Smartphone market gets busy signal

Models present new smartphone "HTC Butterfly" by Taiwanese smartphone maker HTC Corp. in Taipei, southeast China's Taiwan, Dec. 11, 2012. [Photo/Xinhua]

China's smartphone market experienced its first slowdown in the fourth quarter of 2013, signaling the world's top smartphone market may have become saturated and that fiercer-than-expected competition is emerging.

After nine consecutive quarters of explosive growth, the smartphone market suddenly halted its upward trend, posting a 4.3 percent drop in shipments in the fourth quarter, according to research firm International Data Corp.

The 90.8 million smartphones shipped in the fourth quarter slipped from 94.8 million units in the previous quarter. Several factors drove the stumble, IDC pointed out.

First, China Mobile Ltd's fourth-generation network didn't start its commercial rollout until Dec 18, keeping many 4G handsets off the shelves in the domestic market.

Second, the increasing popularity of large-screen phones forced telecom operators to cut subsidies on ones with smaller screens, triggering distribution channels to clear out those stocks.

Melissa Chau, a senior research manager with IDC, said the world increasingly looks to China as a powerhouse to propel global smartphone growth.

"This is the first hiccup we've seen in an otherwise stellar growth path," she said.

Gartner Inc's analyst also warned that mobile phone manufacturers may struggle to do business in China this year because the nation's smartphone market will become highly saturated.

C.K. Lu, a Gartner analyst who follows the consumer electronics industry, said smartphone sales to end users exceeded 82 percent of the total mobile device sales in the third quarter of 2013.

"Because of a saturated market, mobile phone companies are finding it hard to maintain steady growth in China," Lu said.

The situation has prompted domestic phone makers, which were previously content to do business within China, to start looking overseas. While this trend had already begun in 2013, IDC expects it to grow in 2014.

"Chinese players are hungering to become international rather than China-only brands. Nowhere is this more evident than in Lenovo's acquisition of Motorola's handset business. Even smaller players, some of which are unknown to much of the rest of the world - such as Oppo, BBK, Gionee and, of course, Xiaomi - are ramping up their international expansion plans," Chau said.

In a previous interview with China Daily, Paul Jacobs, chairman of mobile chipset firm Qualcomm Inc, mentioned big obstacles for Chinese mobile phone vendors intending to go global: namely, staying innovative and building a brand.

"It's relatively easy today to build a great product. The hard part is telling someone why your product is better than your competitor's. It takes time in building an emotional connection with potential customers," Jacobs said.