China to overtake US as world's largest smartphone market this year: IDC

Last year, China bought 18.2 per cent of the 491.4 million smartphones sold worldwide, closely following the US, which purchased 21.3 per cent. In fact, for the second half of 2011, China surpassed the US in smartphone shipments. 

"PRC smartphone shipments are expected to take a slim lead over the US in 2012 before the gap widens in the coming years," said Wong Teck Zhung, senior market analyst with IDC's Asia-Pacific client devices team. "There will be no turning back this leadership changeover."

Last year, Android smartphones priced below US$200 were a hit segment, and these low-cost smartphones are expected to remain a key driver for smartphone growth, with prices becoming even more affordable, said IDC. During the 2012 Mobile World Congress in Barcelona, Google's Eric Schmidt predicted that smartphones would be as affordable as feature phones in the near future. 

"Emerging domestic vendors will be another important engine of smartphone growth as giants Huawei, ZTE, and Lenovo continue to ramp up with big carrier orders, due to their willingness to produce customized handsets," Wong added. "International players such as Samsung and Nokia are also expected to drive volume at the low end with cheaper smartphones."

China's importance to the smartphone market was underscored by Apple's willingness to modify its iPhone 4S to eliminate signal issues with China Mobile. With 655 million subscribers, China Mobile is the largest telco in the world. 

IDC also predicts that in four years, India and Brazil will number among the world's top five country markets for smartphone shipments. The report forecasts that India will be purchasing 9.3 per cent of the world's smartphones in 2016, a leap from 2.2 per cent in 2011. Brazil will increase to 4.7 per cent in 2016 from 1.8 per cent last year.

"Due to their sheer size, strong demand, and healthy replacement rates, emerging markets are quickly becoming the engines of the worldwide smartphone market," said Ramon Llamas, senior research analyst with IDC's mobile phone technology and trends team. "Users in emerging markets seek more than simple voice telephony, and smartphones offer the ideal platform for mobile entertainment, social networking, and business usage as seen in developed markets."

The Indian smartphone market in particular will show very strong growth over the next four years. Carriers are expected to aggressively roll out 3G networks and data plans while domestic vendors such as Micromax, Spice, Karbonn and Lava have already launched low-cost smartphones in a bid to drive future demand, said IDC. 

In 2011, growth was largely driven by top-tier brands like Samsung and HTC, and international vendors will look to invest further in local manufacturing in the coming years as the high-growth Indian market becomes a top priority.

"Demand for smartphones will also grow as urban and enterprise users mature in their handset preferences and usage," said G. Rajeev, senior market analyst for mobile devices with IDC India. "Consumers are growing accustomed to higher data usage and using handsets for entertainment and other content, instead of just as a communication device."

Meanwhile, mature markets, such as Japan, the United Kingdom and the US, will experience continued growth in smartphone adoption, but volumes will not keep up with those destined for emerging markets. 

Despite its forecast, IDC cautioned that there are still several barriers or challenges to smartphone growth in emerging nations. The total cost of ownership remains a hurdle for potential smartphone buyers," Llamas added. "Smartphones still represent a significant investment for consumers in many countries. This fact was acknowledged by a number of industry executives at the recent MWC, who stressed the need for low-cost devices – as low as sub-US$50 – to spur widespread adoption."

The cost of monthly data plans represents another barrier to adoption, he continued. "To realize the full potential of emerging markets, smartphone vendors need to develop low-cost smartphones that provide a full, robust experience while mobile operators will need to creatively subsidize device cost and data plans."