(Yicai Global) March 21 -- Chinese phonemakers are repositioning to high-end segments as consumers change their handsets less frequently, which is particularly worrying for small and medium-sized manufacturers.

China's handset sales tallied 310 million units last year, the lowest volume in recent years, and sales should further fall to around 300 million units in 2022, according to research institute GFK.

Meanwhile, the average upgrade cycle has extended to about 30 months from the earlier number of about 22 months logged five years ago, based on the latest industry data.

All phonemakers are feeling the heat coming from slowing replacements. As consumers replace their phones less often, manufacturers are forced to be more cautious when investing in product development, Zhao Ming, chief executive of Honor, said during a product launch event last week. Overcoming the problem will be a test for all domestic manufacturers, he added.

But for those that are not big, it is a battle for survival. "The cell phone market is highly dependent on supply chain innovation," said Wu Yiwen, senior analyst at Strategy Analytics. It is hard for smaller manufacturers to secure advantageous pricing, which can severely limit their innovation capabilities and profitability, Wu added.

The average monthly sales of individual small and medium-sized smartphone brands can be anything between 5,000 and 30,000 phones, Yicai Global learned from market research institutes.

As the broader market is shrinking, prices per unit are rising while top phonemakers are focusing on upgrading their products. Average selling prices have grown to a range of CNY2,700 and CNY3,000 (up to USD472) from the earlier CNY1,500-CNY2,000 range, according to technology research organization Counterpoint.

Honor, a budget phone brand spun off from Huawei Technologies, is one of the firms eyeing pricier product segments. The manufacturer is expanding its capacity in Shenzhen, planning to introduce high-end equipment to produce upscale phones. Moreover, Honor recently spent CNY958 million (USD150.6 million) to set up a new software technology company, according to corporate registration information.

Honor's repositioning efforts are bearing fruit. In the third quarter of last year, Honor's Magic 3 series made up about 7 percent of China's sales of high-end phones priced from USD600 to USD700.

Editors: Tang Shihua, Emmi Laine, Xiao Yi