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Consumer electronics market in China

From smartphones to drones: an in-depth look at China’s consumer electronics market

China is projected to generate the highest revenue in the global consumer electronics market, estimated at 228.3 billion USD in China in 2023, followed by the United States with 155 billion USD and India with 69.15 billion USD. The revenue of consumer electronics in China is expected to grow to 252.6 billion USD in 2028 with a compound annual growth rate (CAGR) of 2.4%. The market’s largest segment is Telephony with a market volume of 123.20 billion USD in 2023.

With the emergence of 5G networks, the surging popularity of smart homes, and advancements in augmented and virtual reality technologies, China’s consumer electronics market will continue to expand and grow in the following years.

china's consumer electronics market
Graph Source: Statista, designed by daxue consulting, Top 3 of Global Electronics Market in 5 years

China’s smartphone market in 2023

In Q1 2023, China’s smartphone shipments experienced a decline of 8% YOY(Year-on-year), reaching their lowest level since Q1 2020(1Q22). This was an improvement from the double-digit YOY declines seen in previous quarters as well as a sign of bottoming out.

The smartphone market witnessed a diverse landscape without a single dominant brand. Instead, each brand had its own market share and customer base. Apple accounted for 20% of the market, followed by OPPO with 19%, vivo with 16%, HONOR with 16%, and Xiaomi with 12%.

Apple’s market share in China increased to 20% in 1Q23 from 18% in 1Q22. This was driven by its continued expansion in China’s premium segment with more aggressive promotion and marketing campaigns for the iPhone 14 series.

China's consumer electronics market
Graph Source: Counterpoint, designed by daxue consulting, China’s Smartphone shipments in Q1 2023

China’s smartphone market set for slight rebound in 2023

On January 29, 2023, IDC’s quarterly mobile tracking report revealed that smartphone shipments in the Chinese market for 4Q22 reached approximately 72.92 million units, experiencing a YOY decline of 12.6%. The total smartphone shipments for the year 2022 in China were approximately 286 million units, representing a YOY decline of 13.2%, which is the largest drop in history.

Apart from Honor, which saw a YOY growth of 34.4% in shipments, almost all mainstream brands have experienced declining shipments.

GKURC’s (Global Key Users Research Center) Chief Analyst Ding from China Economic Information Service believes that in addition to the impact of the pandemic, the decline in the Chinese mobile phone market is mainly influenced by factors such as market saturation, longer replacement cycles for users after the innovation platform phase of product technology, and the lower-than-expected impact of the 5G upgrade on overall demand. However, in 2023, with economic recovery and restored consumer confidence, the overall market is expected to experience a slight recovery.

The challenge of prolonged phone replacement cycles on China’s smartphone market

During the period of 2021-2023, smartphones have undergone significant development.

Technological advancements have led to an increase in the average, duration of changing one’s phone, extending it from 27 months to 31 months in a year. This highlights the importance of improving the service-centric back-ends offerings, including innovative services such as Apple’s self-repair program introduced in 2022, providing users with parts, tools, and repair manuals.

In addition, the pandemic has accelerated the transformation of the saturated smartphone market, shifting the industry from product-centric to service-centric back-end offerings. This strategic shift aims to enhance the user experience and differentiate brands.

To address the challenge of prolonged replacement cycles, collaboration among key stakeholders in the smartphone service ecosystem starts to emerge. Mobile manufacturers, e-commerce platforms, and third-party platforms across the industry are now collaborating synchronously, injecting new momentum into brand endorsement and OMO (online merge offline) activities.

Foldable smartphone market in China favors domestic brands

Foldable smartphone shipments are estimated to grow by approximately 50% in 2023, with both Samsung and Chinese manufacturers launching foldable phones.

Currently, the market size is around 18 million units, and it is projected to reach 130 million units in total shipments by 2027. If Apple enters the market, there is a chance to challenge 200 million units. It is speculated that the probability of Apple joining the market is high because Chinese manufacturers are pushing high-end foldable phones, and if Apple fails to do so, it may affect their brand image.

Foldable smartphone shipments china 2023 q1
Source: Business Today, Foldable smartphone shipments expected to grow 52% in 2023, Samsung Galaxy Flip4

5G integration in China’s consumer electronics

Mainland China is the largest 5G market in the world, accounting for more than 60% of global 5G connections at the end of 2022. According to the Mobile Economy Report, 5G will overtake 4G in 2024 to become the dominant mobile technology in China.

On Feb 27th 2023, China issued the “Overall Layout Plan for the Construction of Digital China”, which sets out the overall layout for ‘Digital China 2035’. The plan proposes that by 2035, China should reach the forefront of digital development worldwide.

Regarding base stations, as of the end of 2022, China has accumulated a total of 2.31 million 5G base stations, with 887,000 new 5G base stations built throughout the year. The Ministry of Industry and Information Technology predicts the construction of 600,000 5G base stations in 2023, while also advancing 6G research and development.

In terms of data centers, as of the end of 2022, the three major telecommunications companies provided the public with 818,000 Internet data center racks, with a net increase of 84,000 racks throughout the year.

China’s PC market to stabilize in 2023 as growth looms in 2024

Weak demand, excess inventory, and a worsening macroeconomic climate were all contributing factors for the precipitous drop in shipments of traditional PCs during the first quarter of 1Q23. Global shipments numbered 56.9 million, marking a contraction of 29% compared to the same quarter in 2022, according to preliminary results from the International Data Corporation (IDC) Worldwide Quarterly Personal Computing Device Tracker.

The preliminary results also represented a coda to the era of COVID-driven demand and at least a temporary return to pre-COVID patterns. Shipment volume in 1Q23 was noticeably lower than the 59.2 million units shipped in 1Q19 and 60.6 million in 1Q18.

Graph Source: Statista, designed by daxue consulting, 217-2025E Mobile/Desktop Split in China’s consumer electronics market

Drones: unlocking immense potential in China’s consumer electronics market

The priciest product in consumer electronics is drones. With the advances in technology, drones will be much more accessible and affordable, as a result, the demand of Drones will continue to increase. With the lifting of lockdown policies and the recovery of tourism around the world, the increasing popularity of drones for recreational use and aerial photography has created a wide range of opportunities for this segment. The global Drones segment reached 3.64 billion USD in 2022, marking a huge increase from 2021.

Countries are increasingly focused on reducing casualties among military personnel, and drones have benefited from this trend due to their unmanned nature. China’s military drone market is projected to exceed 10 billion RMB annually by the end of the 14th Five-Year Plan period.

From 2010 to 2020, China held a 17% share in the global military drone market, securing the third position. In the competitive Middle East drone market, China has a remarkable advantage, with a market share of 55.7% from 2010 to 2022, ranking first. This is primarily due to China’s cost advantages over the United States and Israel in the mid-to-high-end surveillance-strike integrated drones, making it a prominent player in the region.

Drones revenue in China
Graph Source: Statista, designed by daxue consulting, Drones revenue in China (2018-2028)

The surging population of smart home devices and kitchen appliances in China’s consumer electronics market

In China’s smart home market, revenue is expected to show an annual growth rate (CAGR 2022-2027) of 14%, resulting in a projected market volume of 54.63 billion USD by 2027. The number of active households is expected to amount to 165 million users with household penetration expected to hit 34% by 2027.

AVCs data show that, currently, the most single popular product category in China is the smart lock segment, which has reached a sales revenue of around 7 billion RMB in 2021 with a growth rate of 35.5%. The average price of one smart lock was 1,544 RMB in China in 2021, a 3.1% increase YOY.

To name a few of the smart kitchen appliances: the air fryer market in China was worth 4.38 billion RMB in 2021, and from January to May 2022, air fryer sales increased significantly by 185% as a result of the health-awareness trend. By 2026, that market is projected to generate 8.26 billion RMB. In addition, dishwashers are becoming more and more common among young families due to the smart home trend and the rise of the “lazy economy“. 1.95 million dishwashers were sold in 2021, generating around 9.96 billion RMB, amounting to a 14.4% increase from the previous year. At the moment, first- and second-tier cities account for most of the dishwasher sales, but there is potential in third- and fourth-tier cities as well.

2023 China’s consumer electronics trends

  • China dominates the global consumer electronics market, with the largest revenue and market share. The market is expected to continue growing, driven by 5G networks, smart homes, and augmented/virtual reality technologies.
  • The smartphone market is facing challenges due to prolonged phone replacement cycles. To counter this, stakeholders are prioritizing service-centric offerings, collaborating to improve user experience, and implementing brand endorsement and OMO (Online-Merge-Offline) activities.
  • The foldable smartphone market in China is favoring domestic brands, and the overall market is projected to grow significantly.
  • China is the largest 5G market globally, with a focus on digital development. The government has issued plans for ‘Digital China 2035’ and continues to invest in 5G infrastructure and data centers.
  • The PC market is expected to stabilize in 2023, with growth anticipated in 2024.
  • Drones and smart home devices, particularly in the kitchen appliances segment, are experiencing increasing demand and growth opportunities.

 Author: Howard Lai

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