China To Witness A Rapid Shrinkage of Smartphone Market In 2018

Judy| 2017-12-27 News Comments( 0 )

For most smartphone manufacturers in China, the winter of 2017 arrives so early.

O-film Tech Co., Ltd—a Chinese company mainly designs and manufactures high performing, cost effective TP, CCM, and FPM products for the consumer electronics and automotive markets—saw its share price rising by 113% in 10 months and reaching an all-time high of 26.12 on the Shenzhen Stock Exchange on November 14, 2017.

Immediately after that, mutations situation, O-film’s share price kept falling 22.8% to 22.17 as of the market closed on December 14, 2017.

However, the case of O-film Technology is not unique. Almost all China’s listed companies involved in the smartphone industry have witnessed plummeted share prices over the past one and a half months, including Lens Technology, ChaoZhou Three-Circle Group, LUXSHARE-ICT, Sunny Optical Technology, Q Technology, Cowell Optic Electronics Ltd, etc.

A lot of people tend to attribute the plummeting stock prices to a rapid shrinkage of Chinese smartphone markets. The year-over-year smartphone shipments in China kept falling in 2017, according to the statistics released by China’s Ministry of Industry and Information Technology.

Analysts also warned that the declining cycle in the smartphone industry will continue well into the end of 2018. From smartphone manufacturers to industrial catenary of upper reaches, they are very likely to experience a long winter in the next year. Importantly, as the global smartphone’s market’s growth engine, China’s slowing growth will take a huge hit to the worldwide smartphone shipments and sales too.

About the causes of China’s smartphone market’s decline, probably the most compelling reason is that the market is near saturation, reflecting on the smartphone penetration rate having reached 96% (96 smartphones per 100 inhabitants) since 2016. In other words, this is a stock market but no longer an incremental market.

In a stock market, the iteration periods become a determining factor to the market size. According to data released by the Counterpoint, the smartphone replacement cycle in China is 22 months on average. Besides iterative cycles, there are also other factors should be taken into consideration, such as technology refresh, mobile operators’ subsidy schemes, and changes in the supply chain & channel.

In addition to the declining shipments, the smartphone industry will also have to face some other problems in 2018. First, upstream components will get more expensive, especially the memory and screen. Secondly, the growth engine of China’s smartphone market will switch from offline to online sales channels. 

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