India, China and Global mobile phone market during Q4 2016 (Oct-Dec) and for entire CY 2016

India Smartphone User Base Tops 300 Million as Smartphone Market Grew 18% YoY in 2016

Chinese brands vivo, OPPO and Lenovo, Xiaomi dominated the Indian smartphone market during the holiday season.

• The shipments clocked 262 million units of which Smartphones accounted for 113 million (43%) and the remaining 149 million were Feature-phones.

• The smartphone shipments in India grew a healthy 18% annually in CY 2016 compared to the global smartphone market which grew a modest 3%

• Chinese brands contributing to 46% of the total smartphone market

• For the first time no Indian brand figured among the top 5 smartphone rankings

Market Summary

• Mobile phone shipments declined 17% QoQ during Q4 2016.• Feature Phone shipments grew 4% YoY as the feature phone to smartphone transition slowed in the

second half of 2016 due to the strength of ultra-low cost brands, such as iTel• More than 83 million smartphones in 2016 were “Made in India”• In Q4 2016, 3 out of 4 smartphones were manufactured domestically• More than 7 out of 10 smartphones shipped in India were LTE capable• Apple achieved a landmark, crossing 2.5 Million units in a calendar year, with a 1/3 of its total shipment

coming alone from the record fourth quarter driven by seasonality and the launch of iPhone 7• Apple captured 10th position in the smartphone rankings during Q4 2016 but led the premium segment

(above US$450) with 62% market share• Chinese brands raced to capture a combined 46% of the total smartphone shipment in Q4 2016, up from

14% a year ago. Furthermore, November 2016 saw Chinese brand share reach an all-time high, accounting for 51% of the total smartphone market.

• Furthermore, November 2016 saw Chinese brand share reach an all-time high, accounting for 51% of the total smartphone market.

• Chinese brands OPPO, vivo, Lenovo and Xiaomi continued to grow at the expense of Samsung and Indian brands

• One in three smartphones sold during the quarter were through ecommerce channels, a segment which grew 24% in CY 2016

• Local brands’ target customers typically buy in cash and from independent retailers. With the short-term liquidity crunch caused by demonetization, these retailers are suffering a slowdown in consumer spending. Local vendors are losing out as retailers look to shift their stock to fast-moving, current devices,” said Canalys Analyst Rushabh Doshi. “In Q4 2015, Micromax, Intex and Lava took second, third and fifth place, accounting for almost 30% of the market. One year on and all three vendors have dropped out of the top five, with their collective share falling to around 11%.

Global mobile handset hardware segment generated USD 10.2 Billion in operating profits during Q3 2016 However, this was down 19% YoY as a result of the world’s leading

smartphone brand Samsung saw almost USD 3 Billion operating profit being wiped out due to the Galaxy Note7 debacle

The game of profits has always been between Apple and Samsung because of its strong presence premium segment and vertical integrated business model

India Smartphone Shipments Market Share in 2016 and 4Q 2016

Samsung 25%Micromax 11%Lenovo 9%Intex 7%Reliance Jio 6%Others 42%Total 100%

India Smartphone Shipments Market Share (%) 2016

Samsung 24%Vivo 10%Xiaomi 9%Lenovo 9%Oppo 8%Others 40%Total 100%

India Smartphone Shipments Market Share (%) 2016q4

Chinese brands share over the quarters

65% Growth in the market share growing from 14% in 2015 q4 to a high of 46% in 2016 q4

Concluding remarks• India will be a critical market in the coming years for

OEMs with the already saturating China market • Feature phones will not be shelved away soon• Slow transition from feature phones to Smartphones• Smartphone base to rise from 300 mln in Q4 2016 to

420 Mln in Q4 2017 and 560 Mln by 2020• The ever falling ASPs of smartphones is the reason for

the increase in smartphone base• Indian OEMs- Micromax, Lava, Karbonn, Intex are sure

to feel the heat with Chinese makers expanding their offline reach

• India will remain a phablet market in the years to come

China market- China Smartphone Shipments Reached an All-Time High in 2016

• China smartphone market grew a healthy 6% annually in 2016 defying global slowdown with a strong second half, driven by emergence of Oppo, Vivo and Huawei capturing almost half of the Chinese smartphone market

• The demand for smartphones in China remained healthy during Q4 2016 (Oct-Dec) as the smartphone shipments were up 12% annually and 9% sequentially driving the full year growth and record volumes. The competitive and crowded environment brings about constant shifts in top players in China’s smartphone market

• Huawei, Oppo & vivo (HOV) emerged as clear winners in 2016, with Oppo, Vivo registering significant growth

• Only five brands registered healthy growth during the full year 2016• Oppo, Huawei, vivo, Meizu and Gionee drove the majority of the volume,

capturing a combined 58% of the total Chinese smartphone market in 2016

• Demand for rest of the brands declined, especially last year’s star performers Xiaomi and Apple with lower-than-expected demand for their smartphones during the year

% Smartphone Shipment Annual Growth for Full Year 2016 vs 2015

“The Chinese smartphone market saw a continuous rise in shipments as OEMs also began to fill channels ahead of the Chinese New Year season. In terms of features, key focus remained on proliferation of

smartphones with fingerprint sensors, 4G+/VoLTE ready, fast-charging, OLED displays, battery. adoption of dual-rear-cameras and higher megapixel front-camera for selfies

China Smartphone Shipments Market Share (%) 2015Q4 2016Q4Oppo 9.4% 18.3%Huawei 15.4% 17.1%vivo 9.6% 14.5%Apple 14.9% 12.2%Xiaomi 15.5% 9.9%Samsung 6.8% 5.5%Others 28.5% 22.4%Total 100.0% 100.0%

China Smartphone Shipments Market Share (%) 2015 2016Huawei 14.3% 16.4%Oppo 7.8% 15.5%vivo 8.4% 13.9%Xiaomi 14.9% 10.9%Apple 14.3% 10.4%Samsung 7.7% 6.9%Others 32.6% 26.0%Total 100.0% 100.0%

Vendor performance• Huawei was the leading vendor for the full year with strong demand not only for its affordable Honor

branded smartphones but also healthy demand for flagship P and Mate series. Huawei has gained a foothold in the premium market with the successful release of P9 and Mate 8 and will continue to put more emphasis in the premium market going forward challenging Apple

• In 2017, we expect Huawei to bear the fruit of its offline channel expansion strategy started in late 2015 to cover 1,000 provinces by the end of the year

• Oppo & vivo were the fastest growing brand and since June 2016 we have seen phenomenal growth for both the brands owing to strong omnipresent distribution channels from tier-1 to tier-4 cities across China, aggressive ATL and BTL marketing, effective retail-level promotions for both trade and consumers and effective positioning with focus on key features such as camera, battery life and audio within their smartphones

• Though, Oppo has been leading the quarterly rankings ahead of rival Huawei in the second half of 2016

• 2017 will be an exciting year and will be a close race between these top three brands which together controls almost half of the Chinese smartphone market as they try to out-innovate and out-market each other.”

• Xiaomi, the most talked about vendor last year, slipped to fourth spot during the year as the demand for its smartphones declined 22% annually

• The key reason for this decline was its rivals racing ahead with key features, innovation, bigger marketing budgets and wider online and offline distribution channel during the year

• Thus, most of the demand for Xiaomi remained across its cheaper sub US$150 Redmi series models than any of the halo flagship devices. Furthermore, Xiaomi’s online sales model has been hitting a ceiling. Thus, Xiaomi is looking to expand its offline presence by opening more than 200 Mi Home Stores in 2017 on top of the 54 Mi Home Stores currently. However, we believe that this pace will not be of much help in boosting Xiaomi’s offline presence in 2017

• Whereas, Apple with slowing traction for its flagship iPhone 6S during the year saw its double digit negative growth being somewhat offset by relatively healthy demand for the newer flagship iPhone 7 series in Q4 2016.

• However, Apple still remains in a vulnerable position and there is higher expectation already with the next year flagship which is rumored to be substantial upgrade from both design and components perspective

Best-Selling Smartphone Models Share in 2016

Ranking Best-Selling Models in 2016 % Market Share*1 OPPO R9 4%

2 Apple iPhone 6S 2%3 Huawei HONOR Joy 5S 2%4 OPPO A33 2%5 MI Redmi Note 3 2%6 LeEco Le2 2%7 vivo Y51 2%8 Apple iPhone 6S Plus 1%9 vivo X7 1%

10 Huawei Mate8 1%11 OPPO R9 Plus 1%12 Huawei P9 1%13 MI Redmi 3S 1%14 MI Redmi 3 1%15 OPPO A59 1%16 Apple iPhone 7 1%17 MI 5 1%18 OPPO A37 1%19 Meizu Blue Note 3 1%20 Apple iPhone 7 Plus 1%

Finer points• More than 500 smartphone models were active during the year

contributing meaningfully to the overall volumes. However, only the top 20 models contributed to roughly a third of the total market share 

• While the smartphone user base is at an all-time-high and maturing, still bulk of the popular models are still skewed towards mid-end which outs a cap on growth for players such as Apple. Looking at the OEMs’ overall rankings, there is no surprise that Oppo, Huawei, vivo and Apple dominate the best seller rankings. Though, Oppo R9 rose to the best-selling smartphone in China in 2016 breaking Apple’s iPhone dominance streak as the best-seller for the first time since 2012

• Oppo had five models in the top 20 rankings, followed by Apple and Xiaomi with four each and Huawei with three and vivo with two. In terms of premium segment, Apple with iPhone 7 and 6s and Huawei with Mate 8 and P9 dominate. In high-end, its Oppo and vivo dominating whereas the mid-tier is dominated by Xiaomi and Oppo. LeEco Le 2 and Meizu Note 3 were the key models which drove volumes for these brands respectively in 2016

Global LTE Smartphone Shipments Crossed One Billion units in CY 2016

Global• Apple registered a record Q4 2016 surpassing

Samsung in Global Smartphone volumes but Samsung led the market for the full year 2016.

• Overall Smartphone shipments reached an all-time high crossing 1.5 billion units in CY 2016.

• Huawei, Oppo and Vivo crossed 300 million units shipments combined in CY 2016

• China smartphone shipments reached an all-time high of 465 million units in 2016, contributing to almost a third of the global smartphone shipments.

The global smartphone shipments grew 3% annually in CY 2016

• The global smartphone shipments grew 3% annually in CY 2016. However, in Q4 2016 smartphone shipments reached the record 440 Million units with a YoY growth of 9% as a result of strong holiday sales thereby lifting up the full year shipment growth.

• 2016 was the inflection point for LTE as a technology as it scaled down to lower price points (sub – USD 75).LTE adoption was much faster compared to any other previous cellular technologies as the total LTE smartphone demand crossed a billion units in 2016. China is leading in terms of LTE subscriptions share globally by contributing to almost half of the total worldwide LTE subscriptions. Going forward we estimate LTE to be a dominant technology for mass market adoption with Gigabit LTE to start providing the foundation next year for premium high speed mobile broadband before the 5G rollout takes over by 2022.”

• The global smartphone market grew by a modest 3% YoY in CY 2016 with major brands such as Apple and Samsung seeing an annual decline in growth. However, the bulk of the growth was driven by three major Chinese brands -Huawei, Oppo and vivo which combined grew a healthy 57% YoY shipping more than 300 million units globally. Furthermore, Chinese brands continued to expand into newer geographies beyond China. As a result, most of the leading Chinese brands registered a healthy growth in 2016.”

• Market Summary• Smartphone shipments reached 1512 million units in CY 2016 with 4 out 5 smartphones shipped was LTE

enabled. In Q4 2016 alone, 440 million units of smartphones were shipped.• Almost 80% of the mobile phones shipped are now smartphones.• Top 10 brands contribute to almost 75% of the smartphone volumes in CY 2016.• Top 10 countries contribute to more than two-thirds of the total smartphone shipments in CY 2016 with USA,

China and India alone contributed to almost 50% of the total smartphone shipments.• Chinese brands had a record 2016 as China smartphone shipments reached an all-time high in 2016.

Moreover, most of these brands have been successful in expanding overseas in 2016.• Oppo, Huawei, vivo, Meizu and Gionee drove the majority of the volume, capturing a combined 58% of the

total Chinese smartphone market in 2016• The other key brands which drove growth during the year were Tecno & iTel in Africa, QMobile in Pakistan,

Symphony in Bangladesh, Wiko in Europe, Innjoo in Middle East and so forth

OEM Performance Insights• Samsung led the smartphone market by volume with a market share of 21% in CY 2016. Its smartphone

shipments declined 4% YoY registering 310 million units during the year• Apple had a record quarter shipping 78.3 million iPhones in all important holiday season, surpassing Samsung

in overall smartphone market share• Apple iPhone ASP hit an all-time high of $695, driven mostly by strong sales of iPhone 7 Plus• Huawei shipments reached record 139 million units with 28% YoY growth in CY2016. However, in past couple

of quarters it is being challenged by Oppo and vivo in China. Demand for Huawei smartphones remain healthy in China and Europe but needs to expand in other growing Asian markets and important North American region

• Huawei’s smartphone market share surpassed 10% in Q4 2016 for the first time ever• Huawei has gained a foothold in the premium market with the successful release of P9 and Mate 8 and will

continue to put more emphasis in the premium market going forward challenging Apple• Oppo and vivo grew 112% and 78% YoY reaching 93 and 72 million units in CY 2016• Oppo & vivo were the fastest growing brands and in second half of 2016 we have seen phenomenal growth for

both the brands owing to strong omnipresent distribution channels from tier-1 to tier-4 cities across China• As both the brands continue to expand internationally a target of 100 million units looks very realistic in CY

2017• Xiaomi, the most talked about vendor last year, slipped to seventh spot globally during the year as the

demand for its smartphones declined 16% annually. The key reason for this decline was its rivals racing ahead with key features, innovation, bigger marketing budgets and wider online and offline distribution channel during the year and inability to ramp up international presence other than India where it is performing well

• LG, Alcatel and Lenovo declined YoY but still remains among top 10 smartphone brands globally as gap between other brands outside top 10 is still significant

• ZTE grew 5% YoY reaching 62 million shipments in CY 2016 as it expands in European and other emerging markets

Global Smartphone Shipments Volume Share (%)

Exhibit 1: Global Smartphone Shipments Volume Share (%)

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