17 October 2019
A Chinese woman takes a selfie on her smartphone. In 2011, China overtook the US to become the world's largest smartphone market. Photo: WSJ
A Chinese woman takes a selfie on her smartphone. In 2011, China overtook the US to become the world's largest smartphone market. Photo: WSJ

Why China smartphone market has no more room to grow

China’s smartphone market, already the largest in the world, is so saturated it does not have much room to grow.

Smartphone shipments in China fell 4.3 percent in the first quarter compared with a year ago for the first time in six years, the Wall Street Journal reported Monday, citing a survey by International Data Corp.

Rival surveys show continued growth during the quarter but at much slower levels than previously.

The slowdown is largely driven by the disappearance of China’s first-time buyers.

Smartphones now have a more than 90 percent penetration rate in China, said Tom Kang, research director of market research firm Counterpoint.

That means just about everybody in China who wants a smartphone already has one. “China is now a replacement market,” Kang said.

And that also means smartphone makers will have to win over upgraders like Liao Huimin if they want to gain market share.

The Beijing information technology worker uses an iPhone 6 and upgrades his phone roughly every two years, although he says he might stick with his current phone longer.

“I won’t buy a new one in the near future unless it gets slow or broken,” Liao said.

“I think I will still buy an iPhone in the future, but if Samsung produced a really fancy phone I would think about buying it.”

The slowdown has major implications for foreign smartphone makers such as Apple Inc. and Samsung Electronics Co., as well as China’s new breed of homegrown phone makers such as Xiaomi Corp.

It comes as foreign and local players including Lenovo Group Ltd., Coolpad Group Ltd. and Huawei Technologies Corp. ratchet up their efforts, with many focused on selling increasingly expensive phones with bigger screens.

“The smartphone market in China is basically now just the very high end like Apple or the very low end,” said Charles Lin, chief financial officer of Pegatron Corp., which manufactures smartphones for Apple and some Chinese brands.

“It’s getting tough for those in the middle.”

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

Apple, of Cupertino, Calif., sells more iPhones in China than in the US Apple in the first quarter became China’s largest smartphone maker by market share, according to IDC, surpassing Xiaomi on the strength of its popular iPhone 6 and iPhone 6 Plus.

Xiaomi, a five-year-old startup now valued at US$46 billion by virtue of its strength in its home market, is trying to keep up.

Last week, it unveiled its Note Pro, a phone about the size of the iPhone 6 Plus but costing about $480, or about half the price of the iPhone 6 Plus in China.

“We will keep pursuing our mission to make high-quality, high-performance phones at affordable prices for our fans,” a spokeswoman said.

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