Smartphone sales in China fell 22% in the first quarter as a result of the Covid-19 outbreak, according to a report released Wednesday, with embattled Chinese smartphone maker Huawei the only manufacturer that saw a growth in the quarter.

Why it matters: The coronavirus outbreak has accelerated a downward trend in the world’s largest smartphone market.

  • Analysts had forecasted a year-on-year drop of 15% to 20% in China’s Q1 smartphone shipments caused by delayed factory reopenings in February.
  • The report by market research firm Counterpoint Research also attributed the decline to “dismal sales” in February. But e-commerce platforms, it said, have helped smartphone vendors to recover some of the losses.

“The drastic fall in Q1 China market was primarily dragged down by the dismal sales of smartphones in February (-35% YoY)… However, during the lockdown period in China, local e-commerce giants such as Alibaba and managed to sustain efficient business operations and delivery services in major Chinese cities outside of Hubei province. For the strong support from these e-commerce players, China’s smartphone sales appeared less negative than our original expectation.”

—Flora Tang, research analyst at Counterpoint Research

Details: Huawei was the only smartphone vendor in the top five that posted positive year-on-year growth of 6% in the first quarter, according to the report. The Shenzhen-based company retained the top spot in China’s smartphone market with 39% share.

  • Sales of Apple’s iPhones fell 1% in the first quarter compared with the same period a year ago. The company sold less than half a million iPhones in China in February. However, sales surged in March, rocketing 406% from February to around 2.5 million units.
  • Sales of smartphones compatible with 5G networks grew 120% compared with the previous quarter, the report said, as Chinese carriers step up efforts to build more 5G base stations in urban areas.
  • “We expect 5G smartphones to rise to account for over 40% of total smartphone sales in China by the end of 2020,” said Mengmeng Zheng, research analyst at Counterpoint.

Context: Huawei said last week its total revenue for the first quarter grew only 1.4% year on year to RMB 182.2 billion (around $25.7 billion). During the same period, China’s GDP contracted 6.8%.

  • In a bid to boost sales, Huawei has teamed up with food delivery platform Meituan, allowing consumers to order its smartphones and tablets and receive them within an hour from flagship stores.
  • Observers were not optimistic about China’s smartphone market over the long term. According to a recent report by market research firm Strategy Analytics, 37% of Chinese consumers have delayed plans to upgrade their handsets.

Wei Sheng

Writing about semiconductors and telecommunications.