with tighter relationships with China-based telecom carriers are seeing their 3G smartphone inventories rising rapidly as carriers have been reducing and canceling their subsidies for 3G models and turning to subsidize 4G models.
China vendors' new sub-brand smartphones released between the end of the first quarter and the beginning of the second, for the online channel, boosted the China smartphone supply chain's sales to a new high in April, which also helped smartphone vendors' sales do the same in early May. However, these devices were only able to compete over price and lacked differentiation from each other, and support only 3G, significantly reducing their lifecycle.
The high cost of 4G service, unsatisfactory communication quality during the initial period, and the limited availability of 4G entry-level smartphones have caused consumers in China to be unwilling to upgrade their services to 4G. In addition, as carriers just stopped providing subsidies for entry-level/mid-range 3G smartphones in May and started turning to subsidize 4G models in June, some consumers have delayed their plans to purchase a new smartphone for the second quarter.
Digitimes Research believes that vendors will gradually digest their 3G inventories in the third quarter, and 4G smartphones priced below CNY1,000 (US$161) will start to appear in July, pumping up China's domestic smartphone shipments. However, China's smartphone shipments are unlikely to break 400 million units as originally expected due to 4G smartphones' failure to become popular in China in the first half.
This article is an excerpt from a Digitimes Research Quarterly Data Report (China smartphone market and industry – 2Q 2014). Visit our latest Data reports.
This article is an excerpt from a Digitimes Research Special Report (China smartphone market and industry – 2Q 2014). Visit our latest Special reports.