China smartphone market shrinks for first time in six years

Country's smartphone shipments drop 4 percent year-on-year to 98.8 million units in first-quarter 2015, with Apple overtaking Xiaomi to take pole position, IDC figures reveal.
Written by Eileen Yu, Senior Contributing Editor

China's smartphone shipments have dropped for the first time in six years as the market continues to mature and hit saturation point.

The country's smartphone segment shrank 4 percent year-on-year in the first quarter of 2015, shipping 98.8 million units. It dipped 8 percent over the previous quarter on the back of large inventory buildup toward the end of 2014, according to data from IDC's latest Mobile Phone Tracker.

Noting that smartphones were becoming increasingly saturated in the country, IDC's China managing director Kitty Fok said: "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 U.S., U.K., 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," Fok said.

Apple climbed up the rungs to become the leading vendor for the quarter, enjoying strong consumer appetite for the larger screens on the iPhone 6 and 6 Plus. Xiaomi fell to second position amid intense competition from other players in the low- to mid-range market segment. Huawei retained its third placing on good sales in the mid-range segment.

IDC further noted that Samsung and Lenovo, which both led the market at least once last year, saw changes in their ranks, highlighting the volatility of consumers' brand preference in China. The research firm added that the Chinese market would likely see flat growth in 2015.

According to IDC, Huawei and ZTE also were expected to push their younger sub-brands Honor and nubia, respectively, as part of efforts to grab Xiaomi's user base and grow their fanbase. Lenovo also would look to heat up the competition with its acquisition of Motorola Mobility and new online-only mobile brand, Shenqi.

IDC projected that more market players including Huawei, Lenovo, and Xiaomi would attempt to focus on the mid- to high-end segments, as well as expand into more vendor-branded retail outlets, direct online sales, and e-tail business. Chinese vendors also would be looking to growth their presence into more Southeast Asian markets and India this year, as their domestic market continued to slow down.

Tay Xiaohan, IDC's senior market analyst for Asia-Pacific client devices, said: "To successfully combat local players overseas, Chinese vendors will need to focus on channel relationships and localized marketing strategies. Most of the market's growth will come from sub-US$150 phones as feature phone users switch to low-cost smartphones."

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