China's smartphone shipments are expected to have dropped over 30% sequentially in the first quarter due to decreased export shipment. China's first- and second-tier brand vendors were still digesting inventories for the domestic market from the previous quarter and China's small regional brand vendors posted results far weaker than expected performances.
Digitimes Research originally estimated in January that China-based smartphone players' shipments in the first quarter would decline by about 20% sequentially. However, during visits to China in March, Digitimes Research's researchers found that the country's independent design houses (IDHs) and ODMs located in Shenzhen and Shanghai that mainly supply products to small regional vendors and white-box vendors nationwide were seeing sharps falls in shipments and orders compared to the previous quarter and a year a ago.
The dismal situation has persisted since the end of the Lunar New Year holidays and has so far shown no sign of recovery.
China's small regional brand vendors mainly target rural areas. Their products have been mostly in two price ranges, CNY700-1,000 (US$113-161) and around CNY1,500, in the past two years.
In 2014, with first- and second-tier brand vendors aggressively pushing into both price segments, these regional vendors were left with little room in the market.
China had a total of 600-700 small regional vendors during the peak of the first half of 2013, but in 2014, over 150 of them quit. Around the Lunar New Year holidays in February 2015, the industry saw another wave of company closures.
Struggling for survival, those remaining players are focusing on models priced between CNY300-500, mostly using Spreadtrum's cheap 4G 3-mode TD-LTE solution; however, some of these players are pessimistic, and expect about 200 more of the small regional vendors to quit in 2015.