“The market is increasingly price-polarized,” added Chiew. “The entry-level segment is saturated, with new offerings from Xiaomi and TRANSSION. Meanwhile, vivo, OPPO and Samsung aim to gain a larger share of the premium market by investing heavily in marketing and exploring new avenues for growth. By consistently promoting Galaxy AI, Samsung has successfully boosted sales of its S24 series, which has surpassed the performance of its predecessor. Looking ahead, vendors are ramping up investments in emerging regions, such as Latin America and Southeast Asia. These markets boast a flourishing middle class, where smartphone penetration continues to rise compared with saturated markets, alongside evolving preferences for high-end models.”

“Despite an upbeat market, it is vital that smartphone vendors keep a watchful eye on inventory levels,” said Canalys Research Analyst Lucas Zhong. “With uncertain global inflationary conditions, vendors are exercising caution in inventory management to mitigate the risk of oversupply and ensure financial stability. Anticipating a slight inventory correction in the second quarter of 2024, the channel aims to digest the aggressive shipments of past quarters, making room for new launches later in the year to bring about more sustainable longer-term growth.

“Samsung’s performance shows early signs of recovery after a tough end to 2022,” said Runar Bjørhovde, Canalys Analyst. “The rebound is particularly connected to product launches, which drove an increase in sell-in volume. Still, Samsung will have to navigate through a difficult landscape going forward, particularly as entry-level device inventory remains high. Declining profits from its semiconductor memory business will also trigger a more conservative marketing spend overall. Meanwhile, Apple had robust performance in Q1, particularly in the Asia Pacific region. Here, Apple’s sustained investments into offline channels enabled it to attract a burgeoning middle-class, which places high value on the in-store purchasing experience.”

“The mid-range price segment has started to recover following huge declines last year,” said Canalys Research Analyst Lucas Zhong. “Vendors are leveraging trade-down opportunities with strong value-for-money offers for consumers with limited spending power. This is supported by decreasing component prices and vendors accelerating spec upgrades for mid-range product portfolios. However, mid-range demand in 2023 will remain limited due to the macroeconomic challenges and missing differentiators within this price band. Furthermore, with supply inventories starting to clear, component prices may quickly start to increase, making great specs for lower prices less sustainable in the long-term.”

“The market remains challenging and Canalys maintains its forecast of marginal declines for 2023,” added Zhong. “Shipments will stabilize around the levels from 2022 as we move into the middle of 2023. Decline rates will start to improve soon, although this is more connected to the stark contrast between 2022 and 2023 shrinking. Canalys expects the smartphone market will gain momentum in the second half of the year as channel inventories reach healthier levels. Vendors are cautiously approaching the market with profitability targets, lean operations and inventory clearing as top priorities. However, for vendors with long-term ambitions and capital to invest, challenging market conditions provide an excellent environment to capture market share, showcase commitment and intentions to new markets, and establish close partnerships with the channel.”