China’s economic slowdown and consumers pulling back on spending have taken a toll on its mobile phone industry, with shipments to the world’s largest smartphone market retreating to the level before 2014, according to an industry report from research firm Canalys.

Global smartphone makers shipped about 396 million phones to mainland China last year, down 14 per cent from the previous year’s 459 million units, according to the report. The decline, which Canalys described as “the most dramatic in history”, brought the annual shipment figure down to the period before 2014, when it surpassed 400 million.

It came as China’s economy grew at its lowest rate of 6.6 per cent in 28 years last year, even as its absolute size expanded considerably. The country’s retail sales, in tandem, scaled back to 9 per cent from 9.4 per cent in 2017, while growth of sales in telecom equipment including smartphones slowed to 7.1 per cent from 11.7 per cent a year earlier, according to data from the National Bureau of Statistics.

Canalys has estimated that smartphone shipments to China will continue to fall by 3 per cent this year to 385 million, as competition rises among global manufacturers to vie for a bigger share of the vast but saturating Chinese market, which is moving towards more high-end products. Many domestic makers are also preparing to launch their first smartphones with 5G networks this year.

China’s smartphone market underwent a reshuffle last year, with a few makers being elbowed out for their poor business practice and by aggressive big players. One casualty was Shenzhen-based Gionee, the mainland’s sixth biggest brand, which filed for bankruptcy late last year.

Against the sluggish market, domestic leaders Huawei Technologies and Vivo, nonetheless, recorded a bumper year.

With a shipment of 105 million units in 2018, representing a 16 per cent year-on-year increase, Huawei remained the top seller, taking a 27 per cent market share, the highest by a single smartphone maker since 2012.

“The China market continues to be a strong supporter for Huawei’s overseas expansion. This has also become its biggest advantage of challenging Samsung’s global market share this year,” wrote Canalys’ Shanghai-based analyst Jia Mo.

Similarly, Vivo recorded an increased shipment of 9 per cent last year to secure a 20 per cent share of the Chinese market, as did its sister company, Oppo. Both smartphone makers, which are owned by privately held BBK Electronics, are based in the industrial city of Dongguan, in southern Guangdong province.

Hong Kong-listed technology giant Xiaomi, which had 12 per cent of market share in 2018, shipped about 50 million smartphones, down 6 per cent from a year earlier.

Apple, while retaining the No 5 spot in shipments and a 9 per cent market share, recorded a 13 per cent year-on-year drop in smartphone units shipped to China last year, according to Canalys.

“Apple needs to re-examine its strategy on iPhone in China, particularly to match the change of purchase among domestic high-end users and improve their recognition of the brand,” wrote Jia. “The Chinese market will be increasingly important for the strategic position of all of Apple’s product lines, which is an irreversible trend.”

In early January, Apple released a rare warning to investors of disappointing iPhone sales in China, and lowered its first-quarter revenue guidance.

While Apple’s high-end flagship iPhone XS failed to take off in China because of its US$1,000 plus price tag, its mid-range iPhone XR models also failed to excite consumers.

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