China smartphone ASP and inventory hit highs in May, intensifying memory-cost pressure on demand

Overview

This report is Bernstein's monthly tracking of May data for the China smartphone market, focusing on high memory costs, historically high ASP, and inventory pressure. It is based on CINNO's China market sell-through data and compares it with CATR sell-in data to monitor channel inventory, while also tracking mobile SoC supplier share, price-band structure, and OLED and foldable penetration. The core conclusion is that although sales improved month over month in May, they remained significantly lower year over year; rapidly rising ASP and historically high Android inventory indicate that demand is being suppressed by price increases and cost pressure, while Apple is relatively advantaged due to more flexible pricing and healthy inventory.

Core views

The report believes that high memory costs are broadly suppressing the China smartphone market, particularly low- and mid-end models. Low-end models declined 38% YoY in May, mid-end models declined 17%, while high-end models showed greater resilience. Although a 24% YoY increase in ASP may improve the revenue mix in the short term, it could also suppress unit sales and limit further ASP upside. Android sell-in exceeded sell-through and inventory rose to 3.9 months, creating a dilemma of high inventory and low margins and resulting in less aggressive 618 discounts than in previous years. Apple cut the iPhone 17 Pro price significantly and increased its unit share by 6 points MoM during 618; Huawei's high-end segment was supported by the Pura 90, but SMIC N+3 and memory costs limited its room for a price war. Non-Apple/Huawei brands struggled to offset low-end losses in the flagship and sub-flagship segments, pressuring Qualcomm, MediaTek, and parts of the supply chain.

Analysis framework

The report uses a monthly sell-through and sell-in cross-validation framework: CINNO measures China smartphone end-market sales, while CATR sell-in and adjusted obsolescence factors are used to estimate channel inventory; the data is broken down by price band, OEM, SoC supplier, and display technology. The investment implications map changes in sales, ASP, inventory, and share to related assets including Apple, Huawei, MediaTek, Qualcomm, Novatek, Luxshare, Largan, Sunny Optical, Soitec, and Xiaomi.

Methodology notes

• Industry trackingSell-through versus sell-in comparison

  Identify channel inventory by comparing CINNO sell-through with CATR sell-in

  The report uses CINNO China smartphone end-market sales as a demand-side indicator and CATR sell-in data to help assess channel inventory; even after considering an approximately 5% potential obsolescence impact, it still found Android brand sell-in significantly above sell-through for two consecutive months.

• Price-band analysisSmartphone price segmentation

  Segmentation into low-end, mid-end, high-end, flagship, and sub-flagship price bands

  The report defines low-end as below RMB2,000, mid-end as RMB2,000-5,000, and high-end as above RMB5,000. It also focuses on flagships above RMB6,000 and sub-flagships priced at RMB4,000-5,999 to assess the effects of rising costs, consumer upgrades, and a potential Edge AI replacement cycle.

• Supply-chain share analysisSoC and display-technology penetration tracking

  Tracking mobile SoC supplier share and OLED and foldable penetration

  The report tracks unit shares of Qualcomm, MediaTek, HiSilicon, Apple, and UNISOC, as well as OLED and foldable penetration in China smartphones, to assess potential beneficiaries and areas of pressure across the semiconductor and hardware supply chains.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Apple

  Beneficiary

  Strengths

  Improved unit share through 618 promotions and more flexible pricing; iPhone sell-through and sell-in were relatively balanced, with healthy inventory; relatively advantaged high-end brand and pricing structure.

  Weaknesses

  The China high-end market still faces competition from Huawei and other Chinese OEMs, while weak overall smartphone demand may limit growth.

  Comparison

  Compared with the Android camp, Apple is better positioned to attack through structural pricing advantages; compared with Huawei, Apple is less constrained by SMIC N+3 and high memory costs.

  Risks

  If high ASP damages overall demand or feedback on Huawei's high-end new products improves, Apple's share recovery could slow.

• Huawei

  Competitor and industry variable

  Strengths

  The Pura 90 series drove models above RMB6,000 up 60% MoM and 33% YoY in May, supporting continued momentum in high-end share recovery.

  Weaknesses

  SMIC N+3 cost and performance disadvantages and high memory costs limit room for a price war; early feedback on new products was relatively moderate.

  Comparison

  It challenges Apple in the high-end segment, but structural chip disadvantages make its pricing and gross-margin elasticity weaker than Apple's.

  Risks

  If N+3 supply or consumer demand falls short of expectations, Huawei's high-end recovery may prove unsustainable.

• MediaTek

  Mobile SoC supplier

  Strengths

  The report maintains an Outperform rating; the ASIC/TPU revenue outlook can offset a decline in smartphone revenue, while the flagship SoC mix has improved slightly and overseas high-end models may provide mix upgrades.

  Weaknesses

  Its handset business has high exposure to mid- and low-end Android and is pressured by high memory prices and weak non-Apple/Huawei OEMs.

  Comparison

  Compared with Qualcomm, MediaTek's monthly share decline was smaller; however, both are affected by weakness among non-Apple/Huawei brands.

  Risks

  The sustainability of overseas high-end growth remains uncertain, and continued weakness in mid- and low-end demand would pressure the smartphone business.

• Qualcomm

  Mobile SoC supplier

  Strengths

  The data-center narrative provides potential support.

  Weaknesses

  Unit share declined 2.4 points MoM and 8.9 points YoY in May, suggesting that smartphone builds and earnings expectations may be too high.

  Comparison

  Its share decline was more pronounced than MediaTek's, mainly due to weaker sales and share among non-Apple/Huawei OEMs.

  Risks

  Weak handset demand and inventory adjustments may continue to pressure orders.

• Xiaomi

  Android OEM

  Strengths

  The share of models above RMB4,000 rose to 19% MoM, while the mid-end RMB2,000-4,000 share increased to 37%.

  Weaknesses

  May shipments declined 29% YoY, market share fell to 14.5%, and low-, mid-, and high-end segments all declined YoY.

  Comparison

  As Apple and Huawei compete more aggressively in the flagship and sub-flagship segments, Xiaomi and other non-Apple/Huawei OEMs will find it harder to offset low-end declines through premiumization.

  Risks

  Memory costs, price competition, and a product transition period may continue to pressure shipments and share.

• Novatek

  OLED DDIC supply chain

  Strengths

  Previously benefited from rising OLED penetration, with OLED helping it withstand Chinese competitors.

  Weaknesses

  OLED penetration is already approximately 90% and nearing saturation, while foldable penetration remains below 5% and is unlikely to increase significantly in the near term.

  Comparison

  Compared with the earlier phase of rising OLED penetration, future growth will depend more on share gains and feature integration than on natural industry penetration growth.

  Risks

  Catch-up by Chinese competitors, a peak in OLED penetration, and delayed foldable volume ramp-up.

• Luxshare and Largan

  Apple supply chain

  Strengths

  The report believes they will show greater resilience than Sunny Optical this year, benefiting from stronger Apple exposure and progress in AI-related products.

  Weaknesses

  They remain exposed to overall smartphone demand and component-cycle fluctuations.

  Comparison

  Compared with Sunny Optical, they have stronger Apple exposure and are less affected by Android pressure.

  Risks

  If Apple's share gains are not sustained or AI-related product progress is slower than expected, their resilience may weaken.

• Sunny Optical

  Optical-component supply chain

  Strengths

  The report's covered rating is Outperform and it lists a HK$94 target price.

  Weaknesses

  Compared with Luxshare and Largan, the report considers its resilience weaker this year, with greater exposure to weakness in the Android chain.

  Comparison

  Given the view that the Apple supply chain is relatively advantaged, Sunny Optical is less favored than suppliers with higher Apple exposure.

  Risks

  Continued Android shipment, ASP, and inventory pressure could weigh on demand.

• Soitec

  RF-SOI and Photonics-SOI supply chain

  Strengths

  The report maintains an Outperform rating, with the core narrative shifting toward Photonics-SOI as the next source of growth.

  Weaknesses

  RF-SOI accounts for approximately 60% of revenue and remains affected by foundry destocking pressure.

  Comparison

  Unlike direct smartphone OEMs, Soitec is more exposed to upstream destocking and technology-transition dynamics.

  Risks

  Prolonged RF-SOI destocking and slower-than-expected realization of Photonics-SOI growth.

Key data

• China smartphone sell-through in May17.3M unitsUp 5% MoM and down 20% YoY; cumulative 5M26 shipments declined 9% YoY.
• YoY performance by price bandLow-end -38%; mid-end -17%; high-end approximately -4.5% to -5%High memory costs had a more pronounced impact on low- and mid-end models, with the low-end shipment share falling to a historical low.
• May ASP change+24% YoY; +13% MoMDriven by a mix upgrade during 618, a lower low-end share, and price increases for the same models, but with a risk of damaging demand.
• Android inventory3.9 monthsAndroid brand sell-in was significantly above sell-through for two consecutive months, driving inventory to a historical high.
• Apple share change+6pts MoMApple cut the iPhone 17 Pro price by RMB1,000 during 618, taking the price below RMB7,000 for the first time and driving higher unit share MoM.
• Huawei high-end segment+60% MoM; +33% YoYModels above RMB6,000 were mainly driven by the Pura 90 series, although early feedback was relatively moderate.
• Non-Apple/Huawei OEMsAggregate May shipments -32% YoY; share -9.5pts YoYPrimarily dragged down by low-end model declines; flagship and sub-flagship models also failed to offset low-end losses.
• Non-Apple/Huawei sub-flagshipsShipments -35% YoY, representing 17% of their total shipmentsApple and Huawei were more aggressive during 618, making mid- to high-end expansion more difficult for other OEMs.
• Non-Apple/Huawei flagshipsShipments -39% YoY, approximately 5% of total shipmentsFlagship share was slightly lower YoY, limiting room for improvement in the revenue mix.
• Xiaomi market share14.5%Below 14.6% in April 2026 and 16.1% in May 2025; May shipments declined 29% YoY.
• Qualcomm and MediaTek unit shareQualcomm -2.4pts MoM; MediaTek -0.2pts MoMMainly due to weak sales from non-Apple/Huawei OEMs; YoY, Qualcomm declined 8.9pts and MediaTek declined 0.5pts.
• OLED penetrationApproximately 90%OLED has become a mainstream feature, leaving limited room for further penetration gains.
• Foldable penetrationBelow 5%The report expects limited significant improvement in penetration before a possible iPhone Foldable launch at the end of 2026.

Impact & implications

From an investment perspective, the report favors Apple and the relative resilience of Apple's supply chain, while remaining cautious on smartphone supply chains with high exposure to low- and mid-end Android. High memory costs and price increases will suppress end-market demand and may transmit OEM inventory pressure to contract manufacturers, component makers, and upstream suppliers in 2H26 and 1H27. MediaTek's ASIC/TPU revenue can offset part of the smartphone pressure, but its handset business remains exposed to the mid- and low-end segments; Qualcomm is affected by weakness among non-Apple/Huawei brands, creating pressure on handset builds and earnings expectations. Novatek benefits from historically rising OLED penetration, but as OLED approaches saturation, it will need to rely on higher Apple/Samsung share and touch integration to sustain growth.

Risks

• Continued high memory costs push up end-market prices, damaging demand and suppressing smartphone shipments.
• Android inventory remains at a historical high; if sell-through does not improve, larger discounts, order cuts, or supply-chain destocking may follow.
• Intensifying competition between Apple and Huawei in the high-end and sub-flagship segments may squeeze the premiumization opportunities of other Chinese OEMs.
• Huawei's high-end recovery may weaken if it faces SMIC N+3 cost, performance, and supply constraints and receives poor feedback on new products.
• OLED penetration is nearing saturation, potentially slowing incremental gains for Novatek and related suppliers from higher penetration.
• Foldable penetration remains below 5%; if the iPhone Foldable launch or demand falls short of expectations, related hardware growth may be delayed.
• Weakness among non-Apple/Huawei OEMs may continue to weigh on Qualcomm, MediaTek, and Android supply-chain orders.

What to watch

• Whether China smartphone sell-through recovers from the May low of 17.3M units and -20% YoY in subsequent months.
• Whether ASP normalizes MoM after 618 and whether the elevated YoY level continues to suppress sales.
• Whether the Android sell-in/sell-through gap narrows and whether 3.9-month inventory begins to decline.
• Whether Apple's share gains after the price cut continue and whether iPhone inventory remains healthy.
• The supply health and consumer feedback for Huawei's Pura 90 series, Kirin 9030, and SMIC N+3.
• Whether non-Apple/Huawei brands can improve share in the RMB4,000-plus sub-flagship and RMB6,000-plus flagship segments.
• Changes in the unit shares of Qualcomm, MediaTek, HiSilicon, Apple, and UNISOC in China's smartphone SoC market.
• Whether OLED penetration remains at an approximately 90% plateau and whether foldable penetration shows a material improvement before the end of 2026.
• Whether upstream contract manufacturers, component makers, and semiconductor suppliers begin to reflect pressure in 2H26 and 1H27 following the earlier inventory-driven pull-forward.