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China’s consumer electronics sector is seeing significant growth due to technological innovation and favorable policy support to boost consumption, executives and company executives said.

Since February, China’s consumer electronics sector has seen its industry index rise 11.7 percent, Shenwan Hongyuan Securities said.

E-commerce platform Tmall also reported a rise in sales between January 20 and February 9. Smartphone transactions increased by over 41 per cent, tablets by over 72 per cent and smartwatches/bands by over 60 per cent compared to last month.

Experts said the recovery in demand for consumer electronics has been driven by a combination of supportive government policies and technological advances.

The Electronics Department of the Ministry of Industry and Information Technology said in an interview with China Daily that: “China’s stable supply chain, improving global demand and strong policy support have solidified its position as the world’s largest producer of consumer electronics. Moving forward, the industry is ready to capitalize on the opportunities brought by next-generation artificial intelligence, accelerating the adoption of new technologies and products while enhancing the resiliency and security of the supply chain.”

One of the highlights of this year’s policy initiatives is the introduction of subsidies for the purchase of new digital products such as smartphones and tablets. During the Spring Festival period (January 28 to February 4), national smartphone sales revenue increased by nearly 182 percent, with more than 4.5 million digital products sold. The National Development and Reform Commission said that sales of these products accounted for 45 percent of the total revenue generated from the trade-in program.

The revival of the consumer market has also promoted growth in upstream supply chains, creating new opportunities for related sectors. By the end of 2024, there were 1.79 billion mobile phone users in China. Experts said if 10 percent of these users participate in the trade-in subsidy program, it could generate a market size of hundreds of billions of yuan for smartphone replacements.

According to the latest data from the China Academy of Information and Communications Technology and global market research firm Omdia, domestic smartphone shipments are expected to reach 314 million units in 2024, a year-on-year increase of 8.7 percent. Notably, Chinese manufacturers account for nearly 60 percent of global foldable smartphone shipments, underscoring the country’s growing influence in the global consumer electronics market.

Companies in the consumer electronics supply chain are taking advantage of these policy opportunities to accelerate product upgrades. For example, Sichuan Changhong Electric Co., Ltd.’s intelligent manufacturing industrial park in Mianyang, Sichuan Province has increased its annual production capacity to 6 million units, reducing delivery times by more than 50 percent.

Zhu Xuewen, head of Changhong Meiling’s China marketing division, said: “The 2025 subsidy policy is driving the market towards high-end, intelligent and green products. Enterprises are focusing on green supply chain, government-enterprise subsidies and technological innovation to capture new market opportunities.”

Similarly, Hu Baishan, Executive Vice President and Chief Operating Officer of Vivo, emphasized that consumers are demanding better performance, quality and innovative features. Vivo is investing heavily in areas like battery life, communications, performance and AI to meet these needs across different price segments.

The recovery of the industry is also reflected in its financial performance. As of February 20, 47 A-share listed consumer electronics companies had released their 2024 earnings forecasts. Of them, 24 companies reported a year-on-year rise in net profit in the fourth quarter, while seven are expected to rise by more than 100 percent.

Ma Beibei, director of the electronic manufacturing research office at the China Center for Information Industry Development, said consumer electronics products, which directly serve end users, have a significant impact on upstream and midstream industries. The trade-in policy has not only boosted sales of products such as TVs, computers and smartphones but also market expansion and technological upgradation for related components.

From foldable smartphones to AI-powered devices, Chinese consumer electronics companies are leading innovation. In 2024, the global foldable smartphone market was dominated by Chinese manufacturers, accounting for nearly 60 percent of shipments. Additionally, data from research companies Omdia and International Data Corp shows that Chinese brands occupied eight of the top 10 spots in the global smart robot vacuum cleaner market in the third quarter of 2024, with a combined market share of more than 60 percent.

The rapid adoption of AI technology is expected to open up further opportunities in the supply chain. Ma of the China Center for Information Industry Development highlighted that AI-powered terminals, including smartphones, computers and even AI glasses, are gaining popularity. In the future, AI is expected to find applications in humanoid robots, smart home devices, and more.

The recovery in the smartphone sector, with its extensive supply chain encompassing thousands of components and parts, not only reflects reviving consumer demand but also creates new growth opportunities for upstream suppliers.

According to Kaiyuan Securities, a combination of AI-driven smartphone upgrades and government incentives are expected to drive significant growth in domestic smartphone sales in 2025. This, in turn, is likely to increase the performance of upstream component and chip manufacturers, especially when operational utilization rates are considered.

Lens Technology, a key player in the consumer electronics supply chain, highlighted that the inclusion of smartphones in the trade-in subsidy program by the government has created a synergy between policy incentives and product cycle. This is expected to effectively ignite market enthusiasm and present new growth opportunities for the consumer electronics industry. Lens Technology intends to take advantage of this wave of innovation.

In a recent earnings call on Feb. 12, Zhao Haijun, co-CEO of leading semiconductor maker Semiconductor Manufacturing International Corp., said the national consumption stimulus policy has generated a strong desire among customers to replenish inventories. This resulted in a surge in urgent orders in the consumer electronics, internet and smartphone sectors, turning a traditionally slow first quarter into an unexpectedly strong one.

However, some industry insiders warn that the impact of the subsidy policy on upstream supply chains may take time to be fully realized. The subsidies, available in most areas through December 31, 2025, are allocated on a first-come, first-served basis, with an overall cap on funding.

Despite positive short-term effects, there are concerns about the long-term efficacy of the subsidy policy. Qi Yingnan, an independent industry analyst, believes that while subsidies aid the shift from traditional to AI smartphones, the strategy remains a short-term market stimulus. Although this may lead to a temporary increase in replacement demand, especially with sales growth in the first half of 2025, consumer habits and product choices are ultimately driven by individual needs and product innovation.

Despite the challenges, experts believe China’s consumer electronics sector is well-positioned to maintain its global leadership due to its extensive supply chain, innovative enterprises, huge market size and ongoing policy support.

Looking ahead, MIIT said China will take advantage of the opportunities presented by next-generation AI, strengthen R&D in new technologies and products, and promote the construction of new ecosystems. By enhancing the quality of innovative and user-friendly consumer electronics, China aims to penetrate both domestic and international markets while enhancing its global competitiveness.

MIIT’s Department of Electronics said, “At the same time, we will continue to strengthen cooperation in the entire supply chain, improve resource allocation and utilization efficiency, and enhance the resilience and security of the industrial chain. This will provide a solid foundation for the high-quality and sustainable development of the consumer electronics sector.”

masi@chinadaily.com.cn