Zero Covid policy is killing the Chinese smartphone market

Chinese smartphone sales have fallen off a cliff this year as the country continues to try to close its borders to a virus.

The latest numbers from Counterpoint Research paint a grim picture. They manage to track the China smartphone numbers on a weekly basis and they reveal a steady decline since mid-February, which roughly coincides with extra quarantine measures introduced for the Winter Olympics. Some of that decline appears to be seasonal, but there is a clear year-on-year drop too.

“Weakened consumer sentiment caused by the Chinese government’s ‘dynamic zero-Covid’ policy was one of the main drivers for this decline,” blogged Minsoo Kang of Counterpoint. “It is now evident that consumer sentiment becomes weak every time strong COVID-19 quarantine measures are taken.

“From the end of January, during the Beijing Winter Olympics, smartphone sales began to decline YoY as the Chinese government strengthened quarantine measures. Again, at the end of March, sales fell further as a lockdown of major cities such as Shanghai began. However, the Chinese consumer sentiment picked up during the Labor Day holiday, so we expect to see some recovery.”

Like any other analyst firm, Counterpoint’s Chinese market visibility will be limited by the opaque information culture there. But its numbers are supported by recently released data from the China Academy of Information and Communications. While any state-affiliated body is presumed to be politically controlled, there is little evidence of these numbers being massaged.

As you can see from the CAICT monthly numbers, the Chinese market has been in steady decline since the start of the year and that decline seems to be accelerating. Chinese mobile phone shipments, which these days we assume to be almost synonymous with smartphones, were down 40% in March and almost 30% for the first quarter. On the plus side, three quarters of Chinese phone shipments now contain 5G chips.

Nearly two-and-a-half years since the start of the Covid pandemic, most countries have eventually realised a zero-Covid policy is not only futile but gratuitously self-harming. It’s fundamentally incompatible with international trade. But the Chinese Communist Party seems to feel it has too much political capital invested in the policy to change course. So long as this continues the Chinese and global economies will continue to suffer.

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