Digitimes Research: China 4G smartphone demand fails to surge; CoolPad, Lenovo, Xiaomi unlikely to achieve 2014 targets

Anthony Chen and Luke Lin, DIGITIMES Research, Taipei 0

After visiting China's smartphone industry in August and September, Digitimes Research found that demand for 4G smartphones in China did not rise as expected and most vendors' domestic shipments did not achieve any growth.

Digitimes Research estimates that even if China's top-three telecom carriers strengthen their promotions for the fourth quarter, vendors that focus mainly on domestic shipments such as CoolPad, Lenovo and Xiaomi, are still unlikely to achieve their shipment targets for 2014.

With China Mobile's TD-LTE service starting to operate at the end of 2013, China-based smartphone vendors originally expected 4G smartphone demand to improve significantly in the third quarter after seeing the business opportunity fail to take off in the first half, but demand did not improve as expected in the third quarter.

China-based CoolPad, which turned all its smartphone product lines to support 4G in the first half, accumulated a large excess inventory of 4G smartphones in the channel from January-April. Since its sales in the third quarter remained weak, the vendor's orders to its upstream supply chain were greatly reduced for the quarter.

Lenovo, which started launching 4G smartphones at the end of the second quarter, had issues with 3G inventory from the first half and saw its shipments impacted in the third quarter. Seeing demand for 4G models remaining unclear, the vendor is taking a conservative approach about placing 4G orders.

Xiaomi, which saw its ranking increase significantly in the first half, also faced weak 4G smartphone demand in the third quarter. The vendor's 4G-based Hongmi sales did not stand out, causing its quarterly shipments to fail to achieve as strong a growth as before.

China's smartphone market is seeing mild growth in 2014 because the market has already reached a plateau. Even with China telecom carriers' plans to push mid-range and entry-level 4G smartphones in the fourth quarter, which will boost CoolPad, Lenovo and Xiaomi's 4G smartphone shipments, it will be traded with a significant reduction in 3G model shipments.

As a result, the three China-based first-tier vendors, which still heavily rely on domestic sales, are unlikely to achieve their shipment goals for 2014.