International Data Corporation (IDC) is an American market research, analysis and advisory firm. Kitty Fok, IDC China’s managing director, has 20 years’ experience working for IDC and is an expert in the in-depth understanding of the IT market with a focus on emerging markets. AllChinaTech spoke with Kitty and below are takeaways from her insights on China’s smartphone market.
Conclusions about the Chinese smartphone market in 2015
Overall, the smartphone market has grown in China. We are talking about 430 million shipments a year — a huge shipment record in one single market. This market is stabilized at the moment. We are not expecting either much new growth or negative growth. It’s more like a weak single-digit growth in the following few years. Two things are happening: for the mature cities, it is really about the replacement market, where users have been adopting big brands like Xiaomi, Samsung, and Apple. For lower-tier cities, there are still new additional users.
For the replacement market, Apple and Android are still dominating. Apple users tend to stick with iPhones, while the Android users are looking for new brands available in the market. We do know that Huawei picked up quite a strong replacement market from mostly Samsung and Xiaomi. For the new users, I think they are looking for different types of new brands with lower prices. What a new user needs is simply a smartphone to replace their feature phones. For example, they need WeChat to communicate or pay bills through the phone. So that’s the change in the market in 2015.
Apple still has opportunities to grow
It is very difficult for Apple users to not use Apple.This fact has been enough for Apple to play around with the big replacement market. There are lots of reports about Apple’s shipments slowing down, while I think Apple still has the capability to increase its user base, for instance with the launch of the iPhone SE
We have one observation: In China, for some reason there are a lot of people who possess two phones, maybe one for personal use and one for their company. In general, they would have one Apple and one Android phone. But after the iPhone SE was introduced, some tend to use two iPhones, choosing an iPhone SE as the second phone. In my opinion, It’s quite clever for Apple to launch this lower-priced series. On the one hand, it captures some of the market that uses two phones; on the other hand, compared with Android phones of the same price range, which is RMB 2000 plus, the SE series could be more tempting to some.
Huawei definitely has strong momentum
The good thing about Huawei is their brand recognition, from the low-end all the way to the high-end. So they basically get any portfolio of users. The company’s strong momentum comes from several aspects. First, Huawei’s high-end phone is well-recognized, as much as a multinational brand, owing to their technology. For instance, the recently launched Huawei P9 with dual-camera is quite a new feature at least for now.The second reason for Huawei’s success is that they use the local chipset Hisilicon. The use of local chipsets is a solution preferred by the Chinese government. So we will continue to see this momentum from Huawei moving forward.
The key for other local brands is to maintain market share
I am quite impressed by those who were once traditional feature phone players who now make smartphones including Oppo, Vivo and ZTE. They have been faced with so many challenges but their market share has been stable. I think the reason might be that they have a strong connection with the carriers, which help the manufacturers with subsidies. The other reason is, for some of the users, it is a natural transition from feature phones to smartphones with reasonable pricing. Now can they really increase the market share? I’m not quite sure.
Those who have found success with distinctive business models should figure out a new way to grow
For Xiaomi and Meizu, whose success stories are based on new business models, including online sales, on-demand supply and hunger marketing, their problem is that they are becoming fatigued in making growth based on innovation in their model as more and more brands are doing the same thing. They probably should figure out a new business model to differentiate and stand out.
Or, when the phone market is getting saturated and it’s really hard to move on by focusing only on phones, they should move beyond the area of the smartphone, as the bigger players including Apple, Samsung and Huawei have been doing. They have a variety of products within the company to support them, creating a much stronger image to users. Xiaomi is trying to diversify itself by launching other devices like smart home appliances and wearables.
The key for Xiaomi is how to differentiate its phones from others
If Xiaomi is launching a product line for premier phones, that’s ok. Huawei has served as a good example. But the key is how to differentiate its phones from others. It doesn’t mean putting all the most expensive components together, it means how it can optimize everything. For instance, one can introduce a phone that’s more secure than others, as I foresee security to be a big issue. Personalization of phones to target different groups of people is also a solution, but a harder one, for almost all personalization could be done through software, i.e. applications. There is a good example of differentiation through hardware — to build different types of sensors into the phone. For instance, if a phone is targeting the elderly, the phone could be designed with a bigger screen, super-big fonts, and also a sensor that can monitor the user’s health condition including temperature and pulse and can regularly stream the data to an app.
(Top photo from Flickr @ Nicolas Nova)