What had been a hot market for smartphone vendors is slowing as more Chinese citizens now have the devices, causing demand for new phones to weaken.
Smartphone shipments in China dropped 4 percent in the first quarter of 2015, compared with the same quarter one year ago, which is the first falloff in sales there in six years. What that means, according to a new research report from IDC, is that China's smartphone market is maturing as more and more people there now have smartphones, causing sales to slow.
About 98.8 million smartphones shipped in China in the first quarter of 2015, which is down 4.3 percent from the 103.2 million smartphones that shipped in last year's first quarter, the report indicates.
"Smartphones are becoming increasingly saturated in China," Kitty Fok, managing director for IDC China, said in a statement. "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 U.S., U.K., 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."
Even worse, first-quarter smartphone sales in China fell 8 percent from the fourth quarter of 2014 due to large inventories at the end of last year, the report stated.
Three smartphone vendors did see their sales rise in the quarter, compared with last year, however. They are Apple, Xiaomi and Huawei. Apple's sales rose to 14.5 million smartphones, compared with 8.9 million one year ago, while Xiaomi's sales rose to 13.5 million from 9.5 million a year ago. Huawei hit 11.2 million smartphones shipped, compared with 8 million one year ago, the report said.
"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," the report continued.
For the rest of 2015, IDC said it expects relatively flat growth for smartphones in China. Also, as sales in China continue to fall, the company said it expects to see phone vendors focus on other markets where growth is still continuing, such as in India and other nations in Southeast Asia.
"To successfully combat local players overseas, Chinese vendors will need to focus on channel relationships and localized marketing strategies," Tay Xiaohan
, an analyst with the IDC Asia/Pacific client devices team, said in a statement. "Most of the market's growth will come from sub-$150 phones as feature phone users switch to low-cost smartphones."
A key reason for the lower numbers in China is that the smartphone penetration rate there has hit about 90 percent
, meaning that people who want a smartphone there already have one, Tom Kang, an analyst with Counterpoint, told The Wall Street Journal
. "China is now a replacement market," Kang told the newspaper.
For smartphone makers, especially companies like Samsung that are working to reverse declining sales, the news of a maturing Chinese market has to be somewhat disappointing. Samsung was hit hard last fall when many smartphone buyers were holding off on purchases as they waited for the new Apple iPhone 6 and iPhone 6 Plus to arrive last September. Samsung's own new flagship Galaxy S6 and S6 Edge smartphones arrived in April and are selling well, but the company needs to sell many more to begin to reclaim more of the market after a string of declining quarters.
Apple's second-quarter sales in China were great, with a new record of $16.8 billion in sales, which is up 4.2 percent from the $16.1 billion in the first quarter, according to an earlier eWEEK
report. The $16.8 billion in the latest quarter's sales is a 71 percent jump from the same period one year ago, according to Apple. International sales accounted for 69 percent of the quarter's overall revenue.
Last fall, Apple announced that it is continuing to beef up its sales network in China with another 25 more Apple stores there by 2016.