SMARTPHONES: 2015 Graces Huawei, Punishes Lenovo

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Bottom line: Huawei is likely to consolidate its position as China’s top smartphone brand this year, while Lenovo and Samsung could regain some market share as each mounts aggressive turnaround campaigns.

Huawei takes China smartphone crown
Huawei takes China smartphone crown

A year is almost like an eternity in the fast-moving smartphone world, and nowhere is that reality more on display than in the latest quarterly data on China’s cut-throat market. In the smartphone history books, 2015 will go down as the year that saw Huawei surge to become China’s largest player, with smaller homegrown brands Vivo and Oppo also making impressive gains. On the other side of the aisle, the year is one that former high-flyers Samsung (Seoul: 005930) and especially Lenovo (HKEx: 992) would rather forget, as both plunged out of the nation’s top 5 brands.

Smartphones are an extremely big business due to their high prices, a fact that has drawn numerous companies to the space and created intense competition in China. But constant changes to technology, combined with increasing commoditization due to the dominance of the free Android operating system, means that unknown companies can quickly rise to become major players. Similarly, a winner one year can quickly stumble to become a loser the next.

Let’s begin with the big picture number, which saw China post a surprisingly strong 117.3 million smartphone sales in the fourth quarter of 2015, up 8 percent from a year earlier, according to new data from IDC. (press release) That strong showing, attributed to Huawei’s surge and strong sales during November 11 Singles Day promotions, helped China to post 3 percent smartphone growth for all 2015. That’s quite a feat, since trends were pointing to a contraction in the market for 2015 after years of breakneck growth.

Huawei led the field of newly harvested winners, grabbing the China crown as its market share jumped 5 percentage points to 15.2 percent in the fourth quarter. I’ve been writing about the Huawei surge for quite a while now, but this is the first time we’ve actually seen it quantified so clearly. Of course the China smartphone crown is quite a difficult object to hold onto, and has changed hands between Samsung, Apple (Nasdaq: AAPL) and Xiaomi over the last couple of years.

Apple and Xiaomi both managed to grown roughly in line with the market and finished in a close race for second and third in the fourth quarter. But after Huawei, the other big story in the top 5 was the recent rise of the lesser-known Oppo and Vivo brands, which finished in fourth and fifth place, respectively. Both companies ended the year with market share in the 11-12 percent range, up about 4 percentage points from a year earlier.

Former High-Flyers

While the top 5 was revealing for its new entrants, the bottom half of the top 10 was littered with former high flyers who lost their way. Leading that list was Lenovo, whose China market share shriveled to just 2.9 percent as its sales plunged by two-thirds, making it the nation’s 10th largest player.

The drop was less spectacular for Samsung, the former leader that ended the year with 6.6 percent of the China market, making it the nation’s sixth largest player. Samsung had already begun its fall from grace in 2014, so its showing at the end of last year only marked a slight decline on a year-on-year basis. Still, it’s quite remarkable that a company that once ruled the roost could decline so quickly.

All of that said, the more important question is what does the market hold for 2016? I would expect we’ll see Huawei hold the China smartphone crown for much of the year, and it could even add a couple of percentage points to its share. Apple could also gain a point or two when its new iPhone comes out, while I expect Xiaomi could continue to slump as its momentum rapidly fades. At the other end of the spectrum, I do expect we’ll see some turnaround by both Lenovo and Samsung, since both have deep resources and each can hardly afford to give up on the market.

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