China handset vendors to control half the global market next year

We all knew that the Chinese mobile market was big, but a new report from ABI Research suggests that Chinese handset vendors will account for over 50 per cent of mobile handsets in 2015. They already accounted for 38 per cent of mobile handset shipments in 2013 and the ongoing shift in growth to low cost handsets will increase their market share, says the report.

“Chinese vendors already take up five of the top ten places in terms of worldwide market share, despite three of them only really shipping into China,” said Nick Spencer, senior practice director, mobile devices. “The Chinese vendors highlight the changing shape of the mobile handset market, as the Chinese manufacturing ecosystem, specifically reference designs, enable the next wave of smartphone growth in low cost emerging markets and amongst price conscious consumers everywhere.”

Greater China has long dominated the mobile handset manufacturing supply chain, said Spencer, but now its OEMs are beginning to dominate sales at the expense of the traditional handset OEMs, including other Asian firms like Samsung.

ZTE is currently ranked fifth largest global handset vendor in terms of units shipped, with rival Chinese firm Huawei one place behind it in sixth. With its acquisition of Motorola Mobility, Lenovo is poised to become a bigger global player, as is local favourite Xiaomi. It would appear that the enormous local market isn’t enough for many Chinese vendors, who are looking to expand their operations further into Asia and then worldwide.

“South East Asia has already experienced this trend, but ABI Research expects to see the impact of these Chinese vendors increasing in all emerging markets and even advanced markets, especially on pre-pay,” added Spencer.

In an unrelated report, research firm IHS says that demand for consumer electronics in China declined in 2013 as demand for TVs and digital still cameras fell. Total product shipments fell 9 per cent to 710.2 million units – the third straight year of declining shipments and the second consecutive year of revenue contraction – due in large part to the end of government subsidies for consumer electronics products.

But a move by OEMs to diversify into global markets is not without risk. The Chinese currency is appreciating in value, forcing local production costs higher.

Something that would help these OEMs is lower licensing costs. Rumours are surfacing that Microsoft may drop its fees to as low as $15 for low-cost computers, rather than its typical $50 fee, but whether this idea would extend to mobiles is unknown (by comparison, Google licenses Android to OEMs for free). It has already relaxed its Windows Phone partnership terms, is apparently warming to the idea of OEMs running more customised software on the OS, and may even permit dual-boot devices (such as the rumoured Windows Phone and Android device from India’s Karbonn.