Smartphone production to take a knock in Q1
The global smartphone production volume for the first quarter of 2019 (1Q19) will come to 307 million units, showing a 10% year-on-year (YOY) drop, according to TrendForce.
Although there has been a decline in the price of components, TrendForce says smartphone makers have set modest production targets due to the lower-than-expected sales in the previous quarter.
TrendForce's quarterly prediction appears to mirror its earlier estimates that the overall outlook in the global smartphone market will remain weak in 2019.
"The latest first-quarter production figures from the major smartphone makers indicate the top six brands by production volume for 1Q19, in order, will be Samsung, Huawei, Apple, Xiaomi, OPPO and Vivo."
The market research firm highlights that Samsung, which is still the market leader, began adjusting its product strategy in the second half of 2018 to challenge the Chinese brands head-on in the market segment for economically priced but high-spec devices.
As a result, TrendForce expects Samsung's total volume for 1Q19 will reach 70 million units.
"In the future, Samsung is expected to raise the production of the Galaxy A devices so that they will gradually substitute the Galaxy J devices as the brand's mainstream offerings. In emerging markets such as India, Samsung plans to heavily promote the newly established Galaxy M series that feature large-capacity batteries.
"These actions, taken together, imply Samsung is redefining its brand image to adapt to the challenges from the Chinese rivals and maintain its advantage in market share."
Despite the market pressure, Huawei will continue to perform well, says TrendForce. Last year, Huawei rose in global rankings by ousting Apple to become the second biggest smartphone maker.
"Its total production volume for 1Q19 is forecast to increase by nearly 10% YOY to 46 million units. Besides having extensive product lines and establishing a strong presence in overseas markets, Huawei has also succeeded in wresting market share away from iPhone in the high-end segment in China with its P and Mate series."
TrendForce believes the US-China trade war is likely to bear some influence on Huawei's smartphone business. "In Europe, Huawei's presence as a provider of telecom equipment has also come under suspicion. These issues will likely have some adverse effects on Huawei's performance in the smartphone market."
The Apple brand, according to TrendForce, will be in third place of the production ranking in 1Q19.
Based on its performances in the first quarter so far, TrendForce expects Apple's total iPhone production volume for the period will come to just 41.5 million units, registering a YOY decline of nearly 26%.
"Apple has been reported to have consistently marked down their iPhone production targets since 4Q18 in order to control its inventory. To stimulate purchases, the company has also lowered the prices of the latest models for some regions in the current quarter.
"Apple's pricing strategy as a whole is not conducive to driving iPhone sales in the present market environment. Furthermore, the sales ban on older iPhone models in China will deny Apple a sizable portion of consumer demand."
After eight consecutive quarters of growth, Chinese smartphone brand Xiaomi's smartphone production registered its first decline in 4Q18, falling to 30 million units, says TrendForce.
For 1Q19, Xiaomi's smartphone production is expected to drop, with total volume falling by 12% YOY to around 26 million units.
"The greatest challenge faced by Xiaomi currently is the lack of R&D into cutting-edge technologies and too much focus on low-price devices with thin margins. On one hand, Xiaomi has to rely more on marketing to drive sales of devices. On the other hand, thin margins can limit the profit gains that can be ploughed back to R&D. The situations result in more resources going to marketing and less going to R&D, forming a vicious circle."
The research firm notes Xiaomi is trying to remedy the aforementioned problems by recruiting more R&D talent and adjusting the market positioning of its subsidiary brands to retain overall market share.
OPPO and Vivo are expected to be in fifth and sixth place, respectively, in the production ranking for 1Q19.
TrendForce forecasts OPPO's total production volume for 1Q19 will approach close to 23 million units, and Vivo's total volume for the same period will be around 20 million units.
"Both brands posted quarter-on-quarter decline in their production volumes in 4Q18, as the Chinese market had become saturated. Huawei's recent success in raising its sales in China has also impacted OPPO's and Vivo's performances."
TrendForce states major brands will continue to pursue hardware optimisation in the immediate term, focusing on four main areas: display, camera, biometric recognition and memory.
However, it believes smartphone makers, in the long run, will have to do more than just upgrade the hardware specifications of their devices. "To expand market share, they will also need to invest in software development and explore peripheral opportunities."