Xiaomi will have to expand to other countries as the as the smartphone market in China starts to wane. Credit: Michael Kan
China's appetite for smartphones is starting to reach its limit, with growth in the once booming market expected to reach single digit levels next year.
The country ranks as the world biggest market for the devices, brought on by its giant population and scores of local vendors peddling cheap Android handsets. Demand in the market was so high that in 2013 smartphone shipments to the country were up 64 percent year over year, according to research firm IDC.
But the growth has cooled down in 2014, with IDC's projection putting the year-over-year growth at 20 percent. And future growth will slow even further."Over the next few years, we expect it to be in single digits," said IDC analyst Kiranjeet Kaur on Tuesday.
Smartphone vendors are still shipping huge quantities to the country, but the market has been mostly tapped, she added. In this year's third quarter, China's smartphone shipments reached 105 million, up by only 1 million units from the previous quarter.
It hasn't helped that the country's mobile carriers have recently cut device subsidies, further tempering smartphone sales, Kaur said.
Unlike the U.S., which only has a handful of vendors, including Samsung Electronics and Apple, with a sizeable presence in the market, China has dozens of different players, both small and large, all fighting for a piece of the pie. About 87 percent of the shipments to the country come from domestic vendors such as networking gear supplier Huawei Technologies, PC maker Lenovo, and fast-rising Xiaomi, according to IDC analyst Kitty Fok.
China's smartphone market is so saturated that earlier this month Lenovo, one of the country's biggest smartphone vendors, said the era of hyper-growth in the market has ended.
"If you want to win you have to find new growth areas," Lenovo's CEO said at the time.
To keep on driving sales, Chinese smartphone vendors are moving outside their home market and into regions such as Southeast Asia. A few of these players including Lenovo and China's Oppo have been gradually growing in countries such as Indonesia and the Philippines, by selling phones for US$100 to $200, said IDC's Kaur.
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