China’s Xiaomi, Vivo and Oppo trim smartphone orders by 20%

China’s leading smartphone makers have told suppliers to scale back orders for the coming quarters by around 20 per cent from previous plans following month-long Covid-19 lockdowns that have severely disrupted supply chains and battered consumer confidence, Nikkei Asia has learned.

Xiaomi, China’s biggest smartphone maker and the third biggest globally, has told suppliers that it will lower its full-year forecast to around 160mn to 180mn units from its previous target of 200mn, sources briefed on the matter said. Xiaomi shipped 191mn smartphones last year and is aiming to become the world’s leading smartphone maker. The company could adjust its orders again as it continues to monitor the supply chain situation and consumer demand in its home market.

Vivo and Oppo have also reduced orders for this quarter and the next by about 20 per cent in an attempt to digest excessive inventories currently filling retail channels, suppliers told Nikkei Asia. Vivo has even alerted some suppliers that it will not update specifications for some key components going into some midrange smartphone models this year, citing efforts to reduce costs amid inflation concerns and dwindling demand, those sources said.

This grim outlook poses a stark contrast with the start of 2022, when most smartphone makers expected a recovery in the post-Covid era and an improvement in component supplies.

Production forecasts for smartphone makers that are less exposed to the China market, such as Samsung Electronics, are relatively unchanged, according to multiple sources familiar with the matter, though even they are facing challenges from looming inflation and the Ukraine war. The South Korean giant hopes to ship more than 270mn units this year, which would be a slight growth from last year, the people said.

Google, which recently unveiled its new Pixel 6A and hinted it will launch its flagship Pixel 7 series in autumn, has told suppliers it plans to manufacture more than 10mn units this year, more than double its shipments in 2021.

China’s Honor, the former budget unit of Huawei, has not yet revised its orders for 70mn to 80mn units for this year, sources said. The smartphone maker has recently recouped domestic market share and is making an aggressive bid to expand overseas in 2022.

Xiaomi, Oppo and Vivo have all benefited from the US crackdown on Huawei, which cost the one-time smartphone giant market share at home and abroad. Xiaomi climbed to the world’s No 3 smartphone maker for the first time last year with a 14.1 per cent market share, compared with 9.2 per cent in 2019, according to data from IDC. In the second quarter of last year, it even overtook Apple to become the world’s No 2 smartphone maker.

But that tailwind appears to be fading. In the first three months of this year, Xiaomi, though still No 3 in the world, saw its shipments plunge 18 per cent on the year. Oppo and Vivo shipments declined 27 per cent and 28 per cent, respectively, year on year. In its home market, Xiaomi dropped from third to fifth in the quarter.

Top China chipmaker Semiconductor Manufacturing International Corp has warned of further trouble ahead, predicting smartphone global shipments will drop by some 200mn units this year due to the Covid lockdowns and the Ukraine war.

Apple had already reduced orders for its budget iPhone SE by 2mn units and lowered them by another couple of million after lockdowns in and around Shanghai. Its key MacBook, iPhone and iPad assemblers in China are only gradually resuming production.

Samsung, whose supply chain for smartphones is mainly in South Korea and Vietnam, has been less impacted by the lockdowns in China. Its market share in the country is less than 1 per cent, which also makes it less vulnerable to the slowing demand in the Chinese market.

“If we say the war, inflation and lockdowns in China are the biggest three factors affecting the smartphone industry this year, then Samsung only has two factors compared with the other players,” said an executive at a supplier to Samsung, Xiaomi and Honor. “It gives an edge to Samsung compared with those that relied heavily on the Chinese market — but there are still two knives in its back, so there are still uncertainties to Samsung’s smartphone sales this year,” the source added, referring to inflation and the war.

Jeff Pu, a veteran analyst with Haitong International Securities, told Nikkei Asia that his agency has trimmed its outlook for the global smartphone market from flat to down 1 per cent this month to reflect the macro uncertainties and impacts of China’s lockdown.

“Most of the slowdowns are really coming from China now, while the demand still looks OK for the US, western Europe, Latin America and south-east Asia. As Shanghai starts to reopen, we are closely monitoring whether demand recovers a bit,” said Pu. “One key indicator will be the upcoming online sale in China on June 18. We heard that all the online sales channels and brands are planning to offer big discounts to energise sales.”

June 18 started out as a sale to mark the anniversary of JD.com but has gradually turned into a major mid-year shopping event. This year it is viewed as a key indicator of how quickly the lockdown impacts might fade.

Eddie Han, an analyst with Isaiah Research, gave a slightly more pessimistic outlook, with his agency forecasting a decline of 2 per cent to 7 per cent for the global smartphone market this year. He expects the Chinese market could even drop 10 per cent to 15 per cent this year.

“The demand is weakening significantly in China and is not especially strong around the world. We have noticed that overseas customers — especially those in Europe and North America — tend to go to Samsung or Google for Android phones rather than Chinese smartphone brands. Geopolitical tensions may play a role in consumers’ behaviours.”

Vivo did not provide a comment as of publication time, while Honor and Oppo declined to comment for this story. Xiaomi did not respond to requests for comment.

A version of this article was first published by Nikkei Asia on May 18. ©2022 Nikkei Inc. All rights reserved.

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