China's smartphone industry in the second quarter did not see growth as strong as Digitimes Research had anticipated previously and it grew only slightly more than 15% sequentially and by a single-digit percentage on year.
The weaker-than-expected growth was because the market is already approaching saturation. Many first-, second-tier and regional brand vendors' sales have been greatly impacted by China telecom carriers' large subsidy cuts and demand from emerging markets such as India and Russia has yet to see a meaningful rebound. As a result, China's independent design houses (IDHs) and ODMs that mainly take orders from overseas markets saw weak shipment growth in the second quarter.
Digitimes Research in April forecast China's overall smartphone shipments would achieve an over 25% sequential growth in the second quarter, but from its visits to the related suppliers in late-June, Digitimes Research found that only a few China-based brand vendors such as Huawei, Oppo, BBK (Vivo), TCL and Meizu achieved significant shipment growth in the quarter, while the rest only saw a flat performance or decline. Lenovo and CoolPad, both of which rely heavily on China's telecom channel for sales, had on-year shipment declines of almost 20% and over 30%, respectively.
As for the third quarter, Digitimes Research expects vendors with strong connections with physical retail channels, such as Oppo and BBK, to continue achieving stable growth, while vendors that have a high portion of shipments to overseas markets such as TCL, Huawei, ZTE as well as some IDHs and ODMs located in Southern and Eastern China, will benefit from the overseas markets entering the traditional peak season.