China Academy of Information and Communications Technology: China's smartphone shipments in April 2022 were 17.7 million units, a year-on-year decrease of 34%.

Demand for smartphones in the previously red-hot Chinese market is cooling rapidly as the resurgence of the pandemic saps consumer spending, prompting phone makers including Apple Inc. to warn about future performance in recent weeks and chipmakers to change their tune on the world’s largest smartphone market. China’s smartphone shipments fell 34% year-on-year to 17.7 million units in April, according to data released this week by the China Academy of Information and Communications Technology. Shipments fell 30% to about 86 million units in the first four months of the year, the academy said, which is part of the Ministry of Industry and Information Technology.

In late April, Apple warned that COVID-19 containment measures threatened to hamper sales this quarter by as much as $8 billion, and this month Chinese smartphone maker Xiaomi said its smartphone revenue fell 11% in the January-March period from the same period last year, blaming partly slow logistics, store closures and component shortages in China due to strict lockdowns.

Semiconductor Manufacturing International Corp., China's largest contract semiconductor manufacturer and producer of chips for smartphones, said this month that it now expects global smartphone makers to reduce production of at least 200 million smartphones in 2022, compared with industry forecasts. Most of those cuts are coming from Chinese phone makers, said Zhao Haijun, co-CEO of SMIC. "There is no end in sight to the downward trend," Mr. Zhao said on an earnings call.

The sharp drop in demand for smartphones has also affected global electronics makers. China accounts for about one-fifth of global smartphone shipments, according to Taiwan research firm TrendForce.

Consumers say they are tightening their purse strings, especially for higher-priced goods. Zhang Rui, a 43-year-old tech worker in Beijing, said she had given up on buying a new smartphone this year. Zhang, who uses an iPhone 12 Pro Max and typically updates her device every other year, said she was not attracted to the new models to the point where she was willing to pay a premium.

Industry executives and analysts say low-end devices are likely to be hit fastest and hardest, as consumers with lower incomes who tend to buy cheaper phones limit their purchases in the face of economic uncertainty.

The trend could hurt some companies the most, including Xiaomi, Oppo and Vivo, said Ming-Chi Kuo, a supply chain analyst at Tianfeng International Securities in Hong Kong. Meanwhile, Apple's product line tends to be high-end, although sales of its lower-priced iPhone SE may also be hit, he said. Major Chinese smartphone makers including Xiaomi, Oppo and Vivo are expected to ship about 270 million fewer smartphones this year than previous industry forecasts.

For smartphone makers and their suppliers, the drop in demand from Chinese consumers adds to a host of problems they have been grappling with, including chip shortages and fallout from Russia’s war in Ukraine.

The global smartphone market fell 7% in the January-March period from the same period last year, according to TrendForce, which expects 1.33 billion smartphones to be produced globally in 2022, having already cut its forecast by 50 million units twice this year.

Some of the largest suppliers to Apple and other smartphone makers have also sent warning signs. Foxconn Technology Group, the world’s largest iPhone assembler, forecast revenue from consumer electronics, including smartphones, to fall this quarter from a year earlier. The unit accounts for more than half of the company’s revenue. TSMC said in April that growth in chips used in consumer electronics, including smartphones, was weakening.

Analysts say the global chip shortage is unlikely to ease in the short term despite a drop in demand for mobile phones in China. Industry executives say the auto industry is still grappling with a chip shortage, but it is difficult for semiconductor manufacturers to quickly switch production from one type of chip to another, and the supply of smartphone chips used to power devices, charge them and connect to Wi-Fi networks may continue to face supply constraints.

From cnBeta.COM