Chinese smartphone brands that have chased Apple and Samsung Electronics in the global market with value-for-money strategies have sharply cut their shipment targets for this year, according to reports. The move comes as surging demand for artificial intelligence (AI) servers drives up memory prices and disrupts the supply of smartphone components.
According to Nikkei Asia and other foreign media on the 9th, major Chinese smartphone manufacturers including Xiaomi have recently informed their component suppliers of plans to significantly reduce their smartphone shipment targets for this year from previous levels. Some companies' target reductions are reported to reach as much as 30%.
The hardest hit is Xiaomi. Xiaomi's smartphone shipment target for this year has been lowered to around 95 million units. Compared with last year's shipments of 170 million units, that represents a reduction of about 44%. The rising prices of core components such as memory, combined with supply shortages, are seen as making it difficult to maintain the previous plan.
Oppo and Vivo are also reported to have lowered their expected shipments this year to below 90 million units each. Honor, which recorded its best-ever performance by shipping 71 million units last year, is also understood to have concluded that it will be difficult to sustain its growth this year.
New product launches have also stalled. Chinese smartphone maker Meizu canceled the launch of its slim smartphone "Meizu 22 Air," which had originally been scheduled to be unveiled last January. The case is interpreted as a revision of product strategy amid growing burdens from component prices and market uncertainty.
Analysts in the industry say that the "cheap price" that had been the strength of Chinese smartphone companies is now acting as a weakness. One component supply chain executive told the outlet that "the average shipment decline rate among Chinese smartphone customers has currently retreated to a baseline of around 15%," adding that this is "because Chinese brands, which have a high proportion of value-for-money products, cannot pass on the increase in component unit prices to consumers."
The key backdrop to Chinese smartphone companies lowering their targets is the surge in memory prices. As the AI semiconductor market grows and DRAM makers concentrate on producing high-bandwidth memory (HBM) and server DRAM, the supply of DRAM and NAND flash used in smartphones has relatively declined.
In particular, demand for low-power DRAM (LPDDR), which had been used mainly in mobile devices, is also shifting to the AI sector. Nvidia's next-generation AI chip central processing unit (CPU), "Vera," is also known to be equipped with multiple LPDDR chips. For the smartphone industry, the situation has become one where it must compete for the same memory supply as the server and AI industries.
The rise in memory prices weighs more heavily on Chinese companies whose main products are value-for-money models. Unlike Apple or Samsung Electronics, which have a high proportion of high-priced premium products, Chinese brands find it difficult to raise consumer prices significantly. They have fallen into a dilemma in which failing to reflect rising costs in product prices worsens profitability, while raising prices weakens their existing competitiveness.
The market outlook is also not bright. Market research firm Counterpoint Research forecast that global smartphone shipments will decline by a total of 14% this year. As the AI-driven surge in memory demand suppresses the recovery of the smartphone market, the shipment adjustments by Chinese companies are expected to continue for the time being.
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