"Chinese mobile phone makers have struggled to stir excitement for their handset demand this year" -- Analyst Anthony Huang
From a note to clients that landed on my desktop Thursday:
China handset shipments up 9.2% y/y in June, marking the 1st y/y growth in 2022. China’s mobile phone shipments arrived at 28.0mn in June, +9.2% y/ y and +34.6% m/m, according to CAICT (China Academy for Information and Communications Technology). 34 new models were released in the month, up 6.3% y/y. 1H22 cumulative mobile phone shipments of 136.3mn were down 21.8% y/y, in which domestic brands were down 25.9% y/y while foreign brands were up 11.9% y/y.
The shipment growth in June was led by foreign brands such as Apple (AAPL US, NR) and Samsung (005930 KS, covered by MHSC analyst Marcus Shin) with 218% y/y growth to 3.5mn due to a very low base of 1.1mn in 2021. Domestic brands like Xiaomi (1810 HK, NR), Oppo, Vivo, Huawei etc however were still down 0.5% y/y to 24.5mn as the official data showed. We believe the bulk of the y/y rebound was from iPhones while Samsung no longer commands a significant share of the country’s mobile phone market. iPhone 13 sell-through demand appeared resilient per our industry survey, as the phones continued to be in the dominant position in the high-end segment without much competition from Android camp. Superior execution along Apple supply chain and good logistics management has also prevented inventory overbuild and destocking risks.
Chinese mobile phone makers have struggled to stir excitement for their handset demand this year with total shipments of 115mn in 1H22, down 25.9% y/y, although the number of new models released were down only by 1% y/y. Nevertheless, we saw a meaningful sequential recovery in June with +47.6% m/ m shipment growth driven by the lifting of COVID city lockdowns in Shanghai and Beijing, 618 shopping festival, and online retailers’ promotional campaigns in China.
Delayed upgrades from consumers, COVID lockdowns, and macro slowdown have caused lackluster handset demand in China. While we expect domestic brands to launch more new models in the coming months, such as Xiaomi’s latest release of 12S series with top-notch 1” CIS from Sony (6758 JP, covered by MHSC analyst Yasuo Nakane) and Leica cameras, these brands’ order placement at component makers are generally conservative, implying conservative outlook with a low demand visibility. Although we expect gradual recovery in 2H from the trough in 2Q, handset supply chain inventory adjustment is likely to bring more moderate seasonal uptrend for the smartphone value chain in the coming couple quarters, especially for Android camp. As for iPhones, EMS in general expects stable 3Q despite upcoming new product launch in Sep/Oct timeframe.
My take: Good for Apple. Not so good for the rest. I almost feel for Samsung.