The third quarter of 2024 witnessed an upward trend in China's smartphone market, with a total shipment of approximately 68.78 million units, marking a modest 3.2% year-on-year growthWhat is particularly noteworthy is that this development signifies a sustained increase for four consecutive quarters, indicating a robust market demand buoyed by a new wave of device upgrades.

As we transitioned into the fourth quarter, major smartphone manufacturers such as Huawei, Xiaomi, Vivo, OPPO, and Honor have been on a release spree, unveiling flagship AI-powered smartphones that signal a strong recovery in the marketThese new releases are part of a strategic push by companies to revitalize their offerings and meet the escalating consumer demand for innovation.

Among the much-anticipated launches is Huawei's Mate 70 series, set to debut on November 26. This series is expected to incorporate cutting-edge AI imaging capabilities alongside a plethora of other innovative functions

Analyst reports from Citic Construction Investment highlight the excitement surrounding the Mate 70 series, as both its software and hardware upgrades are expected to generate considerable sales post-launch.

In line with these advancements, Huawei's vice chairman, Xu Zhijun, expressed hopes earlier this year for the Mate 70 series to feature the "pure blood Harmony" operating system upon its release—something that would position Huawei firmly in the increasingly competitive landscape of software innovation.

As of the third quarter, Huawei maintained a 15.3% market share in China, ranking third overall and achieving double-digit growth for four straight quartersDespite a limited number of new products, Huawei cleverly captured the largest share of the market for smartphones priced between 4000 to 8000 yuan thanks to aggressive promotional strategies.

On October 22, Huawei launched the nova 13 series, which incorporates multiple AI technologies

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Data reveals that shipments of its flagship models surged by an impressive 71% year-on-year during the first three quarters of the yearAnalysts at Debon Securities foresee that with Huawei's ongoing launches, including its foldable smartphones and the nova 13, its sales performance will likely soar further.

Observations from Securities Firm Lianhe suggest that Huawei’s resurgence in smartphone sales—combined with the introduction of innovative technologies such as foldable screens and native HarmonyOS—has generated a “catfish effect,” fostering healthy competition among domestic brandsThis competitive spirit not only helps in generating new devices but also elevates public recognition of local brands, promising a sustained upward trajectory for their market share.

In a flurry of releases, other brands including Xiaomi, Honor, OPPO, and Vivo have also contributed to this revitalization

The latest flagship devices—the Xiaomi 15 series, Honor Magic 7 series, OPPO Find X8 series, OnePlus 13 series, and Vivo X200 series—showcase advancements in AI technology and improved user experiences that can entice even the most discerning consumers.

Recent data from various manufacturers indicate that the sales figures for these new products are promisingHonor’s CEO Zhao Ming recently announced that the Honor Magic 7 series broke the company’s record for sales on a new product's first daySimilarly, Vivo's new X200 and X200 Pro models generated over 2 billion yuan in sales just on their opening day, achieving 200% of the X100 series’ sales in the same timeframe.

On October 29, Xiaomi unveiled its Xiaomi 15 series, and just ten days later, company president Lu Weibing reported that sales had already surpassed 1 million units, with this new series outperforming its predecessor, the Xiaomi 14, in terms of speed to milestone.

Research from Counterpoint reveals that as of August, the global shipments of the Xiaomi 14 series exceeded 6 million units

Given its competitive pricing structure paired with high-spec features, the Xiaomi 15 series illustrates the company's ambition to position itself against high-end devices like the iPhoneThis tempest of flagship releases from domestic brands is undoubtedly intensifying competition within the premium smartphone segment.

Artificial intelligence is playing a pivotal role in enhancing smartphone user experiences, which is increasingly critical as the industry regains its footingChina Galaxy Securities argues that the comprehensive market growth has been stunted by prolonged upgrade cycles, leading to a pressing need for transformative solutionsThey predict that the future growth of smartphones will primarily hinge on two factors: foldable technology and artificial intelligenceThis dual engine of innovation is set to ignite a new wave of device upgrades, marking a significant revolution for the smartphone industry.

Counterpoint further asserts that breakthroughs in generative AI are opening new avenues for smartphone brands to deliver an unprecedentedly intuitive and natural user experience, potentially lifting them into the upper echelons of the high-end market.

On October 28, Apple began rolling out iOS 18.1, providing early users with access to various smart functionalities

In the wake of this AI wave, many Android manufacturers, including Xiaomi, OPPO, Vivo, and Honor, are eager to implement plans for deploying large-scale AI models on mobile devices, heralding 2024 as the "year of edge AI." This trend is expected to accelerate the integration of AI capabilities across devices.

Xiaomi's latest operating system, Surge OS 2, launched on October 29, features transformative applications such as AI writing capabilities, voice recognition, and subtitle generationThe company’s voice assistant, previously known as Xiao Ai, has evolved into “Super Xiao Ai,” now boasting features such as task management, accurate searching, and cross-device operationsOn October 30, Honor also released its Magic 7 series, which includes an AI companion named YOYO capable of learning user habits and executing tasks based on analyzed intentions.

State-owned International Investment Securities indicates that following Apple’s lead, Android brands are rapidly adopting AI strategies

These smart assistants are poised to significantly boost user experiences, thereby improving sales across the board.

According to Canalys analyst Zhong Xiaolei, brands like Huawei, Vivo, Honor, and OPPO are venturing into a new phase of AI interaction and market educationThese AI-enhanced operating systems and various AI assistants aim to elevate consumer experiences, thus stimulating upgrade demandsThe establishment of a broader AI ecosystem is well underway, and before Apple solidifies its presence in the Chinese market, local brands are set to accelerate their AI smartphone developments, which will likely lead to heightened competition in the high-end flagship market come the fourth quarter.

With significant shifts towards premium sales, Counterpoint highlights that Apple and Samsung are fortifying their high-end positioning through features like Apple Smart and Galaxy AI.

Shanghai Securities analyst Ma Yongzheng anticipates that the introduction of AI-equipped smartphones will further stimulate demand for high-end devices, predicted to capture a larger segment of future sales

Chief technology analyst Shen Dai of Pu Yin International notes two favorable trends in the smartphone industry: an increase in the proportion of high-end devices coupled with AI driving enhancements in hardware specifications.

Recent reports from Zhongyuan Securities state that with flagship models like the Huawei Mate 70 series and Apple iPhone 16 series entering mass production, the industry is experiencing a seasonal upswing in activityThe latter half of the year traditionally marks peak operating seasons, and with ongoing innovation cycles, smartphone shipments are expected to see continued growthAI innovations and enhancements in high-end features may result in elevated average prices and improved profit margins on products.

Brands are keenly targeting the high-end smartphone market, motivated by rapid growth within this segmentData from Counterpoint shows that the growth rate for the high-end smartphone market in China has outpaced that of the overall smartphone market

In the first half of 2024, sales revenue in the high-end market, defined as smartphones priced over $600, increased by 8% year-on-year, compared to the broader smartphone market's modest 4% growth.

According to IDC, the average price of smartphones in China has noticeably increased compared to last year, not just due to ascending upstream costs but also because more consumers are willing to invest in higher-priced devicesThe steady recovery of Huawei's shipments is driving growth within the premium smartphone sectorIn the third quarter, the market share for high-end smartphones in China, priced over $600, reached 29.3%, an increase of 3.7 percentage points compared to the previous period.

IDG’s senior analyst Guo Tianxiang notes a steady recovery in the Chinese smartphone market since the last quarter of the previous year, where upgrade demands are gradually being realized.