Let’s end the week with a look at some new data on China’s cellphone market, which is quickly becoming saturated with cheap smartphones cranked out by a crowded field of domestic companies. The rush by Chinese firms into the smartphone market over the last 2 years is typical of the herd mentality one often sees in China, almost always leading to classic boom-bust cycles. The smartphone sector was already showing signs of overheating when media reported during the summer that inventory was building up at many smartphone makers. Now the latest figures are showing that sales are slowing sharply for many of those firms, hinting a bust could come soon for players that rely heavily on the domestic market. Read Full Post…
Chinese smartphone makers have surged in their home market over the last year, coming from out of the blue to challenge big global names like Apple and Samsung. But their rise could be short-lived if they fail to innovate, paralleling a similar rapid rise and fall a decade ago for names like TCL (HKEx: 2618) and Ningbo Bird that are now just footnotes in the history of China’s large but highly competitive mobile market. The rapid rise of Chinese brands over the last year has been nothing short of remarkable, as China gets set to overtake the United States as the world’s largest smartphone market. At the end of last year, the market was still dominated by foreign names, with Samsung (Seoul: 005930), Nokia (Helsinki: NOK1V) and Apple (Nasdaq: AAPL) occupying three of the top four slots to control more than half of the market collectively.
It’s Monday morning, which means there’s not too much news in the market yet and instead it’s a good time for one of my period looks at the broader auto industry. A wide array of new data is out on July sales, which show the continuing decline of China’s top 3 independent auto brands, BYD (HKEx: 1211), Chery and Geely (HKEx: 165). BYD’s top-selling model, the F3, continued its plunge in July, with sales down 41 percent from a year earlier. Sales for Chery’s top model, the QQ, grew just 0.9 percent, lagging the broader market and causing it to lose share. Geely doesn’t have a model in the top 20, but its overall sales fell 6.3 percent in July, a month when overall passenger vehicle sales rose 12 percent. The stumbling of these top 3 domestic brands bears a striking resemblance to a similar trend from six or seven years ago, when domestic cellphone makers like TCL (HKEx: 2618) and Ningbo Bird suddenly emerged to challenge the then-dominant positions of market leaders Nokia, Motorola and Samsung. But in that instance the domestic firms soon fell almost as quickly as they rose, never to return in most cases. The reason was relatively simple: they all soared to prominence on the strength of one or two popular models that captured the public’s interest. But then they failed to follow with more popular models in an industry where product life-cycles typically run around 2-3 years, causing them to quickly fade. The same now appears to be happening with these domestic car makers. Both BYD and Chery found quick success with the F3 and QQ, respectively, but are now struggling to develop popular new models as these successful ones near the end of their life cycles. If they fail to find other new hits soon, they could easily find themselves following in the footsteps of faded names like Ningbo Bird and TCL.
