Chinese mobile handset brands record US$1.5-billion profit

According to the Counterpoint’s Market Monitor program for Q3 2017 (July–September), Global mobile handset profits grew 13% YoY in Q3 2017 due to strong performance of Samsung and Chinese brands.

Counterpoint Associate Director Tarun Pathak said, “This is the first time ever when the cumulative profits of Chinese brands have crossed US$1.5 billion for the first time in a single quarter. Usually, all the profits have been shared by just two brands Samsung and Apple. However, the Chinese brands have made inroads here as well.”

Tarun Pathak further added. “The growth of Chinese brands can be attributed to the diligent efforts in streamlining the supply chain with rising mix of mid- to high-end smartphones in their portfolio. Even in the premium segment, players like Huawei are positioning their flagship models just below the premium offerings from Apple and Samsung. This strategy is designed to penetrate premium market while maximizing revenue and profit.”

Market Summary:

· Apple captured nearly 60% of the total profits generated in mobile handset segment followed by Samsung
 

· Apple’s profit share declined by 30% YoY mainly due to increased mix of previous generation iPhones. The average selling price of iPhone remained flat YoY, while the shipments increased 3% YoY.
 

· In Q4 2017, we estimate that the total profits of Apple will improve driven by its iPhone X sales. Apple exited the quarter with some iPhone 8 inventory due to softer than expected demand compared to the iPhone 7 series.
 

· Samsung made a strong comeback in the third quarter with its Note 8 series, while S8 series continue to perform on par. The profit share reached 26% as compared to its loss during Q3 2016 due to Note 7 debacle.
 

· Huawei witnessed highest profit growth of 67% YoY in Q3 2017 due to its portfolio expansion across price bands. Huawei’s smartphone ASP grew by 6% YoY driven by its Mate and P series.
 

· Oppo and Vivo captured fourth and fifth spots in Global Handset profit share mainly driven by their performance in China.
 

· While Xiaomi has made a strong comeback with handset profit growth of 41% YoY, it is still behind the market leaders. For Xiaomi, offline distribution is the key to reaching OPPO or Huawei’s scale, but most of Xiaomi’s sales are still skewed towards lower-end models. Xiaomi needs premium flagship like Mi Mix 2 or Mi 6 series to scale and drive higher profits also to offset the offline expansion costs. Xiaomi is rumoured to be in pre-IPO phase and instilling investors confidence that it can scale and make more money will be key next year.
 

· Expansion of Chinese players outside china will have an impact on the profit margins of Chinese players which they would like to mitigate by increasing the mix of mid-segment devices in markets outside China.

Tags: Chinese mobile handset brands, Chinese mobile handset, Global mobile handset profits, counterpoint market monitor program, Counterpoint Associate Director Tarun Pathak, Chinese brands, apple, varindia