Can this possibly be true? Outside of China, mobile phone sales are basically flat, with most of the growth now coming from sales of smartphones like those made by Apple and HTC. Based on the current sales pattern, China will account for over 60% of all new mobile phone sales in 2010.
What is happening in China that could account for phenomenally high growth rate? I’m at a loss to explain it. Anecdotally, I can’t find much evidence of this remarkably high rate of new phone sales.
Most Chinese I know are using phones that are at least a year old. Nokia phones are particularly common in my circle. Overall, Nokia is still the biggest selling mobile phone brand in China. But, its sales in China are not doing very well, and the company is losing market share. One reason is that the phones are well-made and tend to last a long time.
China’s Ministry of Industry and Information Technology compiles the statistics on Chinese mobile phone sales. They do a professional job gathering and transmitting data on China’s mobile market. So, I have no reason to doubt the basic accuracy of the numbers. The absolute number may possibly be off, but the 36% growth rate is probably correct.
If so, the larger question may not be one of accuracy, but of sustainability. In other words, if mobile phone sales are growing by 36% a year, is there any way that rate of year-on-year growth could continue into 2011 and beyond? I have severe doubts about this. For one thing, if the 36% annual growth rates continued through 2012, overall annual sales will double from the current high level. If so, every Chinese mobile subscriber on average would end up buying two new mobile phones a year. That, as the British like to say, “beggars belief”.
It may well be that the fantastically high growth rate we now see in China will begin to plateau very soon. If so, the overall market dynamic will change from one of rampant growth, in which even the weakest players register growth every year, to one where a company’s ability to generate sales growth will comes mainly from increasing market share.
In other words, from a manufacturer’s standpoint, the market changes from one of absolute growth to one of relative growth – or loss. It will happen soonest for products like mobile phones, where the market is reaching saturation.
There is still plenty of organic growth left for other fast-growing items like new cars, computers, white goods, and a full range of brand name products, from laundry detergent to Italian suits.
I bought a new phone recently, an HTC Legend, running on Google’s Android operating system. But, it didn’t register on the Ministry’s figures.
Like a lot of people living in Shenzhen, I bought my new phone in Hong Kong, where prices are as much as 35% cheaper, and there’s far more certainty of getting a phone with all its original circuitry intact. It’s not all that uncommon for brand name phones in China to be doctored before sale. They look authentic on the outside, but have some cheaper, replacement parts within.
HTC is still a niche brand in China, though with very ambitious plans for growth over the next year. I bought the HTC in large part because the company is an investor and partner of one of my clients. I like the phone, and like the fact it’s not an iPhone.
I have nothing against the Apple product. I just prefer, in phones and most other things, to choose brands that aren’t already dominant in their market.
Apple phones, either genuine or knockoff, are far more common in China than anywhere else in the world, as far as I can tell. Apple just announced plans finally to begin selling its new iPhone4 in China, months after it went on sale in the US, Europe and much of Asia. The price is still well above the level in Hong Kong, but I have no doubt the phone will sell well.
Apple computers are still very rare in China. There are very few places to buy one. This is a major untapped opportunity for the California company, since anything with the Apple brand is going to sell well in China. Apple has begun opening retail stores in China, but as of now, there are only two, one each in Beijing and Shanghai.
Apple is certainly one of the companies that should continue to thrive in China’s mobile market, even as it shifts from absolute to relative growth. HTC too. As for the others, both global and domestic brands, it’s going to be a dogfight.