China’s emergence as largest smartphone market changes industry

Eric Pfanner / New York Times News Service /

Published Jul 6, 2013 at 05:00AM

Last year, when China quietly passed the United States as the largest smartphone market, the dynamics of global phone making shifted.

Until then, the global market for smartphones had been defined by the rivalry between Apple and Samsung Electronics. They built expensive phones as must-have products for affluent consumers in wealthy countries.

Now more phones are being designed for consumers in emerging markets, who are expected to account for most of the growth in smartphone sales in the future. That presents an opportunity for the major Chinese phone makers, like Huawei, Lenovo, ZTE, Coolpad, Xiaomi and Oppo.

While Samsung is the biggest smartphone vendor in China, with a market share of 20 percent in the first quarter of 2013, according to the research firm Canalys, several Chinese companies have surged past Apple, which holds 8 percent.

These include internationally recognized names like Huawei, known for network switching gear, and Lenovo, known for ThinkPad laptops, which moved into the No. 3 and No. 4 positions in the first quarter. But there are nearly 400 other little-known makers in China, where two-thirds of the world’s smartphones are made. One of these, Coolpad, leapfrogged from seventh place a year ago to second in the first three months of this year, with a 10 percent share.

“There’s a long tail of local competitors that are going to push Apple and Samsung harder and harder,” said Neil Mawston, an analyst at Strategy Analytics.

Apple’s and Samsung’s position in the high end of the market allows them to collect most of the profit from smartphone sales in China, analysts say. Apple sells 55 percent of the phones priced at $450 or more, with Samsung accounting for 40 percent, according to Sanford C. Bernstein, a brokerage firm.

But growth in this segment is slowing. Analysts at Bernstein expect sales of smartphones $450 and up in China to rise to 296 million units this year, from 235 million in 2012. But the total will flatten out at around 300 million a year, the firm said. By contrast, sales of phones priced at less than $200 are expected to surge to 400 million units this year, from 234 million last year, with a further jump to 685 million in 2015.