China's smartphone suppliers are facing another ordeal after Shenzhen and Dongguan authorities announced week-long lockdowns to curb rising COVID-19 infections.
On Monday, the two cities shut down public transport systems and required businesses to adopt "closed-off management" until March 20.
Shenzhen and Dongguan are part of a manufacturing cluster in southern China, where there are many suppliers of phone components and networking equipment.
If the lockdowns are extended, China's smartphone industry will face aggravating challenges, industry sources said.
In 2021, China's smartphone shipments totaled 351 million units, rising 14% year-on-year, including 266 million 5G smartphones, data from the China Academy of Information and Communications Technology (CAICT) showed.
Chase Xu, president of Realme's China operations, has reckoned that China's smartphone shipments will drop to 280-290 million units in 2022. While market competition is getting fiercer, consumers tend to buy new phones after a longer interval, affecting their sales, he said.
The longer phone replacement cycle and the unstable supply of components have shadowed China's smartphone industry for quite a while, whereas the lockdowns come as another blow.
While Xiaomi is based in Beijing, many other brands - Huawei, Honor, and Realme - are headquartered in Shenzhen, and Oppo and Vivo are headquartered in Dongguan. Several phone ODMs, including Gionee, Coolpad, Tinno, Transsion, and Meizu Telecom Equipment are also located in the two cities, industry sources said.
If local authorities cannot put the outbreaks under control soon, the handset industry will suffer heavy losses. As many variables are affecting components supply, production and cargo logistics, phone suppliers are tested if they can agilely tackle the challenges.
Under the persisting shortage of components, small and medium-sized enterprises may suffer more damage, as larger businesses have more bargaining power to weather the challenges. It is estimated that top-5 smartphone brand vendors in China will absorb more market shares from smaller rivals.
Despite the mushrooming of new phone brands, the top-5 brands have taken up nearly 85% of China's total market shares in 2021, DIGITIMES Research data showed.
