China’s world's largest smartphone market shrinks
12 May 2015

China’s world's largest smartphone market shrinks

China’s smartphone market has reached saturation, according to a new study by industry analyst IDC.

This smartphone market shrinkage carries potentially significant implications for the global handset industry led by giants like Apple and Samsung. During the first quarter of 2015, smartphone shipments in the world’s most populous country shrank for the first time in six years to 98.8 million, down 4.3 per cent from a year earlier.

The rise of Chinese consumers has fuelled booming demand for smartphones in recent years, lifting firms including Apple – which made a record $16.8-billion in revenue in China last quarter thanks to its iPhone 6 series launch – and Beijing-based Xiaomi, which grew into a $46-billion company in just four years.

China overtook the United States in 2011 to become the world’s largest smartphone market.

But IDC’s data suggesting that a slowdown has already begun could pose questions for the industry.

Thanks to its large-screen iPhone 6, Apple consolidated its position in the shrinking Chinese market, claiming 14.7 per cent market share, ahead of Xiaomi and Huawei at 13.7 per cent and 11.4 per cent, respectively, according to IDC.

Global leader Samsung came in fourth in China with a 9.7 per cent share.

The slowdown in China will increase pressure on manufacturers to seek growth in India and Southeast Asia, where striking partnerships with distributors will prove critical, said IDC analyst Xiaohan Tay.

Xiaomi, for one, has actively courted both online and offline sellers in India over the past year. The company, which has sold its handsets on Flipkart.com for the past year, said last month it would also sell its phones at The Mobile Store retail chain throughout the country.

idc stats china market shrinkage may 11 2015

 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 Shenql 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.