China’s Fluctuating Mobile Market And Future Trends

China's mobile market is by a comfortable margin the largest in the world, with over 1.3 billion monthly mobile subscribers across the three carriers. It is understandable then that short term trends and fashions can have a huge effect on the incomes of OEMs and the market as a whole.

This year has seen a dramatic shift in the Chinese market, BBK Electronics who owns brands such as OnePlus, Oppo and Vivo managed to capture just under a third of the Chinese smartphone market. For the first time ever the top two spots for OEM mobile device shipments were replaced in the same quarter as Vivo took second place with 16% of the market in Q3 after seeing an impressive increase in shipments of 114% annually. More impressively Oppo was able to capture first place with 17%, thanks to the success of the Oppo R9 which rapidly became the top selling handset in China in Q3 aiding in shipments for Oppo devices increasing 82% annually.    

% Smartphone Shipments By OEMs in Q3 2016

If are unfamiliar with the Oppo R9, the 5.5″ device was launched back in March and ships with a Mediatek Helio P10, Android 5.1, 64GB of internal storage and 4GB of RAM for around $425. The phone rapidly became popular and by mid-June had sold over 7 million units, an equivalent of one every 1.1 seconds.

Huawei, Xiaomi and Apple were pushed down to third, fourth, and fifth place respectively, the latter two taking a heavy hit and being knocked down an alarming 4% annually. Huawei is likely to bounce back as the OEM will undoubtedly be launching devices early into the year which will help bolster their lineup and see them return to the top spot over the course of the first half of 2017. A similar increase in shipments was seen this year and unless Oppo can replicate the success of the R9 again they could be knocked in the rankings once again.

China's mobile industry is not just limited to handsets of course. While smartphone shipments in China still account for a third of global shipments, the stabilizing of the Chinese economy during Q2 led to increased growth across the industry including carriers. The country has just three carriers, China Mobile, Unicom and Telecom which as mentioned above service over 1.3 billion subscribers.

Name (English)	Name (Chinese)	Mobile Subscribers
China Mobile	中国联通	845,824,000
China Unicom	中国移动	262,990,000
China Telecom	中国电信	213,910,000

All three carriers have seen healthy growth over the course of the year, with China Mobile seeing an incredible increase of just under 19 million mobile subscribers, which for a point of reference is close to the total population of Romania. At the end of 2013, prepaid SIMs accounted for 85% of connections in China… however, two years later this figure had dropped to just 78% as more users began opting for monthly subscriptions. If this trend is shown to have continued when the 2016 Q4 figures are released we could be seeing the beginning of a shift to a more evenly split market such as the UK's which has an almost 50/50 split between prepaid and postpaid SIMs.

(In thousands)

 

China's app distribution is an incredible example of severe fragmentation with most Chinese OEMs offering their own app store as well as the hundreds of alternatives such as those offered by Baidu and Tencent. This can make app distribution difficult and is one of the key reasons behind app piracy being so commonplace inside the country. Piracy is seen quite differently in China and is even encouraged by some OEMs. Upon being given a new Chinese variant ZUK Z1 by Lenovo at its launch in Shenzhen, I immediately noticed a second app store on the device dedicated to pirated, modified and cracked apps. Upon asking a spokesman about the cracked store they made it painfully obvious that they considered this an achievement to be proud of.

Despite this piracy problem China's app market is still seeing considerable growth and in 2020 is estimated to generate $31 billion in revenue, $21 billion of this is predicted to be from third party app stores. Likewise, app downloads are set to increase from 49 billion this year to over 90 billion in 2020, of which only 10 billion of these will be from Google Play. That being said if you are an app developer who only publishes their work to the Play Store you could be missing out on some serious traffic. If your app is popular then it may well be available in numerous pirate friendly stores already.

This is something each developer will have to investigate themselves and come to their own decision as to whether they should spread to other platforms and target the valuable but tricky Chinese demographic. While many people are talking about the next billion users and focussing on make their apps better for emerging markets, it's easy to lose sight of the fact that there is an entire market out there that is often forgotten about by western developers.

The Chinese market is changing rapidly, new marketing strategies and fierce competition continue to ensure that the top OEMs do not become stagnant. Growth across all three carriers has greatly aided growth in app downloads and revenue and if the forecasts prove to be accurate, then developers could see dramatic increase in profitability if opportunities are taken advantage of the right way.

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