SMARTPHONES: Huawei Hits Brakes, Apple Tumbles in Q2

Bottom line: The latest quarterly smartphone data show Oppo could soon take China’s smartphone crown from Huawei, whose rapidly slowing sales could cause it to badly miss its 2016 target.

Oppo closes in on China smartphone crown

Recent trends in China’s fiercely competitive smartphone market are accelerating in the latest quarterly data, led by a plunge in sales and market share for Apple (Nasdaq: AAPL) and sharply slowing growth for local leader Huawei. At the same time, the surging Oppo continues its meteoric rise to cement its position as China’s second largest smartphone maker, as it closes in on Huawei.

All that said, the smartphone crown for China, the world’s biggest market, is shaping up to be quite a hot potato that changes hands often. Just 3 years ago that title belonged to Samsung (Seoul: 005930), which was later supplanted by Xiaomi, a former superstar that barely made the top 5 in the newly released second-quarter rankings from IDC. (press release) Apple has also briefly held the title, only to be overtaken last year by current leader Huawei.

This rapid changing of market leaders raises the question of whether the smartphone crown for China is more a poison chalice than something to strive for. The market is huge, with quarterly sales now topping 100 million units. But it’s also fiercely competitive due to the presence of so many domestic brands, meaning that very few companies are making profits here and many are losing big money.

The rise of Chinese brands is reflected in the big-picture numbers, which show that domestic names took the top 4 spots in this year’s second quarter, or 56 percent of the market. Huawei led the pack with 17.2 percent, followed closely by the surging Oppo with 16.2 percent. They were followed by Vivo (13.2 percent), Xiaomi (9.5 percent) and Apple (7.8 percent). But the big story was the acceleration of several trends from the first-quarter.

Leading the trends was the rapid decline of Apple, whose latest fifth-place finish marked a slip from the first quarter’s fourth place. Just about everything looked bad for Apple, whose second-quarter 7.8 percent market share marked a huge drop from its already-shriveling 12.8 percent in the first quarter. That plunge has been a key factor pressuring Apple’s global iPhone sales, which fell 15 percent in its latest reporting quarter. (previous post)

Sputtering Huawei

But Apple wasn’t the only one licking its wounds during the quarter. Huawei’s 15.2 percent second-quarter growth rate was about a third of what it was in the previous quarter, marking a sharp slowdown for a company that had typically reported growth of 50 percent or more during its recent surge. Equally worrisome, the company’s second quarter sales of 19.1 million smartphones brought its first-half total for China to just 35.7 million units. That would seem to make its goal of selling around 120 million smartphones worldwide this year look quite difficult, since China is easily its largest market.

The news was a more upbeat for Oppo, which is now just a percentage point away from taking the China crown from Huwei. Sales for the surging brand that is virtually unknown to anyone outside China more than doubled in the second quarter, rising 124 percent to be exact. But we should also note that figure marked a sharp slowdown from its 173 percent growth in the first quarter, reflecting the company’s growing market presence.

Last but not least in the top 5 was the struggling Xiaomi, whose sales and market share both tumbled by about a third in the quarter. No one has been writing much about Xiaomi these days since its fortunes started fading about a year ago, and this latest data show its hopes for a turnaround probably won’t be coming anytime soon. At the end of the day, these numbers really don’t look too good for anyone except for Oppo, which could find itself with the unlucky title as China’s newest smartphone leader by year end if current trends continue.

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