Smartphone shipments in China slump in first half

GUANGZHOU -- Shipments of smartphones in China dropped for the first time in three years in the January-June period, lending credibility to predictions that the country's economy will slow down in the latter half of the year.

Smartphone shipments fell 3.9% to 226 million units, the first year-on-year decline for the period since 2014, according to data from the China Academy of Information and Communications Technology. Shipments grew by double digits in the first half of last year, but sales have been slow since the start of 2017.

Only 450 new phone models hit the Chinese market in the first six months, down 30% from a year earlier. This is seen as a major factor behind the shipment downtick.

"We focused on clearing piled-up inventories due to overproduction since last year," said an official at a up-and-coming Chinese smartphone maker.

Running out of juice

China has been the world's biggest smartphone market since 2012, accounting for about 470 million of the roughly 1.47 billion devices shipped worldwide last year. The rise of smartphone makers has also fueled the growth of industries that manufacture key smartphone components, such as liquid crystal display panels.

The shipment shortfall in the first half of 2014 came amid an economic slowdown. But sales recovered in the second half, helped partly by the start of full-scale sales in China by Apple. The Chinese smartphone market kept growing after that, with domestic smartphone startups such as Oppo Electronics and Vivo flourishing.

Some believe that smartphone sales will also recover in the second half this year, as inventory adjustments run their course.

"We saw some inventory adjustments in the first half, but demand likely will recover in July or later," said Shigenao Ishiguro, president of Japanese electronics parts maker TDK.

Although smartphone makers are gearing up to release new models, some predict that full-year shipments will also end up lower than 2017 because the market has already reached a saturation point.

Watch out

The Chinese auto market presents a similar story. Beijing's efforts to shore up auto sales by offering tax breaks inflated new-car sales, but the market is now facing blowback as the measures simply accelerated future demand. According to the China Association of Automobile Manufacturers, the growth in domestic shipments of new cars in the January-June period eased to 3.8%, the slowest pace in two years.

Consumer spending is holding firm, but it lacks the strength to lift up the overall economy, with spending growth moderating. When combined with predictions that real estate investment and other economic activities will run out of steam in the second half, there is a high probability that China's economy will start slowing.

The holiday period in early October, centering on National Day, is a major sales season in China. Releasing products timed specifically for this period is crucial for manufacturers as well as stores.

Trends in demand and shipments of smartphones, automobiles and their components over the summer will be key to predicting the Chinese economy's performance for the rest of the year.

Source: Smartphone shipments in China slump in first half