While the urbanization of China, with farmers leaving rural areas and moving to urban cities is a demographic shift that has been well underway for sometime, the fast emergence of Sino technology manufacturers has made a quick and unexpected impact at the expense of some of the Western world’s most powerful companies. Rising from obscurity with almost no market share have been Chinese mobile handset makers with memorable names like Gionee and K-touch. These fast-moving manufacturers have had the most impact on Apple (AAPL) which has seen the most decline in Chinese mobile handset market share.
Smartphone handsets units shipped to China as of the most recent count in 3Q 2012 totaled over 61 million devices, a sharp 16 million units higher than in 2Q 2012 and over a 3 fold increase from 2Q 2011. Market leader Samsung remained on the top rung with 16.4% market share, almost a point and a half increase in its market share from 2Q 2012. Chinese manufacturer Lenovo sprinted to the second highest share, going from just 1.1% of the market in 2Q 2011 to 11.2% as of the most recent tally. While Lenovo is best known as the number two global manufacturer of personal computers behind Hewlett-Packard, the recent launch of phones with larger screens including the Lenovo S720 and the S890 have moved the company solidly up the charts. Lenovo has used the Chinese market as its testing ground before expanding globally with over 95% of its sales in its home country.
Conversely, market share losses have mostly been felt by Apple with over a halving of its market share from 15.4% to 6.6%. While the delay of launching its iPhone on China Mobile (see our article Surge in Apple iPhone 5 sales in China to drive share price) the largest mobile carrier in China, has hurt Apple shipments, it has been the rise of Lenovo, Coolpad, Gionee, K-Touch, and Xiaomi which have diverted local attention to new products and away from former incumbent leaders. Even leader Samsumg, although slightly gaining share year-over-year has dropped from a high of 21.0% market share to its 16.4% position, also ceding shipment volume to Chinese manufacturers.
While the 3Q 2013 announcement 1 of the China Mobile agreement for Apple could improve these handset numbers and hence the slumping AAPL stock price, it will be worth watching if these upstart manufacturers can hold their nascent market share. Apple shares can also be invested in via State Street’s Technology ETF (XLK) where they comprise 14% of the fund or via the S&P 500′s ETF (SPY) where shares comprises just over 3%.
- This is the rumored start date ↩