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China Smartphone Shipments Rise

EL SEGUNDO, CA — Shipments of smartphones for sale in China are set to soar by a record 53 percent this year, according to new research from the IHS iSuppli China Electronics Supply Chain service, from information and analysis provider IHS (NYSE: IHS). Domestic smartphone shipments in China will rise to 54.1 million units in 2011, up from 35.3 million units in 2010. Of the projected domestic total for this year, more than 10 million and 15 million smartphone units will come from the giant Chinese makers ZTE and Huawei, respectively.

By the end of 2015, IHS forecasts that Chinese companies will ship 111.6 million smartphones, rising at a compound annual growth rate of 25.9 percent from 2010. In contrast, the global smartphone market will grow at a more modest CAGR of 20.7 percent during the same period.

The China numbers do not include iPhones from Apple Inc. that have been smuggled into the country, or phones made by HTC that are sold in China—together estimated at somewhere in the range of 7 million units in 2010.

“China’s domestic smartphone market is booming in 2011 as prices for handsets and 3G services fall,” said Kevin Wang, director of China electronics value chain research at IHS. “Consumer demand also is being stimulated by the arrival of compelling mobile Internet applications.”

The average selling price for smartphones in China is set to fall below the $300 threshold in 2011 for the first time, declining to $299, down 4.9 percent from $314 in 2010.

Gray skies ahead for gray-market handsets
Meanwhile in the Chinese white-box and gray-smartphone market, 2011 will see domestic Chinese suppliers focus mainly on EDGE smartphones based on the Android operating system, as well as 3G smartphones from 2012 onward.

Overall shipments of gray-market handsets, considered illegal in the country, are projected to expand to 255 million units in 2011 and then begin to decline to 213 million units in 2012. This will launch a pattern where gray-market handsets continue to decrease in unit shipments for the next four years.

While gray-market suppliers are positive about prospects in the emerging markets, a lack of new and compelling selling features will result in price-based competition. This is true even in 2011, with the gray-handset market anticipated to see lower revenue despite an increase in unit shipments. Existing players also may leave the smartphone space altogether to seek greater opportunities in other consumer electronic sectors, such as tablets.

Several factors account for the decline in the shipment of gray-market smartphones in China, including stronger supervision by the Chinese government of gray-market handsets and a serious crackdown on counterfeit mobile phones. Moreover, players in the emerging markets, supplying product to their own areas, are grabbing market share away from gray-handset suppliers.

Other factors include concern from end customers about the quality and aftersales services of gray handsets; the expansion in market share of dominant local players like ZTE, Huawei, TCL/Alcatel and Sangfei into the developing countries, with cooperation from local operators; the change from some traditional gray-handset suppliers into branded original equipment manufacturers that promote their own trade names in the developing countries; the increasing difficulty among gray handsets in differentiating from similar platforms, such as those operated by big entities MediaTek or Spreadtrum; and the lack of a cost advantage in gray handsets when compared to 2G phones, as well as the absence of a competitive 3G turnkey solution for gray handsets in the near future.

In the second quarter of this year, IHS saw the closure of many small independent design houses for handsets in the Shenzhen area because of continuous losses, following the sharp decline of the export white-box and gray-handset market in April and May. Channel inventory had been too high in the first quarter of 2011, while demand declined in the emerging markets during the second quarter. Moreover, the Chinese government cracked down hard on gray handsets and the suppliers of counterfeit phones in Shenzhen during that time, adding to the pain of local gray-market manufacturers.

IHS iSuppli

8 comments on “China Smartphone Shipments Rise

  1. Adeniji Kayode
    July 18, 2011

    This is such an inspiring article. Could it be that China is offering more features on that smartphone than other manufacturers or lower price and what of if the reason for such increase in shipment is as a result of preference for quantity over quality.

    If all there conditions apply then we should expect to see more of china's consumer good in market.

  2. jbond
    July 20, 2011

    This is great news for handset makers. I'm curious about how many more smartphones they would sell if China didn't have so many restrictions on their social content for their citizens. If sales of smartphones are growing this fast while helping to eliminate counterfeits, most companies should have a positive outlook at Chinas market.

  3. mario8a
    July 24, 2011

    Hi,

    It's glad to read the shipments for smartphones will raise in China, however, as Handset/ Headset designer It was very surprising to read about the small gray handset manufacturers, I've been many times in the sotuh area in China, never heard of this before.

     

    Regards

     

  4. Wale Bakare
    July 24, 2011

    Increase in sales of smartphones in China is not surprising considering the fact that larger percent of the population shopping for low price phones. And besides, it also reported that target market for Gray phone manufacturers is also in Africa region.

    If they are of high quality – EDGE, 3G and able to meet the standard regulatory requirements, i cant see reason for them remain unlicensed.

  5. electronics862
    August 30, 2011

    Eventhough this is great news for handset manfacturing people. China government should control the gray market to maintain the healthy relationship between seller and user as there is no gurantee for the products bought in gray market. 

  6. Adeniji Kayode
    September 5, 2011

    @Bakare, You are right, China is really causing wave so much in phones right now but its less quality for more quantiy, features and less price.

  7. Wale Bakare
    September 5, 2011

    @Adeniji taking into account the larger percentage of China population leave on low wages/salaries. High quality design mobile phones – notable famous ones like Apple's iphone, Rim's Blackberry and Samsung  surely attract high prices in market so as to maintain profit margin.

    So to promote local manufacturing mobile devices in china, i think  low quality design phones will attract larger number of consumers, who may find it difficult to fork out more money on high end smartphones.

  8. Adeniji Kayode
    September 9, 2011

    @Bakare.You are right,some how the so called China phones have started to make sense to consumers and the phones are gaining more ground in the market place right now. Infact consumers think about these phone before thinking of brand like Nokia and the likes  just because they are quality phone-agreed but expensive when compared to china phones

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