Chinese Smartphone Market's 2021 in Retrospect and Outlook for 2022

Consumer Discretionary Author: Contributor, Xiangru Chen Editor: Tao Ni Apr 01, 2022 10:35 AM (GMT+8)

With Apple seeing a stellar market result in Q4 2021, crowned as the No. 1 brand, major OEMs have accelerated the rollout of their premium products with differentiated features and optimized consumer experiences, vowing to regain their dominance

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The Chinese smartphone market experienced L-shaped growth in 2021, with growth in Q121 on the back of better COVID control and a multifaceted stimulus program. This was followed by declines in subsequent quarters given the challenges of supply shortages and lower-than-expected demand for mid-to-high-end products.

Overall, China's smartphone market still managed to grow 1.1% YoY in 2021, despite Covid-19, soft demand and supply chain disruptions. Notably, in Q4 2021, the market dynamic shifted drastically, with Apple crowned as the No. 1 brand, capturing the highest (21.7%) market share for the quarter when general retail consumption was subdued. Since its divestiture from Huawei, Honor saw a stellar performance, coming in second with a more-than-doubling market share growth. Oppo rose to third with a 16.6% market share after merging with OnePlus. Vivo ranked fourth with 16.5%, while Xiaomi fell to the fifth place with a 16.1% share, sustaining its downward trend. 

Top 5 Q4 2021 Smartphone Company Highlights:

- Apple dominated the premium segment and entire Q4 smartphone market with its launch of iPhone 13 models in September (week 39). Thanks to its alluring pricing strategy, robust supply chain and deep channel penetration, Apple notched a 21.7% market share amid the decline of Huawei, up from 16% a year ago. This expectation-beating sales momentum in the final three months of 2021 has continued, bringing Apple's total market share in the country to 16% throughout 2021, up from 11% a year ago and just six percentage points behind Vivo, the leader by yearly market share. In 2021, Apple reached more than 50 million units in shipment again after crossing the mark in 2015, and it also had the largest growth among the top five vendors. 

- Honor surprised the market with a 253.4% YoY growth in market share, up from 7.5% in Q4 2020 to 16.7% in Q4 2021, after the launch of the Honor 60 series and X30 series in December. After the adjustment period in the first half of the year, the brand has achieved outstanding results in its diversified product strategy. While Honor's Magic3 led the sales in the premium segment thanks to its high-end specifications and iconic exterior design, Honor's mid-to-high-end products further secured its dominant position, with Honor 50 retaining the top spot in the USD 200-599 price band for five months after its launch. Besides, on January 10, 2022, Honor launched its first foldable phone Magic V, which it claimed to be the thinnest of all models then in the market, further targeting the premium segment by providing differentiated products.

- Vivo's market share expanded to 22% from 17% in 2020, representing a growth rate of 21% YoY, primarily driven by the brand’s strong offline presence and expansive product portfolio. Prioritizing user-centric service, Vivo has been actively gathering insights and analyzing the potential needs of users while focusing on innovative technologies and products to enhance their daily lives. This can be seen in recent product launches, such as the X70 and V23 series, which include the latest camera specifications and upgrades to meet the needs of mobile photography enthusiasts. With heated competition in the smartphone market, Vivo has decided to focus on imaging systems, industrial design, operating systems and performance, and it has continued to make breakthroughs in R&D. Vivo's first in-house designed V1 custom imaging chip, which took two years to develop and is available for the first time on the X70 series, is a concrete manifestation of its efforts in imaging system development. In addition, back in Dec 2021, Vivo launched the fully upgraded OriginOS Ocean, which delivers a smooth user experience and helps solve various pain points through comprehensive optimization. With more than 10 R&D centers focused on 5G development, artificial intelligence and imaging technologies, Vivo is poised to seize a bigger market share in the premium segment.

- Oppo (encompassing the Oppo, OnePlus and Realme brands) delivered a portfolio of high-performing 5G products, the success of which has resulted in the brand ranking second for two consecutive years. With Oppo mainly targeting the offline and mid-to-low-end segment, Realme is setting out to strengthen its presence in the online lower tier and OnePlus has advertised its products as premium smartphones. In all, the company's multi-brand strategy allows each of its subsidiary brands to independently raise brand awareness in their respective areas, meeting individual consumers' different needs. Meanwhile, instead of becoming entangled in China's dog-eats-dog smartphone war, Oppo has shifted its attention to the international market. Through successful partnerships with leading mobile telecom operators, growth in the USD 600 segment surpassed 200% in 2021, while global shipments of the Oppo Find X3 series increased by 140% compared with the previous Find X Series. Going forward, Oppo is betting heavily on the overseas high-end handset market, with new models featuring a self-developed image processor. Its merger with OnePlus, the Chinese smartphone brand popular with geeks in the West, also might help enhance Oppo’s brand appeal. Particularly, on February 24, the company unveiled its new flagship Find X5 series equipped with a futuristic design, seamless ceramic back panel, and premium International Warranty Service. The lineup uses a chip that Oppo developed in-house, the MariSilicon X, a neural processing unit that uses custom AI algorithms to handle images and video.

- Xiaomi, previously associated with ultra-low profit margins, has experienced increasing challenges. While Xiaomi has won the Chinese market in Q4 with its new product, the Note 11 series and Mi 12 series, and secured the third place in 2021 with its iconic Redmi 9 and K40 series, the brand's outlook is still gloomy, considering its weakness in the offline channel. Globally, Xiaomi maintained the No. 1 position in India in Q4 2021, but its market share shrunk significantly due to the rise of Realme and an ascendant Samsung. With saturated market conditions and intensified competition, Xiaomi is forced to ditch its original positioning —to supply affordable smartphones to everyone — and instead double down on its premium product strategy with the release of Mix 4.


In summary, encouraged by Apple's success, major Chinese OEMs has accelerated their investment in the high-end market, expanding their premium product portfolios with devices including Vivo's X70 Pro, Xiaomi's Mix 4 and Honor's Magic3 and Magic V. Particularly, Honor's Magic3 led the expansion in the premium segment with an iconic exterior design and Snapdragon 888-led flagship-level specifications. 

Besides optimizing user experiences with HD pixels and 5G chips, foldable flagship model is another hotspot for OEMs to target to emerge on top from the premium segment. Apple is yet to enter this domain but rumors said it will next year. After Honor launched its first foldable handset, Magic V, claiming to be the thinnest with a 6.45-inch OLED panel, OPPO released Find N in December 2021 that features a similar design to Samsung's Galaxy Z Fold series, with an only 5.49-inch outer screen when closed.

The premiumization battle is not confined to the Chinese market to be sure. Honor, Oppo, Xiaomi and Vivo have already brought their high-end products to the global stage, with Western Europe being their primary destination. Looking forward into 2022, the Mobile World Congress held in Barcelona from February 28 to March 3 surely has granted the Chinese OEMs with more access and exposure to showcase their premium products to the European markets.