Next year, Chinese manufacturers’ smartphone shipments will exceed 100 million units this year

According to the China Research Special Report of IHS iSuppli, Chinese mobile phone manufacturers' smartphone shipments in 2012 will nearly double and exceed 100 million. Factors that have stimulated this market growth include increased consumer interest in smart phones, improved telecom infrastructure, and more affordable prices.

In 2012, smart phone shipments from China's mobile phone suppliers are expected to reach 101.4 million units, a sharp increase of 94% from 52 million this year and almost 10 times from 10.2 million units in 2009. Although the growth rate will slow down from next year, the double-digit growth rate will remain at least until 2015, when shipments will reach 188.4 million units, as shown in the figure. At present, most smart phones are sold in the Chinese domestic market for consumers to use in the country. However, this situation will change in the future, and half of the smart phones produced in 2015 will be oriented towards the export market.

Indeed, smart phones are still a minority in China today, and the number is far lower than that of low-end mobile phones (feature phones) and ultra-low-cost mobile phones (ULCH), which are generally targeted at entry-level markets. China's smart phone shipments will exceed 100 million units next year, but by comparison, feature phone shipments will reach 535 million units, while ULCH handsets will reach 175 million units. However, the shipment of feature phones will obviously decline, and the growth rate of ULCH phones will be difficult to match with smartphones.

The vitality of Chinese smart phones stems from many factors, but mainly because the Apple iPhone and Samsung Electronics’ Galaxy S II have aroused consumer interest. IHS iSuppli's research shows that while Chinese consumers often purchase iPhones or Galaxy S IIs to show their status, more and more consumers are starting to favor smart phones, and they are favored by their large screens, high-quality camera functions and many Appealed by popular apps.

At the same time, the coverage and quality of China's 3G wireless networks have been improved, and the number of base stations deployed by China's three major operators has continuously increased. China Mobile, China Telecom and China Unicom have begun to attach importance to subsidizing 3G smart phones to attract high-end users.

Increasing prices have also contributed to the growth of smart phones in China. Chinese mobile phone manufacturers began to launch 3G smart phones with prices below 1,000 yuan, but up to 2,000 yuan a year ago, and now they can get a one-year deal with operators.

Huawei and ZTE are the two largest smart phone manufacturers in China and have already ranked among the top 10 smartphone vendors in the world. In 2012, Huawei and ZTE will aggregate 60 million smart phone shipments. Other Chinese smart phone manufacturers include TCL/Alcatel, Lenovo, Yulong Coolpad, Beijing Tianyu and Jinli, and Xiaomi and Alibaba. These online companies also entered the Chinese smartphone market and launched their own branded products.

Both Huawei and ZTE are competing with Korean Samsung and Finnish Nokia. Samsung and Nokia are still the largest smartphone suppliers in the Chinese domestic market.

China's most popular domestic smart phones are those that cost less than RMB 1,000, including ZTE's V880, Huawei's U8650 and Lenovo's A60.

Kevin Wang is the Director of China Research at IHS.