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Wednesday, April 12, 2017
Smartphone Output in 1Q17 Down 23.2% On Quarter

Smartphone brands, especially those based in China, lowered their production volume forecasts through the first quarter as demand slowed down significantly due to the conventional seasonal effect.

Major brands such as Samsung, LG and Huawei have begun to ship their flagship devices for the year, but the market demand going into the second quarter is expected to remain relatively weak as consumers are holding off their purchases in anticipation of the 10th anniversary iPhone devices that will arrive in the third quarter. Smartphone sales will be fairly lackluster until the second half of this year. TrendForce estimates that the global smartphone production volume for this second quarter will register a modest single-digit growth versus the preceding three-month period.

Strong sales of the Galaxy J series made Samsung the only brand posting production volume growth for the first quarter

Samsung's sales results for its high-end smartphones fell short of expectations in the first quarter as consumers' confidence in the brand had yet to fully recover from the recall of Galaxy Note 7. Nevertheless, Samsung continued to do very well in the mid-range and low-end segments of the market. The economically priced, high-performing Galaxy J series sustained Samsung's shipments and contributed significantly to the expansion of the brand's overall smartphone production volume. Samsung was the only brand that saw positive growth in production volume during the off season of the first quarter.

Samsung has also released its flagship device for the year Galaxy S8 this second quarter. However, the high-end model is expected to make limited sales contribution because the buzz surrounding the next-generation iPhone devices is dampening demand for products from non-Apple vendors. Samsung is expected to post flat growth for its second-quarter smartphone production volume. The S8 devices and the J series, which are contending for market shares respectively in the high-end and the mid-range to low-end segments, will keep Samsung's shipments relatively stable in the second quarter. For the entire 2017, Samsung is estimated to increase its production volume by as much as 5% compared with the volume figure of 2016.

The total production volume of all iPhone devices for the first quarter of 2017 fell by 36% compared with the previous quarter and declined by 41% versus the same period a year ago. These results actually showed an overall improvement in iPhone sales. Apple this first quarter released the "PRODUCT Red" edition of iPhone 7 and 7 Plus, which can be regarded as a follow-up to last year's "Jet Black" edition. The use of striking colors has been well received by consumers and helped Apple grab market share. The bold color scheme has also raised awareness about the upcoming release of the 10th anniversary iPhone devices.

TrendForce estimates that the total production volume of all iPhone devices for the second quarter will reach around 43 million units, a decline of 17% from the preceding quarter. Apple will likely to lower the production of existing iPhone models as the company prepares for the launch of the next-generation devices in the third quarter.

Because of the seasonal effect on demand, LG's first-quarter smartphone production volume plummeted by almost 40% compared with the prior quarter. This was despite that the brand had rolled out the high-end device V20 in the second half of 2016 to help drive shipments during the turn of the year and beyond. Looking ahead, LG's shipments will benefit from the impending arrival of G6. TrendForce projects that LG's production volume will reach around 18 million units this second quarter, similar to the result for the same period last year.

Chinese brands will be busily reducing their component inventories in the second quarter as their total production volume for first quarter fell 26% versus prior quarter

China's smartphone market in the first quarter was affected by weak demand and uncertainties surrounding the subsidy plans offered by domestic telecom companies. Major Chinese brands lowered their production volume targets and reduced component purchasing during the period as there were additional one to two weeks of inventories for their smartphone products (the whole device).

Going into the second quarter, Chinese brands will be releasing their latest flagship smartphones and replacing older products with this year's lineups. Chinese brands also recognize that the market is being influenced by the arrival of the next iPhones, so they are going to continue to reduce their component inventories as to prepare for further uncertainties in shipments and sales.

Huawei remained the leader among Chinese vendors and the third largest brand worldwide in the first quarter, even though its production volume declined by about 22% compared with the fourth quarter of 2016. TrendForce expects Huawei to return to growth in the second quarter as the brand's high-end series P10, which features dual-lens camera from Leica, will be officially entering the market. Huawei's second-quarter production volume is estimated to expand by 16% compared with the first quarter and reach close to Apple's iPhone volume figure for the same period.

OPPO and Vivo were respectively at the second and third place in the Chinese vendor ranking in the first quarter. In terms of production volume, both brands registered a decline from the fourth quarter of around 30%. TrendForce expects OPPO and Vivo to make a recovery as they continue to develop overseas markets and promote affordable premium devices. For the second quarter, two vendors will increase their respective production volumes by 20~30% over the prior three-month period.

Xiaomi saw no sequential growth in its production volume for the first quarter, though the figure did represent a modest year-on-year growth of 12%. In contrast, Huawei's, OPPO's and Vivo's year-on-year growth rates for the first quarter were respectively 30% and over. According to TrendForce's estimate, Xiaomi's second-quarter volume may be more than 10% higher than the prior quarter as the brand rolls out the refresh for its Mi Note series.

Without new products in the offering, Lenovo's smartphone production volume fell by nearly 30% between last year's fourth quarter and this year's first quarter. The first-quarter result also represents a year-on-year drop of almost 20%. Lenovo's smartphone market share is thus on a decline. TrendForce projects that Lenovo will post single-digit growth in production in the second quarter'

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