Yoshida in China: Apple falls to No.5 in China; Pearl River woes

China’s smartphone trend: How real is it and who are driving it?

You’ve been hearing that China is no longer all about cheap feature phones, right? Your logical response to that is: Show me the data.

Check out a report published by Canalys Research last week.

Canalys’ data on Q2 2012 country-level shipment estimates shows that in total, more than 42 million smartphones were shipped to, or within, China in Q2 2012, representing the second consecutive quarter of record-breaking volume in a single country’s market.

In other words, behind China’s phenomenal mobile phone market growth, there is an increasing demand for smartphones. China accounted for 27% of 158 million global smart phone shipments, compared to 16% for the United States, according to Canalys.

But who are the drivers behind the smartphone craze in China?

The number one smartphone brand in China turns out to be Samsung. The Korean giant maintained its overall leadership position in China, with a 17 percent market share, according to Canalys.

But it’s important to note that Samsung’s share in China declined in Q2, as volumes were flat. Meanwhile, several local vendors are closing the gap, according to the market research firm.

ZTE, Lenovo and Huawei – all based in China – were the second-, third- and fourth-place vendors, ahead of Apple, making up a third of the market, the report says.

The three Chinese vendors achieved growth of 171%, 2,665% and 252% year-on-year respectively. Collectively, domestic Chinese vendors shipped 25.6 million units, representing 60% of the market. By comparison, international vendors grew by a more modest 67% to 16.7 million units.

Apple is now No. 5 in China. While its shipments were up 102% year-on-year, they were down 37% compared to Q1 2012.

Local tier-two vendors like Oppo, K-Touch and Gionee, feature phone vendors, are now “making significant progress transitioning their portfolios and customer bases to be more focused on smartphones,” according to a Canalys analyst.

So…where are Nokia and Motorola in China?  They both lost significant ground in China, with Nokia’s volume down 47% on Q2 2011, according to the report.

Taiwan-based HTC was the only vendor among international brands that “managed an outstanding performance in mainland China,” according to Canalys.  HTC’s shipments grew 389% year-on-year to reach 1.8 million units for the quarter.


Pearl River woes

No matter how you slice and dice different data sets – China’s electricity consumption, purchasing managers' index, and GDP – all measurements point to the same reality: China’s economy is slowing down. No doubt about it.

Reports suggest that things are getting worse in an industrial city like Dongguan. Located in the the Pearl River Delta, Dongguan is a manufacturing hub in Guangdong province. It borders the provincial capital of Guangzhou to the north, Huizhou to the northeast, Shenzhen to the south, and the Pearl River to the west.

The Financial Times recently reported that in Dongguan, GDP growth in the first half this year hit a three-year low, recording an expansion rate of just 2.5 per cent.

A survey by the Guangdong Credit Guarantee Association shows close to 50 percent of the guarantee companies in the Pearl River Delta are losing business. Small and medium-sized companies are hit hardest. They are seeing a big drop in available financing.

China Daily also recently ran a story about local governments in Zhejiang province setting up emergency funds for small and medium-sized enterprises that have failed to obtain loans from banks or other agencies underwritten by guarantee companies.

Even in Shenzhen, demand for labor – reportedly – has weakened rapidly. Statistics from Shenzhen Human Resources show employment demand declined by nearly 50 per cent in the second quarter compared to 2011, according to Southern Metropolis Daily.

Of course, we are not talking about the “unemployment rate” here. The data shows that in Shenzhen, there were 110,000 vacancies in June this year, down from 210,000 in June 2011.


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