According to statistics of the ITIS project - a project initiated by Taiwan's Ministry of Economic Affairs and conducted by Taipei-based MIC - China's mobile phone industry reached a shipment volume of 175.2 million units in the third quarter of 2008, representing 6.2% sequential growth and 4.3% year-on-year growth. The industry's growth rate, which peaked in 2006, gradually slowed down to mid-single digits. This indicated that the Chinese mobile phone industry was significantly impacted by a slowdown in global market demand.
The Chinese industry's shipment volume of GSM (Global System for Mobile communications) products reached 155.1 million units in the third quarter, up 8.4% sequentially and 6.4% year-on-year. Even though ZTE and Huawei experienced sales growth in the CDMA (Code Division Multiple Access) phone segment in overseas markets, shipment volume of CDMA phones still slowed down amid the global financial turmoil. Additionally, as China Unicom and China Telecom were preparing for the CDMA handover, the number of CDMA subscribers slumped significantly during this period in China. As a result, CDMA shipment volume slipped 7.8% sequentially to 18.9 million units, down 3.4% year-on-year. CDMA phones' share of the industry's overall shipment fell to 10.8% in the third quarter.
The worldwide mobile phone market was also affected. Leading mobile phone brands, including Nokia, Motorola, and LG - which used to enjoy shipment growth in the third quarter, traditionally a peak season - did not experience this seasonal effect in 2008. Nevertheless, driven by strong performances from Apple, RIM and other companies, worldwide mobile phone shipment volume did achieve slight sequential and year-on-year growth.
Combined shipment volume of international brands in China's industry slipped 1.3% sequentially in the third quarter, a phenomenon seldom seen in past years. Previously, dragged down by poor sales performances of their major clients Motorola and Sony Ericsson, combined shipment volume of Taiwanese makers in China's industry declined. In the third quarter, however, driven by strong sales of Apple's 3G iPhone and rollouts of several new products outsourced to Taiwanese makers, their share of total volume increased significantly to 16.4%. Meanwhile, Chinese makers pushed shipments in anticipation of the Chinese long holiday period in October, traditionally a peak season. Owing to a significant decline in shipment share of international brands in China's industry, Chinese makers' share increased to 32.4% in the third quarter.
Regarding production locations, Northern China, where international brands' production sites are mostly located, saw its share of the overall industry's production fall to around 45.9% in the third quarter. The share of Eastern China, where most Taiwanese mobile phone makers are situated, picked up to 13.3%, while that of Southern China, where most Chinese mobile phone makers have their facilities, inched up to 39.7%.
Affected by the global financial situation, the Chinese domestic market also saw a slowdown in growth momentum. To reverse the situation, China's government has taken several countermeasures in order to stimulate domestic demand and has shifted focus to how to sustain China's growth momentum. As the slowing global economy has a certain impact on consumer sentiment in China, consumers become more cautious when making purchasing decisions. As a result, it is anticipated that the sales growth momentum in the Chinese market will be affected in the fourth quarter of 2008 and even in the Chinese Lunar New Year holiday period in 2009.
Furthermore, the global financial crisis is gradually affecting emerging markets, which are major export destinations for Chinese makers, and China's export growth momentum is beginning to slow down as well. It is anticipated that in the fourth quarter, the seasonal effect in the market will be less evident than in previous years and shipment volume of the overall Chinese mobile phone industry is expected to reach approximately the same level as the third quarter.
In the first half of 2008, Chinese export-oriented makers, including Huawei, TCL, ZTE, and Konka, enjoyed strong sales performances as the number of mobile phone subscribers continued to grow in India, the Middle East, Africa, and Southeast Asia. However, as mentioned above, the global economic situation, which has led to reduced consumer spending in mature countries, has also affected emerging countries to a certain extent. Furthermore, according to trends among component suppliers, the export-oriented vendors in China's have significantly reduced their advanced purchases. The export-oriented makers will thus face challenges in terms of maintaining their growth momentum in the fourth quarter of 2008 and in 2009.
More information can be found in the following MIC report: The Chinese Mobile Phone Industry, 4Q 2008
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About MIC
Market Intelligence Center, based in Taipei, Taiwan, was founded in 1987. MIC is Taiwan's premier IT industry research and consulting firm providing intelligence, in-depth analysis, and strategic consulting services on global IT product and technology trends, focusing on markets and industries in Asia-Pacific. MIC is part of the Institute for Information Industry. https://mic.iii.org.tw/english
About ITIS
The ITIS (Industry and Technology Intelligence Services) project is managed by the Department of Industrial Technology of Taiwan's Ministry of Economic Affairs. As part of the project, research is conducted in a variety of fields, including the ICT sector. The project serves both the public and private sector.