China’s Mobile Engine Is Slowing, Says Gartner

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Winter might well be coming for (more) smartphone makers as the sales engine of China shows signs of saturation and slowing growth, according to analyst Gartner.

Putting out its latest global mobile device shipment predictions the analyst says growth across the mobile phone market as a whole is expected to slow down to 3.3 per cent in 2015 — hit by “weaker performance” in China.

“We have witnessed fewer and fewer first time buyers in China, a sign that the mobile phone market in there is reaching saturation,” says Annette Zimmermann, research director at Gartner, in a statement.

“Vendors in China will have to win replacement buyers and improve the appeal of their premium offerings to attract upgrades, if they want to maintain or increase their market share,” she adds.

Slowing growth in its home market explains why fast-growing Chinese mobile maker Xiaomi — which is launching in its ninth market, Brazil, today — continues to aggressive fire up its international expansion engines. If it’s to meet an ambitious sales target of 100 million devices this year it needs to locate a whole lot more first time smartphone buyers. And that means pushing outside China.

As well as eight countries in Asia, Xiaomi has additional market moves to Russia, Turkey and other regions in Southeast Asia on the slate for this year. Thus far, in H1, it’s sold just shy of 35 million phones.

Gartner’s Zimmermann notes that smartphone makers looking to grow their performance in a global smartphone market comprised of so many saturated regions will have to follow a similar emerging markets target playbook.

“Vendors looking to grow their performance in the global smartphone market will be challenged to quickly enhance their expansion into emerging markets outside of China, where we still witness a sizeable share of feature phones and an opportunity for double-digit smartphone growth,” she says.

2.5 billion devices

The analyst is expecting worldwide combined shipments across the all the tracked device types (PCs, tablets, ultramobiles and mobile phones) to reach 2.5 billion units in 2015, which it says is a 1.5 per cent increase from 2014 — and down from the previous quarter’s forecast of 2.8 per cent growth.

It predicts end-user spending across devices will total $606 billion in 2015 — noting that will show a 5.7 per cent decline in current US dollars for the first time since 2010.

Despite slowing mobile growth in China, the mobile phone market is the only device category that continues to show growth, according to Gartner, thanks to the first-time buyer engine of emerging markets. Handset prices are also continuing to fall, helping to drive adoption.

Gartner expects the global PC shipment market to total 300 million units in 2015, a decline of 4.5 per cent year on year. While the ultramobile segment — which is comprised of tablets and clamshells — is also expected to shrink this year. It expects ultramobile shipments to total 214 million units, a decline of 5.3 per cent year on year; and tablets to account for 207 million units, a decline of 5.9 per cent from 2014.

A range of factors is continuing to slow tablet sales, including cannibalization from larger smartphones and a lack of innovation offering little incentive for tablet owners to upgrade. Gartner now expects average tablet lifespans to expand to three years by 2016.

“The tablet market is hit by fewer new buyers, extended life cycles and little innovation to encourage new purchases,” says research director Roberta Cozza in a statement. “The tablet has become a ‘nice to have’ device, and there is no real need for an upgrade as regularly as for the phone.”

Larger smartphones — aka the so-called ‘phablet’ trend of smartphones having screens in excess of 5 inches — are also cannibalizing the tablet market. Apple launched its first such device, the iPhone 6 Plus, last year, adding an iOS phablet option to the raft of Android OEMs which had been pushing larger phones for years.

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