Three trends shaping China’s smartphone sector
Recent data and commentary highlight strong performance of premium models and success in export markets
By Jacob Schindler
China has emerged as the most dynamic corner of the smartphone market, as fierce competition among several major OEMs has spurred innovation in technology, features and business models. All this, as well as Chinese brands' growing market share overseas, means the ebb and flow of smartphone competition in the country has important downstream consequences for the IP world.
Below are several observations based on recent market data, news reports and expert commentary from the public domain.
Good outlook for premium devices in China
Few companies are as closely attuned to the mobile phone market as Qualcomm. In its Q2 2024 earnings material, the company revealed strong demand in China for flagship Android devices powered by its Snapdragon chips. President and CEO Christiano Amon elaborated on that observation in a call with analysts:
“I think what we're seeing in the China market is that the mix is improving, […] premium and high tier as a percentage continue to increase, and that's actually what's driving the results,” Amon said, adding, “[A] lot of the strength is really coming from premium devices from Xiaomi, Honor, Oppo, OnePlus, Vivo. And I think Huawei entering that market actually increased the [total addressable market] of premium Android.”
The positive outlook for high-end handsets is a good sign for the recovery in Chinese consumer confidence. For OEMs, it will help sustain investment in advanced flagship models that continue to push average selling prices higher.
AI to drive handset competition
A Counterpoint analyst called Q1 2024 the “most competitive quarter ever” for the domestic smartphone market in China, with the shipment shares of the top six OEMs separated by just three percentage points. The Q1 report from Canalys confirmed that. “The talking point within the industry surrounds intensifying competition and innovation moat building,” it stated.
5G penetration in China is plateauing according to recent reports, with 5G-equipped smartphones now accounting for over 80% of monthly shipments. Increasingly, Chinese brands are relying on AI and other technologies to differentiate themselves.
Analysts agree that generative AI (gen-AI) features will soon be key selling points for premium phones, with Counterpoint expecting the technology to start filtering down to the mid-end segment throughout 2024. Canalys believes China will outpace the rest of the world in adopting smartphone-based AI, forecasting 12% of shipments in China to have gen-AI capabilities in 2024, compared to 9% globally.
Qualcomm’s Amon stated that the early examples of on-device AI and gen-AI are “resonating well with the consumer” in China. As in other regions of the world, the hope is that AI will launch a new upgrade cycle, creating demand for newer and higher-end handsets.
Transsion making waves in the export market
Perhaps the most-discussed trend of the last year has been the rise of Transsion, a Shenzhen-based company that sells low-cost smartphones in emerging markets outside of China. Rapid growth in Africa, the Middle East and other developing regions has propelled the company to a top 5 global market share, heralding its arrival as a major world player. According to IDC, Transsion had 28.5 million shipments in Q1, a remarkable 85% year-on-year increase that gave it a global market share of 9.9%.
On the licensing front, Transsion has been quiet, with no publicly announced agreements to date. That is usually supposed to be a consequence of its geographic footprint, so it will be interesting to see whether it starts to change. In that context, two matters of public record are worth noting.
Qualcomm’s most recent quarterly SEC filing stated: “We also continue to engage in negotiations toward comprehensive resolution with a growing, China-headquartered OEM that sells primarily in developing regions.” Transsion would fit the description and does not currently appear on Qualcomm’s list of licensees.
In addition, Transsion is climbing the sales leaderboard in India, which has become a major centre of SEP litigation. Public court documents indicate that Transsion Holdings is a defendant in a litigation of some kind initiated by Philips before the High Court of Delhi.
Transsion’s emergence is reshaping the mobile device landscape in much of the developing world, so the next chapter in its story will be closely watched across the industry.
Jacob Schindler is Sisvel's senior content and strategic communications manager. He is based in the firm's Hong Kong office
Photo by Niek Verlaan at Pixabay