Smartphone shipments in China reached 131.6 million units in the fourth quarter of 2016, accounting for nearly a third of worldwide shipments, according to Canalys.

Smartphone shipments in China for the fourth quarter of 2016 were also the quarterly highest in the history, said Canalys. Shipments for all of the year came to 476.5 million units, rising 11.4% from 2015 levels.

Huawei shipments of 76.2 million units took the top spot in China's smartphone market in 2016, followed by Oppo with 73.2 million units and Vivo with 63.2 million, Canalys indicated. "In 2016, the top three brands were competing with new product launches, go-to-market strategies and brand building," said Canalys research analyst Jessie Ding. "Also, their flagship products started to contribute to a much larger part of their total shipments and created a halo effect for the rest of the portfolio, like Samsung and Apple."

While Apple, Samsung and Xiaomi are all in the process of adjusting their strategies in China, Huawei took the opportunity to consolidate its position in the tier-1 and -2 cities. Ding noted. Meanwhile, Huawei began "attacking Oppo and Vivo's backyard in the tier-three and tier-four cities," while Oppo and Vivo started to move upscale to target consumers in the tier-1 and -2 cities through heavy investments in branding, Ding said.

In 2017, competition between Huawei, Oppo and Vivo will become much more intense, while their increasing scale and bargaining power within the industry will have a larger impact on device strategies of operators and open channel partners, Ding identified. "This will leave very little room for smaller brands to increase share. Moreover, among these three vendors, it will be difficult for one of them to capture more than 20.0% market share and be a clear leader under current competitive conditions," Ding said.

Xiaomi became number four in the China smartphone market in 2016, while Apple fell to fifth place, according to Canalys. Xiaomi shipped a total of 51.4 million smartphones with a 21% on-year decline, while its market share decreased from 15.2% in 2015 to 10.7% in 2016, the lowest since 2013.

Apple shipped 43.8 million iPhones in China in 2016, down 18.2% on year. "China and Hong Kong are still the hardest-hit areas in Apple's global top-10 market. This directly led to a 7.0% decline in global shipments compared to 2015," Ding said. "This year, the outlook remains bleak for Apple to get its China performance back to its heyday of 2015. As with consumers in other developed markets, China's consumers are awaiting the 10th anniversary of the iPhone with very high expectations."