Smartphone Sales Decline in China first Time in Years

IDC reports that Chinese bought less smartphones last quarter compared to a year ago. What is wrong with China?

Analyst house IDC released new numbers today that say that China smartphone market contracted by 4% year-on-year with 98.8 million units shipped in the first quarter of 2015. This is the first time in six years that the China smartphone market declined year-on-year as the market continues to mature.

On a quarter-to-quarter basis, the market contracted 8% on the back of a large inventory buildup at the end of last year. 

“Smartphones are becoming increasingly saturated in China,” said Kitty Fok, Managing Director at IDC China. “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. 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.”

Apple was the top smartphone vendor in China in the first quarter of 2015 according to IDC. This confirms last week’s Kantar Worldpanel ComTec report. Chinese consumers are still having a strong appetite for the larger screens on the iPhone 6 and iPhone 6 Plus.

Xiaomi slipped to the second position as it faced strong competition from other vendors in the low to mid-range segment of the market, while Huawei maintained third position as it saw a good uptake in the mid-range segment. Samsung and Lenovo both led the market at least once last year, but rankings have since changed quickly, highlighting the volatility of consumers’ brand preference in China.

Apple’s growth is depended on China as the latest quarterly earnings showed again in clear view. For the first time Apple sold more iPhones in China than in the United States. A decline in the overall smartphone market is not good news. Apple could though be save as Chinese consumers trade-up from lower end smartphones to the iPhone 6.