After more than two decades of development, the smartphone industry chain has reached a high level of maturity, with consumer demand for new devices waning and smartphone manufacturers struggling to innovate. The market competition for existing shares has already entered a fiercely competitive phase.
On the consumer side, the replacement cycle for smartphones is continuously lengthening, signaling a period of sluggish growth in the smartphone race. Research institution TechInsights revealed that the global smartphone replacement cycle will extend to a historically long 51 months in 2023. In China, the speed at which consumers replace their devices has slightly increased, but it still exceeds 40 months.
On the supply side, to stimulate a "replacement wave," smartphone manufacturers have accelerated product updates and iterations, with little effect despite their busy efforts. In the face of an increasingly saturated market, phone manufacturers strive to enhance product quality, betting on new features such as satellite communication and AI capabilities in hopes of driving a large-scale replacement wave, and by increasing prices to gain higher profits.
In such an environment, product innovation becomes particularly important, but also more challenging. Especially at the crossroads of upgrading from smartphones to AI phones, every smartphone manufacturer wants to seize the initiative, thus the competition among high-end smartphone manufacturers becomes even more intense.
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Changes in the high-end smartphone landscape
In the first quarter of this year, the overall shipment of global smartphones showed a growth trend, and the Chinese market, as one of the largest smartphone consumer markets globally, is also benefiting in sync.
IDC data shows that in the first quarter of 2024, global smartphone shipments grew by 7.8% year-on-year to 289 million units, with shipments increasing for the third consecutive quarter, indicating an ongoing market recovery. Additionally, in the first quarter of 2024, the Chinese smartphone market shipped approximately 69.26 million units, a year-on-year increase of 6.5%.
As the global smartphone market warms up and domestic smartphone sales are pleasing, the return of Huawei's 5G phones signals a reshuffling of the high-end smartphone market in China. Smartphone manufacturers are experiencing both concerns and joys.
On one hand, Chinese smartphone manufacturers represented by Huawei are further dividing the domestic high-end smartphone market share. The International Data Corporation (IDC) 2024 Q1 China mobile phone market report indicates that Honor secured the top spot in the first quarter of the mobile phone market with a 17.1% market share, with Huawei following closely behind with a 17.0% market share, just a 0.1% difference, almost tying with Honor for the lead.On the other hand, overseas smartphone manufacturers represented by Apple are under increasing pressure, and their decline in the Chinese market continues. The International Data Corporation (IDC) report on the Chinese smartphone market for the first quarter of 2024 shows that Apple ranks fourth with a market share of 15.6%, with a year-on-year increase of -6.6%.
Furthermore, the latest data from market research firm Counterpoint Research indicates that Apple's iPhone sales in China fell by 19% in the first quarter, dropping to the third position in the fiercely competitive Chinese market.
Clearly, Huawei's smartphone resurgence has taken a bite out of the market share of other manufacturers, and since Huawei is currently focusing mainly on the high-end market, the impact on Apple is the most evident. However, Apple still has a solid market share and a loyal user base, thanks to its unique brand influence and high-end product positioning.
Multiple data reports indicate that the domestic high-end smartphone market is facing a new transformation. Various smartphone manufacturers are actively striving to launch competitive products and services, which will further intensify the competitive landscape of the Chinese smartphone market.
Apple's Charm Fades, Full Remedial Efforts Underway
In the Chinese market, Apple faces increasingly fierce competition and is losing some market share. Apple's latest quarterly financial report shows that in the first three months of this year, it achieved a revenue of $90.753 billion, a year-on-year decrease of 4%; the revenue in the Greater China region, its third-largest market, was $16.372 billion, a year-on-year decrease of 8%.
In fact, there have been signs of Apple's smartphone charm fading, specifically manifested in the fact that even price reductions and promotions for Apple phones cannot boost sales. Since 2024, the iPhone 15 series has been reduced in price multiple times. For example, the price of the iPhone 15 standard edition 128GB on e-commerce platforms has now been reduced to 4499 yuan, a drop of more than 25% compared to the initial launch price of 5999 yuan.
What are the reasons for Apple falling from the throne of the domestic high-end smartphone market?
Firstly, there is a lack of innovation momentum within the company. Apple's smartphone products are conservative in innovation, and the introduction of new features and technologies is relatively slow, making it difficult to attract a large number of users to upgrade. JP Morgan once stated in a report, "The iPhone 15 does not offer a substantial upgrade experience and will not attract a large number of users to upgrade."
The lack of innovation in Apple's new models is a recurring issue. Since the iPhone 11, users have criticized the new models for lacking new ideas. The iPhone 12 and iPhone 13 were merely upgrades to 5G and a slight change in the position of the rear camera, while the iPhone 15, in terms of performance, imaging performance, and design, shows little difference from the iPhone 14.One of the main reasons users used to purchase Apple smartphones was Apple's leading position in technological innovation. New Apple smartphones often came with brand-new technologies and features, representing the latest in consumer electronics technology. Now, the innovation in Apple smartphones is gradually diminishing, and the improvements and updates at new product launches are not significant, naturally leading users to lose interest in buying new products.
Secondly, several strong competitors have emerged. The smart ecosystems of domestic mobile phone brands have gradually matured, and their reputation and market share have increased, causing the status of Apple smartphones in consumers' minds to decline.
In terms of products, domestic mobile phone brands such as Huawei, Xiaomi, OPPO, and VIVO have gradually caught up with Apple smartphones in aspects such as hardware performance, design, camera functions, battery life, fast charging technology, and after-sales service, gaining the favor of more and more consumers. In terms of ecosystems, domestic smart mobile phone brands have launched a series of smart phones and supporting smart devices, forming their own unique ecosystem, and have also bridged the ecosystem between Android phones and Apple smart terminals such as Mac and iPad.
Domestic mobile phone brands have made significant progress in the past few years, further compressing the status of Apple smartphones in consumers' minds. In order to regain consumer trust and affection, Apple is trying to make up for it through innovative design and technological breakthroughs.
Apple CEO Tim Cook said in the second quarter earnings call: "Apple will continue to increase its investment in AI technology research and development, and seek to promote the development of AI technology with more partners. At the same time, Apple will also pay attention to the latest trends and trends in the industry, in order to adjust its own strategy and product line in a timely manner."
In general, the demystification of Apple smartphones is largely due to the strong rise of Huawei, the most powerful competitor.
Huawei's Charm, Strong Return
Unlike the beleaguered Apple, Huawei smartphones have made a strong comeback after two years of silence, with good news in the new season.
For well-known reasons, the sales volume of Huawei smartphones once plummeted. According to publicly available online data, in 2019, Huawei's mobile phone shipments were hundreds of millions (240 million), and only two years later, Huawei's mobile phone shipments in 2023 reached 40 million units, a decrease of 83.3% from 2019.
After lying low for two or three years, Huawei actively adjusted and improved its product strategy, successfully launching a series of smartphones that are popular with consumers and is gradually recovering and growing stronger. TechInsights predicts that in 2024, Huawei's smartphone shipments in China will exceed 50 million units, and the market share will increase significantly from 12% in 2023 to 19% in 2024.Huawei's smartphone sales have once again reached their peak, thanks to several key factors: the Huawei Mate 60 Pro directly driving sales, the Kirin chip enhancing brand effect, and the HarmonyOS operating system optimizing user experience.
Firstly, the explosive sales of the Huawei Mate 60 series have been a key driving force for Huawei to regain the top spot in the Chinese market. In August 2023, Huawei quietly launched the Mate 60 series, featuring unique and innovative features such as dual-direction satellite communication and dual-star Beidou satellite capabilities, which have caught the attention of consumers.
The Mate 60, leading in sales, has directly increased Huawei's market share. According to public data, from the online and offline launch on August 29 to September 1, the Huawei Mate 60 Pro sold approximately 800,000 units, setting multiple historical records for Huawei smartphones.
Secondly, the successful development of the Kirin 9000s chip is the foundation and confidence for Huawei's return to the high-end smartphone market. For Huawei, developing its own chips allows for independent technological innovation and upgrades, offering more innovative features and leading technological applications. It also reduces reliance on external suppliers, improving production efficiency and product competitiveness.
According to Huawei's public data, it invested 164.7 billion yuan in technology research and development in 2023, and over the past decade, it has invested 1.1 trillion yuan into revenue. In terms of proportion, in 2023, Huawei's investment in technology research and development accounted for 23.4% of the total revenue, exceeding the company's net profit.
Thirdly, Huawei continues to optimize the HarmonyOS operating system, enhancing system fluidity, stability, and response speed, thereby providing a variety of applications and services, improving user experience, and attracting more users.
A powerful operating system requires a comprehensive ecosystem for support, including an app store, developer resources, and diverse applications. With continuous investment and innovation from Huawei, the HarmonyOS operating system has gradually demonstrated excellent performance and outstanding user experience, giving Huawei's smart products a unique competitive advantage.
In summary, the launch of the Mate 60 Pro is an important milestone for Huawei's strong return to the high-end smartphone market. It has not only achieved high sales but also demonstrated Huawei's ongoing investment and efforts in technological innovation and innovation, indicating that Huawei will achieve greater growth in the high-end smartphone market.
Huawei, Apple's Next Journey: Meeting the Challenge of AI Smartphones
With the development and popularization of AI technology, the introduction of AI large models has become an important trend in the smartphone field.Market research firm Counterpoint has released data showing that shipments of generative artificial intelligence (AI) smartphones are expected to grow rapidly between 2023 and 2027. It is projected that the shipment share will be 11% in 2024, reaching 550 million units by 2027, accounting for 43% of the market, with a compound annual growth rate (CAGR) of 49%. The firm anticipates that by 2027, the market penetration of generative AI smartphones will exceed 1 billion units.
In this context, major smartphone manufacturers are increasingly integrating AI-related features into their products, aiming to attract consumers' attention and enhance product competitiveness through AI smartphones. Both Huawei and Apple recognize the potential and market demand for AI smartphones and are actively gearing up to compete in the AI smartphone market.
Over the years, Apple has conducted a series of AI-related research and acquisitions, and has released several AI-related technological and functional improvements. According to market news, Apple will introduce AI large models in the iPhone 16 and iOS 18 to be released this year. These models integrate generative AI capabilities, making features like Siri, Spotlight, and Apple Music smarter.
Similarly, Huawei has already released the PanGu large model and integrated it into the HarmonyOS 4 operating system. With the support of the large model, Huawei's smart assistant, Xiaoyi, has been upgraded in three directions: interaction, productivity enhancement, and personalized services. New products such as the P70 series and Mate70 series are also planned to be equipped with the large model.
Undoubtedly, 2024 will be a year of explosion for AI smartphones, and it will be a year for smartphone manufacturers like Huawei and Apple to seize the AI smartphone market, with both opportunities and challenges.
On one hand, the emergence of AI smartphones will have a profound impact on user experience, technological development, and industry chain upgrades, promoting the entire mobile phone industry to develop in the direction of intelligence and personalization, thereby triggering a wave of phone replacement. On the other hand, AI smartphones provide personalized services by collecting user data, which also brings risks to privacy and data security. If not handled carefully, it can easily lead to user backlash.
Looking back at last September, Apple and Huawei released their flagship phones, the Mate 60 and the iPhone 15 series, on the same day. Subsequently, the Huawei Mate 60 was widely praised, while the iPhone 15 was widely mocked, marking the beginning of Huawei's charm and Apple's disenchantment. In the future, as AI smartphones become fully popularized, the smartphone market will undergo a revolutionary change, and those smartphone manufacturers with foresight and strength will become the leaders of the AI smartphone era.