2015 may be a tipping point in the smartphone wars that have escalated this year, possibly toppling Korean giant Samsung off of the top-selling spot in China. China is an important market battleground for the smartphone OEMs because of both the volume and the added challenge of local, low-cost brands posing real competitive threats to major, global brands.
China as new proving ground
While the mature market economies hold the focus for the high-priced smartphones from leading OEMs Apple and Samsung especially, the global smartphone economy will see shifts in 2015. The emerging economies may hold question marks in some regards, but when it comes to smartphone purchases and volume expectations, 2015 will be an important sales and volume year by all current indicators. As The New York Times reminded us of IDC's forecast that "people in China [are] expected to buy 500 million smartphones in 2015 – more than three times as many as will be sold in the United States […]."
There are questions, however, about where China is in the market cycle with smartphones. According to a recent article inÂÂ China Daily, China's driving feature in smartphone sales in 2015 will be 4G capabilities, but that leading-edge capability will also drive up prices, nearly doubling from 1,000 yuan (roughly US $160) to 2,000 yuan. The price point could present a speed bump in sales. In sync with the 4G device introductions, China's leading telecom service providers are poised to provide 4G LTE services to their customers as early as the first quarter of 2015 (1Q15). As Seeking Alpha recently reported:
A number of telecoms stories are in the headlines today, highlighting the huge hopes everyone has for new 4G services that will open up the market to a wide array of new products. Leading the headlines are word that China Telecom and Unicom have recevied [sic] the green light to expand their trial 4G networks as the nation's two smaller mobile carriers play catch-up to industry titan China Mobile.
There are questions, however, since China Mobile's 3G network was under-utilized due to problems with the system, as reported in the Seeking Alpha article. How China resolves the 3G problems, or simply hops over them to replace the network with 4G LTE, will act as an important test case both to see what consumer buy-in for 4G devices will be as well as whether or not the increase in features and capabilities provided by 4G and 4G-enabled devices is a demand driver as strong as initial device purchase and connectivity has been.
BRIC growth for mobile
Regardless of the GDP and other economic indicators for growth, and whether or not those reach the expected (or hoped) percentiles, there is an important and quiet divergence happening between the semiconductor and electronics industry and economic patterns, as presented earlier this month in this blog and which will be discussed in more detail in next month's Smith MarketWatch Quarterly. This topic might seem like the musings of analysts alone, but it is important for the wider supply chain and forecasting. If 2015 provides further evidence that the electronics industry and economic shifts are following (at least some critical) different trends, then the core of what drives momentum for electronics consumption needs to be understood and tracked to adjust sales and forecasting models for purchasing and production cycles.
As it stands, the global, "Mobile Economy," as GSMA coined and extensively reported on earlier this year, continues to grow steadily regardless of the wider economic shifts and concerns. The reasons are not really mysterious, rather very basic, the role and the importance of mobile devices, smartphones and tablets especially, are becoming (or have become?) central to people's personal and business lives. To be and stay connected is fundamentally important and the devices that enable that are, therefore, becoming part of the fundamental needs and purchases that people make. That is a powerful position and one that secures the semiconductor and electronics industry's sustainable growth.