China’s Smartphone Market Growth Contracts For First Time in Six Years

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Smartphone shipments to China, have contracted for the first time in six years, according to market research firm IDC. This is the first time in six years that the China smartphone market declined YoY as the market continues to mature. On a QoQ basis, the market contracted 8% on the back of a large inventory buildup at the end of last year.

“Smartphones are becoming increasingly saturated in China,” said Kitty Fok, Managing Director at IDC China.

“China is oftentimes thought of as an emerging market but the reality is that the vast majority of phones sold in China today are smartphones, similar to other mature markets like the US, UK, Australia, and Japan. Just like these markets, convincing existing users as well as feature phone users to upgrade to new smartphones will now be the key to further growth in the China market.”

Apple was the top smartphone vendor in China in the first quarter of 2015, with consumers still having a strong appetite for the larger screens on the iPhone 6 and iPhone 6 Plus. Xiaomi slipped to the second position as it faced strong competition from other vendors in the low to mid-range segment of the market, while Huawei maintained third position as it saw a good uptake in the mid-range segment. Samsung and Lenovo both led the market at least once last year, but rankings have since changed quickly, highlighting the volatility of consumers’ brand preference in China.

IDC expects relatively flat growth for China in 2015.  Other trends to expect in China this year include:

  • Multi-brand strategies. Huawei and ZTE are positioning younger sub-brands Honor and nubia, respectively, to chip away at Xiaomi’s user base, and to attempt to gain a loyal fanbase. Lenovo is also getting into the mix with the Motorola acquisition, not to mention its upcoming online-focused Shenqi division.
  • Higher price tier competition. More vendors like Huawei, Lenovo, and even Xiaomi are trying to push higher into the mid to high-end segment.
  • Non-traditional channel strategies. Reduced operator subsidies mean that vendors will further expand channels into more vendor-branded retail shops, direct online sales, and eTailers instead. In particular, they are trying to save on the cost that they had to pay to the traditional dealers/distributors in the past.
  • Expansion into overseas markets. With the market in China slowing down, Chinese vendors will focus on increasing their presence in India as well as more Southeast Asia countries in 2015.

“To successfully combat local players overseas, Chinese vendors will need to focus on channel relationships and localized marketing strategies,” said Tay Xiaohan, Senior Market Analyst with IDC Asia/Pacific’s Client Devices team.

“Most of the market’s growth will come from sub-US$150 phones as feature phone users switch to low-cost smartphones.”

china smartphone idcFigure 1
Source: IDC Asia/Pacific Quarterly Mobile Phone Tracker, May 2015

Notes: * Figures may not be exact due to rounding. Lenovo 2015Q1 includes shipments from its subsidiaries including Motorola. For comparison, IDC have included 2014Q1 Lenovo + Motorola above, however acquisition was not finalized until 2014Q4

china smartphone yoy idcFigure 2

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