During visits to firms in China's smartphone supply chain in November and December 2014, Digitimes Research found that their shipments to the domestic market were weak in the fourth quarter of 2014. But their exports remained strong. Many China-based brand vendors and ODMs who had a strong focus on overseas markets were enjoying strong sales in emerging markets due to seasonal demand.
Most of these vendors and ODMs saw their shipments in the fourth quarter of 2014 grow at least 10% sequentially, while players who focused mainly on the China market mostly suffered sequential shipment declines in the quarter.
Digitimes Research estimates that the China smartphone industry will report an about 8.6% sequential increase in overall shipments for fourth-quarter 2014, but the volume in the first quarter of 2015 will drop 20% sequentially.
To satisfy demand from China's National Day holidays in October and Single's Day promotions in November, China's smartphone vendors placed strong orders from late third-quarter to October 2014, with upstream independent design houses (IDHs) and ODMs achieving significant results in September and October.
After mid-November, China's smartphone brand vendors saw their sales start weakening and inventories building up. To control the damage, they stopped taking delivery of finished goods they had ordered from their upstream suppliers. To offload these finished products, the IDHs and ODMs repackaged and relabeled them, and then shipped them abroad.
TCL and Huawei, both of whom have high portions of exports, saw significant increases in demand from emerging markets outside of China in the fourth quarter of 2014, and they achieved overall shipment growth of over 15% sequentially.
Shenzhen-based IDHs and ODMs who are mainly focusing on clients in non-China countries also saw shipments increase 10-25% sequentially in the fourth quarter of 2014.
With the arrival of the low season in overses markets and the domestic market stilll digesting inventories, China-based smartphone players' shipments are expected to reach 100 million units in the first quarter of 2015, declining about 20% sequentially, Digitimes Research estimates.