The Chinese smartphone market is in total decline and is believed to be mostly responsible for the failures of Apple, Samsung and LG this quarter. The decline could continue in 2019.
Apple is not the only company that has suffered the most this quarter, since the publication of a historical warning on its sales figures. In parallel with their announcements at the CES, Samsung and LG both reported poor results during the last three months of 2018. The Korean giants are recording much stronger falls than Apple’s and are anticipating a very tricky start to 2019.
LG and Samsung performing worse than Apple
For the last quarter of 2018, Samsung Electronics will shortly publish its revenue; it is expected to be 59 trillion won or $52.5 billion, according to the company. It is much less than the 58.8 billion expected by analysts and is above all a spectacular 11% drop over the past year. In comparison, Apple’s expected revenue this quarter ($84 billion) represents only a 5% decrease from last year. It is enough to put the Apple “catastrophe” into perspective.
On the LG side, the results are equally alarming. Its turnover (14 billion dollars) fell by 7% year-on-year, and its profit fell by… 80%. The company only achieved a margin of 67 million compared to 344.3 million a year ago — a phenomenal loss.
How can such a fall be explained for these three companies? In its warning, Samsung explains that it is suffering from a drop in demand for components, particularly in its memory division. The world leader also admits suffering the consequences of intense competition, without mentioning Chinese manufacturers such as Huawei.
On LG’s side, the smartphone is indeed not the first element to be questioned, as the company only represents 3% of the market. The Korean does not give any details, although analysts suspect a decline in TV margins. Apple points to several reasons, such as the slowdown in the global economy, tensions with China or low renewal among iPhone users.
Chinese market in free fall
In parallel with these announcements, the China Academy of Information and Communications Technology, an organization managed by the Chinese government, published its review of the smartphone market in 2018. Very interestingly, it shows that mobile sales fell by 15.5% year-on-year in China (390 million units) and by 17% in December alone, the most significant month of the last quarter.
How can we explain the decline of the Chinese market, which is the largest in the world?
According to the analysis firm Canalys interviewed by Reuters, China has become a mature market, with less smartphone renewal than in the past. The economic war between the United States and China and the mistrust of certain manufacturers would have reduced the interest of Chinese consumers. With entry-level devices increasingly more efficient and designed by local companies, all analysts agree that 2019 will be a complicated year for traditional manufacturers such as Apple, Samsung, and LG.