Shares across the mobile phone supply chain experienced a significant sell-off. At the time of writing, Hua Hong Semiconductor Ltd (01347) was down 7.85% at HK$133.9. ZTE Corporation (00763) fell 7.42% to HK$27.46. FIH Mobile Ltd (02038) dropped 7.04% to HK$24.28. Lens Technology Co., Ltd. (06613) declined 6.94% to HK$25.46, and Q Technology (Group) Company Limited (01478) was down 6.7% at HK$8.63.

Market Drivers and Research Insights

Recent research findings indicate that in the first quarter of 2026, smartphone sales in the Chinese market reached 70.68 million units, representing a year-on-year decrease of 6% and a sequential quarter-on-quarter decline of 5%. The primary factors behind this downturn are a shortage of memory components coupled with price increases of 10% to 30% for new models. This has led consumers to extend their device replacement cycles to over 36 months. Some essential demand was pulled forward and concentrated in March 2026 ahead of the price hikes, creating a negative cycle of "demand front-loading and subsequent sales exhaustion." It is anticipated that domestic market sales may continue their downward trend from the second through the fourth quarter of 2026.

Analyst Outlook and Forecast Revisions

Analysts note that rising memory prices are likely to continue putting pressure on smartphone profit margins, particularly for companies with already low profitability. With some subsidy-driven demand having been pulled forward, the outlook for the overall smartphone market in 2026 is now more cautious than previously. Consequently, the full-year smartphone sales forecast has been revised downward to a projected decline of 14% year-on-year.