China's smartphone shipments dropped 4% year over year to 98.8 million units in the first quarter of 2015, the first decline in six years as the market continued to mature, according to a report by IDC.
On a quarter over quarter basis, the market contracted 8% on the back of a large inventory buildup at the end of last year.
IDC expects relatively flat growth this year, as the market is becoming increasingly saturated in China. Most of the market’s growth will come from sub- $150 phones as feature phone users switch to low-cost smartphones, the firm predicts.
"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 US, UK, Australia, and Japan,” said Kitty Fok, managing director at IDC China.
“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."
Apple was the top smartphone vendor, with its market share growing to 14.7% from 8.7% the year before, and the number of devices shipped going to 14.5 million from 8.9 million, thanks to a strong appetite for the iPhone 6 and iPhone 6 Plus.
Xiaomi slipped to the second position as it faced strong competition from other vendors in the low to mid-range segment of the market. Its market share still rose to 13.7% from 9.2% and the number of smartphones shipped grew to 13.5 million from 9.5 million.
Huawei maintained third position as it saw good uptake in the mid-range segment, with its market share growing to 11.4% from 7.8% and the number of devices shipped reaching 11.2 million from 8 million.
Samsung and Lenovo both led the market at least once last year, but have since slipped to the fourth and fifth place, respectively, highlighting the volatility of consumers' brand preference in China (see the chart below), IDC said.
Source: IDC Asia/Pacific Quarterly Mobile Phone Tracker, May 2015
Looking ahead, trends this year will include multi-brand strategies, as Huawei and ZTE are positioning younger sub-brands Honor and nubia, respectively, to chip away at Xiaomi's user base, and to attempt to gain a loyal fanbase. Lenovo is also getting into the mix with the Motorola acquisition, not to mention its upcoming online-focused Shenqi division.
There will also be higher price competition as vendors like Huawei, Lenovo, and even Xiaomi trying to push further into the mid to high-end segment.
At the same time, smartphone manufacturers will also adopt non-traditional channel strategies on the back of reduced operator subsidies. They will further expand channels into more vendor-branded retail shops, direct online sales, and eTailers instead. In particular, they will try to save on the cost that they had to pay to the traditional dealers/distributors in the past.
IDC also expects that Chinese vendors will continue their push into overseas markets this year, especially in India and Southeast Asia countries, to seek growth beyond the slowing Chinese market.