China smartphone sales slow for first time in six years just as competition picks up

The Chinese smartphone market slowed for the first time in six years in the first quarter, according to a new report, just as a host of new companies are planning to wade in with new offerings.

Technology research company International Data Corporation (IDC) said shipments contracted four per cent year over year to 98.8 million units as the market continued to mature. Apple ranked as the largest seller, followed by Xiaomi.

“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,” said Kitty Fok, managing director at IDC China.

“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," she added.

The prospect of high profits has tempted a slew of companies to step into the smartphone market, with many non-phone makers set to join established local players Xiaomi, ZTE and Huawei as well as the top foreign brands of Apple and Samsung.

Many foreign observers have warned the surge in entrants could cause a bubble that would force some to lose out, and IDC warned that the market is becoming saturated.

To fight for share, IDC said major smartphone makers will use multiple strategies. Huawei and ZTE are competing in “multi-brand strategies,” relying on the speedy development of new models.

Huawei, Lenovo, and Xiaomi are all in a “higher price tier competition,” making high-end models to compete with each other and with Apple, IDC said.

Almost all major Chinese smartphone makers have the ambition to explore foreign markets, which is also a key strategy, it said.

But others said that many people in China have only just started to change their old mobile phones to smartphones, pointing to huge demand ahead. 

Yang Weiqing, founder of Chinese consulting group iResearch, told the South China Morning Post recently that smartphones are the most promising sector in the Chinese IT industry.

“The smartphone is the fundamental tool to connect all parties on the Internet and can be the starting point of Internet Plus to link consuming, industries and finance,” he said, referring to the government’s plan to boost e-commerce, called “Internet Plus”.

More than 500 billion Chinese were using smartphones last year, and about 570 million used mobile Internet, up by 13.4 per cent year on year, according to iResearch.

Apple continues to stress the importance of the Chinese market, which overtook the US to become the largest market for iPhones in the first quarter. On Monday, CEO Tim Cook joined China’s largest social network Sina Weibo, attracting 410,000 followers within just one day.