Chinese provinces splash handset subsidies to boost sales

After a couple years of flat or shrinking sales China's domestic handset market has rebounded strongly this year. Shipments rose 4% year-over-year in Q3, with 69.1 million units sold, according to Canalys (a sister company of Light Reading), which attributed it to summer sales and the back-to-school shopping season. Sales spiked 10% in Q2 and grew just 1% in Q1.

Now handset-makers are getting an assist from provincial governments in the form of retail subsidies – and analysts expect the subsidies will continue and expand.

Right now consumers in two provinces are getting discounts of up to 1,300 Chinese yuan (US$179) on their trade-ins for new phones, business news site Yicai reported.

Jiangsu, a wealthy eastern seaboard province, is handing out subsidies of up to 15% for seven types of devices and 20 different home appliances.

In Guizhou province similar rebates apply, with one customer reporting the purchase of a Huawei Pura70 for RMB4,600 ($633), more than 20% below the regular price.

Four other provinces have also begun subsidies for consumer electronics, although not yet including smartphones. Guangdong, for example, is offering a rebate of up to RMB1,000 ($137.60) for products such as tablets and smart wearables that are priced above RMB500 ($68.80).

Juicing consumption

These discounts have their source in a central government announcement in March aimed at driving "equipment updates and consumer goods trade-ins."

It's a way of juicing consumer spending and the bottom line of electronics manufacturers at a time when the economy is struggling with low growth and deflationary pressures.

The subsidy scheme has won praise from analysts, who expect it will be expanded significantly by early next year.

Citic Securities said in a research note it was optimistic that the subsidies would continue and would be extended to include mobile phones, AIoT devices and other categories by early next year.

Another brokerage, Tianfeng Securities, agreed the stimulus policies would release demand for consumer electronics.

Wang Jiping, an IDC China vice-president, told Yicai that with more than 1 billion mobile phones in the China market the replacement and subsidy program has plenty of upside.