FP StaffAug 17, 2022 16:36:22 IST
The bubble for the Chinese smartphone industry seems finally to have burst in the domestic market as well as internationally. The shipment of Chinese smartphones decreased by almost 15 per cent in the second quarter of this financial year. As per Financial Post, a Canadian financial news website, this marks the fifth consecutive quarterly loss for the industry.
Several analysts have opined that the Chinese market is in deep trouble and that things are only going to become worse as a result of a variety of causes.
India is currently the second-largest mobile market in the world, and it will soon surpass China as the biggest market for smartphones. However, the market in India has been dominated by smartphones from Chinese telecommunication businesses, especially in the budget and mid-range categories.
Indian smartphone manufacturers, who took on giants like Samsung and Nokia, and dethroned them from the top of the market, have been struggling ever since companies like Xiaomi and Oppo flooded the market with cheap Android devices.
That is one of the reasons why the rumours of the Indian government banning Chinese smartphone manufacturers from selling products for less than Rs 12,000 seemed so plausible.
Several Chinese telecommunications companies have been the subject of investigations by the Indian government, and have had their offices raided in recent months on allegations of money laundering and the improper transfer of revenues and funds from India to their Chinese offices in order to avoid paying legitimate taxes.
With big companies like Xiaomi, Vivo, and Oppo also reporting severe drops in sales, it was the fifth straight quarter of declining shipments and the second consecutive quarter of double-digit declines.
As per reports, multiple factors contributed to the decline. The first factor that has caused the sharp drop in demand is the strict “Zero COVID Policy” that China has adopted. China’s severe COVID-19 restrictions are not good for businesses. Arbitrary and strictly imposed lockdowns have disrupted the local as well as global retail, logistics and manufacturing industries.
The bigger problem, however, is the fact that the Chinese smartphone market is severely saturated, both domestically, as well as globally. As of the end of last financial year, there were more than 1.6 billion active mobile phone accounts in China, surpassing the population of 1.4 billion. This has resulted in intense brand competition and market cannibalism within different brands that are owned by the same parent company.
The final and perhaps the biggest reason for the decline in the demand for Chinese smartphones is the security concerns that several governments and internet activists have had for years now. Several government agencies from all over the world fear that not just apps, but the devices themselves originating from China can potentially spy on their citizenry, and are a major concern for domestic security and sovereignty.