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Mobile Phones and Apps - China - February 2014

“China is the number one market in terms of mobile phone volume sales. The market also exhibited very positive growth in 2013. The strong annual increment was fuelled by enthusiastic consumers with a strong demand for mobile phones, and smartphones in particular.”

– Can Huang, Senior Research Analyst

Some questions answered in this report include:

  • How to stand out from the crowd amid the smartphone competition in China?
  • Where do the future opportunities of mobile apps lie? Are there any potential threats?
  • How will mobile payment’s growth and future fare in the current fast growing online shopping environment?

China is the number one market in terms of mobile phone volume sales. The market also exhibited very positive growth in 2013. The strong annual increment was fuelled by enthusiastic consumers with a strong demand for mobile phones, and smartphones in particular.

Samsung leads the China market. Apple is also performing well thanks to its premium positioning, while domestic companies are posing an increasing threat to foreign leading mobile brands. Xiaomi is a young mobile telecommunications product manufacturer and software developer. As a latecomer it grabbed the market’s attention with its innovative online selling channel, its open mind-set regarding product optimisation, and value image. The success of the brand reflects some of the key success factors in China’s mobile phone market, such as a reliable brand and good value for money.

That said, commoditisation in handsets makes competition and profitability increasingly difficult. Nowadays, the greater potential for revenue generation lies in the OS, the app ecosphere, and with the network operator.

Growing with the boom in smartphone usage, mobile apps have also seen lucrative potential. However, the app market is also complex, and involves many players, such as mobile phone manufacturers, OS providers, telecom operators, and internet companies. It is important to understand this unique market and consumers’ evolving needs in order to be successful in China’s app market, and it will be equally important to be a part of the revolution in mobile payment systems that is just emerging. 

This report covers both mobile phones and mobile apps. The mobile phone market covers 2G, 3G and 4G & other mobile phone handsets. The report includes both non-smartphones - which covers basic mobile phones and feature phones - and smartphones.

For the purpose of this report, mobile apps are defined as software downloaded to mobile phones and tablets, subsequent to the purchase of the hardware. Software that comes built in with the purchase of hardware is not the subject of this report, regardless of whether it is considered as an app or not.

This report provides an overall analysis of the mobile phone and app market in China, covering topics like market size and forecast, major brands and their activities, consumers’ behaviour and their attitudes towards mobile phones and apps.

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Table of contents

  1. Introduction

      • Definition
        • Report structure
          • Methodology
            • Abbreviations
            • Executive Summary

                • The mobile phone market
                  • Forecast
                    • Figure 1: Mobile phone forecast, by volume sales, 2008-18
                  • Mobile phone market in China embraced prosperous growth in 2013
                    • Figure 2: Mobile sales in China, by value and volume, 2011-13
                  • A lucrative market for smartphones
                    • Figure 3: Non-smart phones and smartphones split, by volume share, 2008-13
                  • 3G capable mobile phones are the current mainstream - but the future lies with 4G
                    • Figure 4: 3G and 2G capable mobile phones sales split, by volume share, 2011-13
                  • Market drivers and growth barriers
                    • The mobile app market
                      • A complex app market full of potential
                        • Market drivers and growth barriers
                          • Companies and brands
                            • Samsung leads while domestic companies are catching up
                              • Figure 5: Top mobile phone companies, by volume share, 2012-13
                            • Commoditisation
                              • Major players in app market
                                • The Consumer: Mobile phone ownership
                                  • Figure 6: Smartphone and non-smartphone ownership, December 2013
                                  • Figure 7: Smartphone and non-smartphone ownership, by percentage shares of smartphone only users, non-smartphone users, and dual users, December 2013
                                • The Consumer: Operating system of current smartphone
                                  • Figure 8: Operating system of current smartphone, by percentage share, December 2013
                                • The Consumer: Price of current smartphone
                                  • Figure 9: Price of current smartphone, by percentage shares of price ranges, December 2013
                                • The Consumer: Consideration factors for buying mobile phones
                                  • Figure 10: Top three Important factors in choosing a mobile phone, December 2013
                                • The Consumer: Types of apps used
                                  • Figure 11: Frequently used types of apps, by category type, December 2013
                                • The Consumer: Attitudes towards mobile apps
                                  • Figure 12: Attitudes towards mobile phone apps, December 2013
                                • The Consumer: Attitudes towards mobile phone and apps
                                  • Figure 13: Attitudes towards mobile phone and apps, any agree, December 2013
                                • Key issue: How to reach different consumer segments in the mobile phone market
                                  • Key issue: How to be successful in China’s app market
                                      • Figure 14: Attitudes towards mobile apps, by percentage, agreement on “I would like to see more mobile apps tailored for Chinese users”, December 2013
                                    • Key Issue: The revolution on mobile payment
                                      • What we think
                                      • The Mobile Phone Market

                                        • Key points
                                          • Mobile phone market in China exhibited prosperous growth in 2013
                                            • Figure 15: Mobile sales in China, by value and volume, 2011-13
                                            • Figure 16: Average mobile phone price per handset, 2011-13
                                          • A lucrative market for smartphones
                                            • Figure 17: Non-smart phones and smartphones split, by volume share, 2008-13
                                            • Figure 18: Mobile phone volume growth rate, by non-smartphones and smartphones, 2008-13
                                          • The start of 4G era
                                            • 3G capable mobile phones are the current mainstream…
                                              • Figure 19: 3G and 2G capable mobile phones sales split, by volume share, 2011-13
                                            • …but the future lies with 4G
                                                • Figure 20: 3G network registered users, 2013
                                              • Market drivers
                                                • National economic growth continues
                                                  • Figure 21: GDP and growth rates, China, 2008-13
                                                • Income rises in both urban and rural areas
                                                  • Figure 22: Annual per capita net income and actual growth rate of urban and rural residents in China (RMB), 2008-12
                                                • Demands of mobile population in modern life
                                                  • An internet savvy nation
                                                    • Development of mobile networks
                                                      • Growth barriers
                                                        • A dynamic market with technology development challenges
                                                          • Mobile phone platform and product innovation challenges
                                                            • Threats from copycats (Shanzhai)
                                                              • Forecast
                                                                • Figure 23: Mobile phone forecast, by volume sales, 2008-18
                                                            • The Mobile App Market

                                                              • Key points
                                                                • A complex app market full of potential
                                                                  • Market drivers – apps
                                                                    • Booming smartphone market
                                                                      • 4G opportunity
                                                                        • App-friendly Chinese consumers
                                                                          • Growth barriers
                                                                            • The clash between free usage mind-set and profit model
                                                                              • The competitive environment
                                                                                • A motley variety of app stores
                                                                                  • Intellectual property concerns
                                                                                  • Companies and Brands

                                                                                    • Key points
                                                                                      • Samsung is leading the race in mobile phone market…
                                                                                          • Figure 24: Top mobile phone companies, by volume share, 2012-13
                                                                                          • Figure 25: Top mobile phone companies, by value share, 2012-13
                                                                                        • …and its success lies in broad product ranges and understanding local needs
                                                                                          • Commoditisation
                                                                                            • Domestic brands emerge as strong contenders the smartphone segment
                                                                                              • Major players in app market
                                                                                                • Local platforms are leading downloading portals for Android
                                                                                                  • Internet giants’ influence
                                                                                                    • Company profiles: Mobile phone manufacturers:
                                                                                                      • Samsung Group
                                                                                                        • Apple Inc.
                                                                                                          • Nokia Corporation
                                                                                                            • Lenovo Group
                                                                                                              • Xiaomi Inc.
                                                                                                                • App platforms:
                                                                                                                  • Apple Inc. (iOS)
                                                                                                                    • Wandouja (Android)
                                                                                                                      • Internet companies:
                                                                                                                        • Tencent Inc.
                                                                                                                          • Alibaba Group
                                                                                                                          • The Consumer – Mobile Phone Ownership

                                                                                                                            • Key points
                                                                                                                              • Mobile phones are an essential part of consumers’ lives
                                                                                                                                  • Figure 26: Technology products ownership, December 2013
                                                                                                                                • Smartphones are the mainstream
                                                                                                                                  • Figure 27: Smartphones and non-smartphones ownership, December 2013
                                                                                                                                  • Figure 28: Smartphones and non-smartphones ownership, by percentage shares of smartphone only users, non-smartphone users, and dual users, December 2013
                                                                                                                                • Dual users tend to be young, single and on low incomes
                                                                                                                                    • Figure 29: Mobile phone ownership, by smartphone only and smartphone and non-smartphone dual users, December 2013
                                                                                                                                • The Consumer – Operating System of Current Smartphone

                                                                                                                                  • Key points
                                                                                                                                    • Android is the leading smartphone operating system
                                                                                                                                        • Figure 30: Operating system of current smartphone, by percentage share, December 2013
                                                                                                                                      • No strong preference for Android and iOS by age and gender
                                                                                                                                          • Figure 31: Operating system of current smartphone, by gender and age, December 2013
                                                                                                                                        • iOS/iPhone attracts higher income and better educated consumer groups
                                                                                                                                            • Figure 32: Operating system of current smartphone, by income, city, and education, December 2013
                                                                                                                                        • The Consumer – Price of Current Smartphone

                                                                                                                                          • Key points
                                                                                                                                            • Around half smartphones used are mid-price
                                                                                                                                              • Figure 33: Price of current smartphone, by percentage shares of price ranges, December 2013
                                                                                                                                              • Figure 34: Price of current smartphone, December 2013
                                                                                                                                            • Older women are prepared to spend on premium phones
                                                                                                                                                • Figure 35: Price of current smartphone, by gender, age and income, December 2013
                                                                                                                                              • Consumers from tier one cities are more likely to own more expensive mobile handsets
                                                                                                                                                  • Figure 36: Price of current smartphone, by city, December 2013
                                                                                                                                              • The Consumer – Consideration Factors When Buying a Mobile Phone

                                                                                                                                                • Key points
                                                                                                                                                  • Good value for money is top of mind when purchasing a mobile phone
                                                                                                                                                      • Figure 37: Single most Important factors in choosing a mobile phone, December 2013
                                                                                                                                                    • High processing speed and configuration most important when aggregating top three factors
                                                                                                                                                      • Figure 38: Top three Important factors in choosing a mobile phone, December 2013
                                                                                                                                                    • Large screen fantasy
                                                                                                                                                      • Demand for high quality cameras
                                                                                                                                                        • The question of colour
                                                                                                                                                          • For people who are willing to pay a premium for mobile phones, brand becomes the most important factor
                                                                                                                                                              • Figure 39: Single most Important factors in choosing a mobile phone, by current mobile phone price, December 2013
                                                                                                                                                          • The Consumer – Types of Apps Used

                                                                                                                                                            • Key points
                                                                                                                                                              • Social, daily life services, entertainment, and payment/investment related apps are most frequently used
                                                                                                                                                                  • Figure 40: Frequently used types of apps, by category type, December 2013
                                                                                                                                                                • Social networking and instant messenger apps are the most often used apps
                                                                                                                                                                  • Growth scale for daily life service apps
                                                                                                                                                                    • Entertainment needs
                                                                                                                                                                      • Mobile payment potential
                                                                                                                                                                          • Figure 41: Frequently used types of apps, December 2013
                                                                                                                                                                        • Women and young people using social networking and instant messenger apps most frequently
                                                                                                                                                                            • Figure 42: Frequently used types of apps, by gender and age, December 2013
                                                                                                                                                                        • The Consumer – Attitudes towards Mobile Apps

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Half of consumers willing to try new apps
                                                                                                                                                                                • Figure 43: Attitudes towards mobile phone apps, on new apps, December 2013
                                                                                                                                                                              • Word of mouth and recommendations help apps to increase usage
                                                                                                                                                                                  • Figure 44: Attitudes towards mobile phone apps, on social influence on apps, December 2013
                                                                                                                                                                                • Mobile app advertising is acceptable, but requires careful execution
                                                                                                                                                                                    • Figure 45: Attitudes towards mobile phone apps, on mobile app advertising, December 2013
                                                                                                                                                                                  • Well-designed paid apps can have a broad appeal
                                                                                                                                                                                      • Figure 46: Attitudes towards mobile phone apps, on payment of apps, December 2013
                                                                                                                                                                                  • The Consumer – Attitude towards Mobile Phones and Apps

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • International brands are still seen as better quality
                                                                                                                                                                                          • Figure 47: Attitude towards mobile phone, on international brands, December 2013
                                                                                                                                                                                        • Consumers are looking for the latest versions of phones
                                                                                                                                                                                            • Figure 48: Attitude towards mobile phone, on function and size, December 2013
                                                                                                                                                                                          • Apps with Chinese features appeal to consumers
                                                                                                                                                                                            • Figure 49: Attitude towards mobile apps, December 2013
                                                                                                                                                                                          • More efforts required for mobile payment adoption
                                                                                                                                                                                              • Figure 50: Attitude towards mobile apps, on mobile payment, December 2013
                                                                                                                                                                                          • Key Issue – How to Reach Different Consumer Segments in Mobile Phone Market

                                                                                                                                                                                            • Key points
                                                                                                                                                                                              • Consumer segmentation
                                                                                                                                                                                                • Figure 51: Target groups, December 2013
                                                                                                                                                                                              • Status Aware (27% of sample)
                                                                                                                                                                                                • App Enthusiasts (25% of sample)
                                                                                                                                                                                                  • Casual Users (24% of sample)
                                                                                                                                                                                                    • Skeptics (24% of sample)
                                                                                                                                                                                                        • Figure 52: Attitudes towards mobile phone and apps, by Target groups, November 2013
                                                                                                                                                                                                      • Different pricing strategies for different target groups
                                                                                                                                                                                                        • Budget priced mobile phones should target Casual Users and Skeptics first…
                                                                                                                                                                                                          • …and everyone fights in the mid-price range…
                                                                                                                                                                                                            • …while premium positioned models should prioritise the Status Aware and App Enthusiasts
                                                                                                                                                                                                                • Figure 53: Price of current smartphone, by target groups, November 2013
                                                                                                                                                                                                              • iOS/Apple is more appealing to the Status Aware and App Enthusiasts
                                                                                                                                                                                                                  • Figure 54: Operating system of current smartphone, by target groups, November 2013
                                                                                                                                                                                                                • What it means
                                                                                                                                                                                                                • Key Issue – How to be Successful in China’s App Market

                                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                                    • Lucrative but competitive app market full of potential
                                                                                                                                                                                                                      • Figure 55: Attitudes towards mobile phone apps, on new apps, December 2013
                                                                                                                                                                                                                    • Be Chinese
                                                                                                                                                                                                                      • Figure 56: Attitude towards mobile apps, by percentage, agreement on “I would like to see more mobile apps tailored for Chinese users”, December 2013
                                                                                                                                                                                                                    • Add social elements
                                                                                                                                                                                                                      • Figure 57: Attitude towards mobile apps, by percentage, agreement on “Social networking apps are becoming an essential part of my life”, December 2013
                                                                                                                                                                                                                    • Find a sustainable monetisation model
                                                                                                                                                                                                                      • Figure 58: Attitudes towards mobile phone apps, on payment of apps, December 2013
                                                                                                                                                                                                                      • Figure 59: Attitudes towards mobile phone apps, on mobile app advertising, December 2013
                                                                                                                                                                                                                    • Select the right app downloading platforms
                                                                                                                                                                                                                      • Know your enemies
                                                                                                                                                                                                                        • Figure 60: Attitude towards mobile apps, by percentage, agreement on “The hidden risks of copycat apps puts me off trying new mobile apps”, December 2013
                                                                                                                                                                                                                      • What it means
                                                                                                                                                                                                                      • Key Issue – Catching the Revolution in Mobile Payments

                                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                                          • The potential of mobile payment
                                                                                                                                                                                                                            • The future of payment lies in mobile payment
                                                                                                                                                                                                                              • Figure 61: Frequently used types of apps, by payment and investment related apps, December 2013
                                                                                                                                                                                                                            • Mobile payment is in its infancy
                                                                                                                                                                                                                              • Figure 62: Attitude towards mobile apps, on mobile payment, December 2013
                                                                                                                                                                                                                            • Key players and types of mobile payment in China
                                                                                                                                                                                                                              • Future opportunity in NFC
                                                                                                                                                                                                                                • Future opportunity in mobile payment through apps
                                                                                                                                                                                                                                  • Broader scale of coverage and applications
                                                                                                                                                                                                                                    • Better understanding of consumers and hence more focused and targeted marketing
                                                                                                                                                                                                                                      • What it means
                                                                                                                                                                                                                                      • Appendix – Mobile Phone Ownership

                                                                                                                                                                                                                                          • Figure 63: Technology products ownership, December 2013
                                                                                                                                                                                                                                          • Figure 64: Most popular technology products ownership, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 65: Next most popular technology products ownership, by demographics, December 2013
                                                                                                                                                                                                                                      • Appendix – Operating System of Current Smartphone

                                                                                                                                                                                                                                          • Figure 66: Operating system of current smartphone, December 2013
                                                                                                                                                                                                                                          • Figure 67: Operating system of current smartphone, by demographics, December 2013
                                                                                                                                                                                                                                      • Appendix – Price of Current Smartphone

                                                                                                                                                                                                                                          • Figure 68: Price of current smartphone, December 2013
                                                                                                                                                                                                                                          • Figure 69: Most popular price of current smartphone, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 70: Next most popular price of current smartphone, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 71: Other price of current smartphone, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 72: Price of current smartphone, by technology products ownership, December 2013
                                                                                                                                                                                                                                      • Appendix – Types of Apps Used

                                                                                                                                                                                                                                          • Figure 73: Frequently used types of apps, December 2013
                                                                                                                                                                                                                                          • Figure 74: Frequently used types of apps, by operating system of current smartphone, December 2013
                                                                                                                                                                                                                                      • Appendix – Consideration Factors for Buying Mobile Phones

                                                                                                                                                                                                                                          • Figure 75: Important factors in choosing a mobile phone, December 2013
                                                                                                                                                                                                                                          • Figure 76: Most popular important factors in choosing a mobile phone – Rank 1, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 77: Next most popular important factors in choosing a mobile phone – Rank 1, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 78: Most popular important factors in choosing a mobile phone – Rank 2, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 79: Next most popular important factors in choosing a mobile phone – Rank 2, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 80: Most popular important factors in choosing a mobile phone – Rank 3, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 81: Next most popular important factors in choosing a mobile phone – Rank 3, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 82: Important factors in choosing a mobile phone, by technology products ownership, December 2013
                                                                                                                                                                                                                                          • Figure 83: Important factors in choosing a mobile phone, by price of current smartphone, December 2013
                                                                                                                                                                                                                                      • Appendix – Attitudes towards Mobile Apps

                                                                                                                                                                                                                                          • Figure 84: Additional attitude towards mobile phone apps, December 2013
                                                                                                                                                                                                                                          • Figure 85: Additional attitude towards mobile phone apps – Social influence on apps, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 86: Additional attitude towards mobile phone apps – Mobile app advertising, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 87: Additional attitude towards mobile phone apps – New apps, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 88: Additional attitude towards mobile phone apps – Payment of apps, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 89: Additional attitude towards mobile phone apps – None of these, by demographics, December 2013
                                                                                                                                                                                                                                      • Appendix – Attitudes towards Mobile Phones and Apps

                                                                                                                                                                                                                                          • Figure 90: Attitude towards mobile phone and apps, December 2013
                                                                                                                                                                                                                                          • Figure 91: Agreement with the statement ‘It is worth paying to have my mobile phone upgraded to the latest version’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 92: Agreement with the statement ‘The bigger the mobile phone is, the more convenient it is to use’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 93: Agreement with the statement ‘Mobile phones that just provide the basic functions are more convenient to use’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 94: Agreement with the statement ‘International mobile phone brands are of higher quality than China’s own’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 95: Agreement with the statement ‘It is worth paying more for mobile apps of higher quality’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 96: Agreement with the statement ‘I would like to see more mobile apps tailored for Chinese users’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 97: Agreement with the statement ‘The hidden risks of copycat apps puts me off trying new mobile apps’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 98: Agreement with the statement ‘Social networking apps are becoming an essential part of my life’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 99: Agreement with the statement ‘There is a lack of different mobile payment services/apps to choose from’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 100: Agreement with the statement ‘There are a lack of places where i can pay via my mobile phone’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 101: Agreement with the statement ‘There is not enough information available on mobile phone payment’, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 102: Agreement with the statement ‘Mobile payment is just as safe as paying through traditional methods’, by demographics, December 2013
                                                                                                                                                                                                                                      • Appendix – Further Analysis

                                                                                                                                                                                                                                          • Figure 103: Target groups, December 2013
                                                                                                                                                                                                                                          • Figure 104: Target groups, by demographics, December 2013
                                                                                                                                                                                                                                          • Figure 105: Technology products ownership, by target groups, December 2013
                                                                                                                                                                                                                                          • Figure 106: Operating system of current smartphone, by target groups, December 2013
                                                                                                                                                                                                                                          • Figure 107: Price of current smartphone, by target groups, December 2013
                                                                                                                                                                                                                                          • Figure 108: Frequently used types of apps, by target groups, December 2013
                                                                                                                                                                                                                                          • Figure 109: Important factors in choosing a mobile phone, by target groups, December 2013
                                                                                                                                                                                                                                          • Figure 110: Additional attitude towards mobile phone apps, by target groups, December 2013
                                                                                                                                                                                                                                          • Figure 111: Attitude towards mobile phone and apps, by target groups, December 2013

                                                                                                                                                                                                                                      Companies Covered

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                                                                                                                                                                                                                                      Mobile Phones and Apps - China - February 2014

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