China to Become World's Largest Smartphone Market

By CIOinsight  |  Posted 09-04-2012

A wealth of low-end Android smartphone options and China's rising middle class are together having a powerful impact on the global phone market. During the first quarter of 2012, China overtook the United States to become the world's largest smartphone market, and on Aug. 30 research firm IDC said it expects China to retain that title for the full year, and well through 2016.

China and the United States currently dominate the market while the United States accounted for 21.3 percent of the market last year, 2012's tally is expected to dip to 17.8 percent, while China's share rises from 2011's 18.3 to 26.5 percent.

The United Kingdom is the third-largest market, though expected to account for 4.5 percent of the world's smartphone sales this year, followed by India, with a 2.5 percent share, and Brazil, with a 2.3 percent share, according to IDC analysts.

IDC expects the sub-$200 Android segment to continue to drive sales in China, and for intensifying competition among vendors to push pricing closer to $100 or less, further encouraging it.

Other drivers will include carrier subsidies and customized handsets from domestic brands, said IDC.

Earlier this month, Canalys analysts emphasized the appeal of domestic brands to Chinese consumers, reporting that ZTE, Lenovo and Huawei all outsold Apple in the market.

Faster wireless networks also will play a role, according to IDC.

"Looking ahead to the later years in the forecast," Won Teck-Zhung, an IDC senior market analyst, said in an Aug. 30 statement, "the move to 4G networks will be another growth catalyst."

Research firm Research2Guidance has estimated that by 2017, the number of households in China that can afford a smartphone will double, from 40 percent today to 80 percent. China already has more than 1 billion mobile subscribers.

The firm noted that while the smartphone market has been dominated by devices that sell for about $300, Huawei, ZTE and foreign brands--including Samsung and Nokia--are supplying the Chinese market with devices nearer to $160.

China's growth is hardly bad news for the United States.

"The fact that China will overtake the United States in smartphone shipments does not mean that the U.S. smartphone market is grinding to a halt," said IDC analyst Ramon Llamas. "Now that smartphones represent the majority of mobile phone shipments, growth is expected to continue, but at a slower pace. There is still a market for first-time users as well as thriving upgrade opportunities."