It had to happen sometime, and all the signs pointed to 2017 as that time. Chinese smartphone shipments fell by 4% year over year in 2017, after dropping 3% in the second quarter and 5% in the third quarter. Fourth-quarter shipments tumbled 14% year over year.

For the full year, shipments in the Middle Kingdom declined by 4%, the first year-over-year drop ever according to U.K.-based technology market analyst firm Canalys. Full-year shipments totaled 459 million units, compared to a total of 476.5 million units in 2016.

Apple Inc. (NASDAQ: AAPL), which dropped to fifth place in Chinese shipments in 2016, recovered to close the quarter in fourth place behind Huawei, Oppo and Vivo. Apple shipped 13 million units in the fourth quarter.

Counterintuitively, perhaps, some vendors posted sales gains in the fourth quarter and even for the full year. Top-selling vendor Huawei shipped more than 24 million units in the fourth quarter, its best quarter ever, and a record-setting 90 million units for the whole year. Both Oppo and Vivo posted double-digit gains in 2017.

Canalys research analyst Hattie He said:

The declining Chinese market will have a detrimental impact on those Chinese vendors that have been heavily relying on their home market. It will affect their cashflow and profitability, limiting overseas expansion and bringing into question future survival. The threat to vendors such as Gionee and Meizu is now closer than ever. There is little room left for the smaller vendors. The leading players will make aggressive plans to maintain or grow their market share. We can expect a major market shake-up in China in 2018.

The following chart from Canalys shows the growth of smartphone shipments to China beginning in 2009.

 

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