Manufacturers face difficulties, but the domestic smartphone market is far from saturated

It is obvious that domestic smartphone manufacturers are facing difficult times.

Since 2015, we have not only seen a large number of small manufacturers such as Xiaxin, Tianyu, Dakele, IUNI, and Yuandian exit the market, but also seen many large manufacturers also fall into the trouble of sales growth and fail to produce beautiful incremental data.

On the one hand, there are manufacturers that are dying out, and on the other hand, there is a decline in the growth rate of manufacturers. Under this reality, people have also started to discuss whether the Chinese smartphone market has been saturated. Most people believe that the current domestic smartphone market is already saturated. After all, in the past few years, manufacturers were flourishing and the growth rate was still very high.

But I personally don’t quite agree with this. I personally think that the saturation stage of the domestic smartphone market may still be far from coming.

It is true that domestic smartphone manufacturers are dying out and the growth rate of the smartphone market is not optimistic. However, looking beyond the phenomenon to the essence, we find that domestic smartphone manufacturers are in an interesting change of growth and decline. In fact, the domestic smartphone market has entered a stage where good money drives out bad money. In both the rural market and the high-end market, domestic manufacturers still have great growth opportunities and great potential.

1. The change in growth rate is actually a matter of one thing increasing while the other decreases. The difficulties faced by manufacturers are actually because the domestic smartphone market has entered a stage where good money drives out bad money.

I personally think it is untenable to infer that the domestic smartphone market has entered a saturation period from the fact that some manufacturers have left the market or are stuck in a growth dilemma. The following data is very telling, and we can see that the domestic market has not yet entered a saturation period.

1. The growth rate of manufacturers is in a state of decline

While some manufacturers have withdrawn from the market or are stuck in a growth dilemma, another group of manufacturers are showing a trend of rapid development. In the first quarter, the growth rates of Huawei, OPPO and vivo, the three major domestic smartphone manufacturers, were eye-catching. According to IDC data: in the first quarter of 2016, Huawei's smartphone sales increased by 58.4% year-on-year, OPPO increased by 153.2% year-on-year, and vivo increased by 123.8% year-on-year.

Judging from the current shipment distribution of these three manufacturers, it is obvious that the domestic market occupies the majority, which is enough to show that the domestic market still has a strong market capacity.

But why are so many manufacturers withdrawing and complaining? The reason behind this is that the domestic smartphone market has entered a stage where good money drives out bad money. The reason why manufacturers have drastically decreased and withdrawn is that, through observation, we found that the manufacturers who withdrew are basically some weak manufacturers that are almost linked to copycats, while the ones with strong growth are mostly manufacturers with differentiated innovation advantages. 2. YUNOS installation volume soared in 2016

The growth rate of installed capacity of Alibaba's YUNOS in 2016 can actually prove that the domestic smartphone market is still in the growth stage. Relevant data shows that by the end of 2015, the cumulative user base of YUNOS was about 40 million, and its 2016 goal is to reach 100 million users. A simple conversion can show that the growth target of YUNOS this year is 60 million. Regardless of whether this goal can be achieved, setting this goal is enough to show that the current domestic smartphone market still has a large room for growth.

2. Broad opportunities in the rural market

Although my country's smartphone sales have soared from about 189 million in 2012 to nearly 500 million in 2015, the penetration rate of smartphones in my country is still relatively low, given the huge population base, unbalanced regional development, and huge urban-rural gap. Data from various research institutions also support this view: For example, the world-renowned market research institution eMarketer predicts that 38.6% of Chinese people will own and use smartphones this year. Forrester predicts that the penetration rate of smartphones in China will be 44% in 2015.

The urban and rural markets with low smartphone penetration rates are undoubtedly opportunities, and this also provides a good solution to the current low growth rate in domestic smartphone sales.

Smartphone sales in urban and rural markets in China have begun to show a rapid growth trend. Statistics show that since the first quarter of 2014, the T4-T6 (fourth-tier to rural markets) market has grown rapidly, accounting for 50% of the overall market capacity, which is the same as T1-T3. The price advantage of domestic smartphones is even more conducive to the development of rural markets. The current price of domestic smartphones is showing a further downward trend. Many smartphones priced at less than 1,000 yuan are already affordable for the majority of rural consumers. With the renewed emphasis on offline channels this year, the rural market will continue to explode with strong potential in the foreseeable future.

3. There is still much room for development in the high-end market

The smartphone market is not completely stagnant. Consumers still have a demand for high-end smartphones, and the high-end smartphone market is still full of opportunities and has a lot to offer. However, the current reality is that the high-end smartphone market is still dominated by Apple and Samsung, and the share of domestic manufacturers in the high-end market is not optimistic. Previous data showed that domestic mobile phones accounted for only 1.6% of the shipments of mobile phones priced above 4,000 yuan. This also indicates that there is still a huge market to be explored.

In the domestic mid-to-high-end market, which we define as the domestic market, only Huawei, OPPO and vivo have truly established their footholds, while other domestic manufacturers have made few gains. The mid-to-high-end market represents real money, influence and profit margins, which should be the direction of domestic manufacturers' efforts and the hope of entering a virtuous cycle.

Domestic mobile phone manufacturers have naturally seen the blue ocean of the high-end smartphone market. Currently, many manufacturers have begun to accumulate strength to develop mid-to-high-end smartphone products. They have launched products priced at 3,000 yuan or even 4,000 yuan. However, under the crazy trend of cost-effectiveness of thousand-yuan phones, those companies labeled with cost-effectiveness have not been smooth in entering the high-end market. But at least we have seen a relatively good phenomenon, that domestic manufacturers have begun to slowly shift towards manufacturing high-end models.

In summary:

We can see that although a large number of manufacturers have died in the past two years, overall, this is not due to the saturation of the domestic smartphone market, but the inevitable result of the market entering the stage of good money driving out bad money. From the perspective of incremental prospects, both the domestic rural market and the high-end market still have a large room for growth. In the midst of this growth and decline, it seems a little too early to talk about the domestic smartphone market entering a saturation period.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.