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China to be flooded with unsold smartphones in 2017

China to be flooded with unsold smartphones in 2017

By BizLED Bureau

Dec 22, 2016: Morgan Stanley has warned that the smartphone market in China will be flooded with unsold phones from the first quarter of 2017.

The Chinese smartphone brands’ revenue targets for 2016-2017 was so high that it would cause oversupply of unsold phones, warned Morgan Stanley analyst Jasmine Wu. The component manufacturers like OLED will be under increasing pressure in 2017, said a report.

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Huawei, Oppo and Vivo had set very high shipment targets for 2016, and had aimed for volume growth of 31% to 123% year-on-year (YoY), Wu pointed out in a research report. Their targets for 2017 are also very high—above double digits of 21% to 114%. Some are even trying to secure crucial components like OLED panels, or memory to reach their targeted share gains.

This situation has been made even worse as the Chinese smartphone OEMs, who in order to avoid competition from top smartphone brands like Apple and Samsung, had focused on new phone model that were released during the third quarter to fourth quarter of 2016. This led to severe competition that has halved the product life cycle from six months to less than three months.

This situation clearly indicates that production volume of smartphones in 2017 would fall short of expectations, and component suppliers who have expanded production capacities during in the first half of 2016 will now face crucial challenges.

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