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Mobile Phones - China - February 2017

“In the saturating mobile phone market, replacement purchase is the key driver as consumers show the potential to trade up. This is especially the case for lower tier cities and rural areas. Brands should focus on offering outstanding premium phones and also pay attention to developing offline retail channels to win in lower tier markets.”

– Terra Xu, Senior Research Analyst

This report is looking at the following areas:

  • Online and offline channels play different roles
  • Attracting purchases in the saturated smartphone market
  • Brands should enrich their product portfolios

The mobile phone market covers 2G, 3G and 4G and other mobile phone handsets. Although the report includes both non-smartphones – which covers basic mobile phones and feature phones – and smartphones, the analysis focuses mainly on smartphones which is the leading segment.

  • A basic mobile phone is one that is mainly capable of calling and sending text messages.
  • A feature phone is defined as a device capable of connecting to 2G networks (but not usually 3G), and which may come with a colour screen, a music player or a camera, but which typically lacks the advanced web browsing ability of a smartphone as well as the ability to download more applications.
  • A smartphone is defined as any modern mobile phone capable of connecting to the internet, as well as downloading applications from proprietary application stores.

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Table of contents

  1. Overview

    • What you need to know
      • Covered in this report
        • Personal income
        • Executive Summary

            • The market
              • A slow growth, and estimated to continue
                • Figure 1: Volume sales of mobile phones in China, 2011-21
              • Premiumisation fuels market growth, and offline channels remain important
                • Companies and brands
                  • Huawei leads volume share, followed by OPPO and Vivo
                    • Xiaomi, Apple and Samsung face challenges
                      • Figure 2: Leading mobile phone brands in China, by volume share, 2015-16
                    • The consumer
                      • Huawei enjoys increase among tier one, two and three cities
                        • Figure 3: Brands of current smartphones and ranking change, October 2016 and November 2016
                      • Purchase intention dropped in 2016
                        • Mid earners and lower tier cities should be the focus to attract purchase
                          • Figure 4: Smartphone purchase intention in the next 6 months, October 2015 and November 2016
                        • Huawei continues to win consumers’ favour
                          • Figure 5: Intended smartphone brands, October 2014, October 2015 and November 2016
                        • The less expensive current smartphones, the higher upgrade degree
                          • Figure 6: Price range of current smartphones and future purchase budget, November 2016.
                        • Product rather than brand driven
                          • Figure 7: Smartphone purchase motivation, November 2016.
                        • Both online and offline channels are important, but play different roles
                          • Figure 8: Attitudes towards online and offline channels for mobile phone purchase, November 2016
                        • Always going for the latest models
                          • What we think
                          • Issues and Insights

                            • Online and offline channels play different roles
                              • The facts
                                • The implications
                                    • Figure 9: Xiaomi Home, Shanghai, February 2016
                                  • Attracting purchases in the saturated smartphone market
                                    • The facts
                                      • The implications
                                        • Brands should enrich their product portfolios
                                          • The facts
                                            • The implications
                                            • The Market – What You Need to Know

                                              • Mobile phone market grows slowly yet steadily
                                                • Premiumisation drives market value growth
                                                  • Smartphone growth slows down, as does 4G mobile phone growth
                                                  • Market Size and Forecast

                                                    • Mobile phone market maintained slow yet steady growth in 2016
                                                      • Figure 10: Volume sales of mobile phones in China, 2011-16
                                                      • Figure 11: Value sales of mobile phones in China, 2011-16
                                                    • Mobile phone market estimated to continue steady growth with slight acceleration
                                                      • Figure 12: Volume sales of mobile phones in China, 2011-21
                                                  • Market Factors

                                                    • Consumers trading up to premium smartphones fuels market value growth
                                                      • Offline channels remain important
                                                        • 4G transition is no longer a key growth driver
                                                        • Market Segmentation

                                                          • 4G devices make 96% of total mobile phone volume, but no longer a key driver
                                                            • Figure 13: Volume sales of smartphones and non-smartphones in China, 2011-16
                                                            • Figure 14: Volume sales of 2G, 3G and 4G mobile phones in China, 2014-16
                                                        • Key Players – What You Need to Know

                                                          • Huawei, OPPO and Vivo won in 2016, while Xiaomi, Apple and Samsung lost share
                                                            • Brands are offering premium models
                                                              • Opening bricks-and-mortar stores in lower tier markets, and leveraging the power of celebrities
                                                                • Innovative screen design and limited/special edition to increase appeal
                                                                • Market Share

                                                                  • Huawei is the biggest winner in 2016, followed by OPPO and Vivo
                                                                    • Xiaomi, Apple and Samsung losing volume share
                                                                      • Fewer product lines, more specific target audience
                                                                        • Figure 15: Leading mobile phone brands in China, by volume share, 2015-16
                                                                      • A more concentrated smartphone market, in terms of value sales
                                                                        • Figure 16: Leading mobile phone brands in China, by value share, 2015-16
                                                                    • Competitive Strategies

                                                                      • Offering premium models to satisfy consumers’ evolving needs
                                                                        • Bricks-and-mortar stores winning in lower tier markets
                                                                          • Continuing the power of celebrity endorsement
                                                                            • Enriching product portfolio for new growth or spreading the risk
                                                                            • Who’s Innovating?

                                                                              • Differentiating screen design to increase appeal
                                                                                • Limited or special editions to attract sophisticated consumers
                                                                                • The Consumer – What You Need to Know

                                                                                  • Domestic brands dominate with Huawei taking the lead
                                                                                    • Purchase intention sees decline, while lower tier markets show potential
                                                                                      • Huawei expected to strengthen advantage
                                                                                        • Consumers show potential to upgrade their smartphones
                                                                                          • Function and design upgrade can motivate purchase
                                                                                            • Online and offline purchase channels both appeal, while consumers trust online information more
                                                                                              • About half of buyers would always choose the latest models
                                                                                              • Current Smartphone Brands

                                                                                                • Huawei ranking up and Xiaomi faces challenge
                                                                                                  • Figure 17: Ranking comparison of top 5 smartphone brands, October 2015 and November 2016
                                                                                                • Domestic brands dominate
                                                                                                  • Figure 18: Brands of current smartphones, November 2016
                                                                                              • Purchase Intention

                                                                                                • A drop in purchase intention
                                                                                                  • Figure 19: Smartphone purchase intention in the next 6 months, October 2015 and November 2016
                                                                                                • Who are likely to buy smartphones?
                                                                                                  • Figure 20: Smartphone purchase intention in the next 6 months, by personal income and city tier, October 2015 and November 2016
                                                                                                • No big difference by brand owners
                                                                                                  • Figure 21: Smartphone purchase intention in the next 6 months, by current smartphone brand, November 2016
                                                                                              • Intended Brands

                                                                                                • Apple and Samsung are losing appeal, while Huawei is biggest winner
                                                                                                  • Figure 22: Intended smartphone brands, October 2014, October 2015 and November 2016
                                                                                                • Brand loyalty is relatively low
                                                                                                  • Figure 23: Loyal users of leading brands, October 2015 and November 2016
                                                                                              • Smartphone Price Range

                                                                                                • Average spending and budget for future purchase reduce …
                                                                                                  • Figure 24: Average price of current smartphones and future purchase budget, October 2014 and November 2016.
                                                                                                • … yet consumers still want to upgrade their smartphones
                                                                                                  • Figure 25: Price range of current smartphone and future purchase budget, November 2016.
                                                                                                • 20-24-year-olds show strong upgrade potential
                                                                                                    • Figure 26: Average price of current smartphone and future purchase budget, by demographics, November 2016.
                                                                                                • Smartphone Purchase Motivation

                                                                                                  • New function and appearance drive purchase
                                                                                                    • Figure 27: Smartphone purchase motivation, November 2016.
                                                                                                  • Trade-in programmes can attract those who have not made up their mind
                                                                                                    • Figure 28: Smartphone purchase motivation, by purchase intention in the next 6 months, November 2016.
                                                                                                  • Appearance and design is important to attract the 20s, while WOM reputation matters to 30s and 40s
                                                                                                    • Special/limited editions still attract high earners
                                                                                                      • Figure 29: Smartphone purchase motivation, by age and personal income, November 2016.
                                                                                                  • Attitudes towards Mobile Phone Purchase

                                                                                                    • Online versus offline channels
                                                                                                      • Not an either/or question
                                                                                                        • Figure 30: Attitudes towards online and offline channels for mobile phone purchase, November 2016
                                                                                                      • Xiaomi users prefer buying mobile phones online, while Huawei users do not show specific preference
                                                                                                        • Figure 31: Attitudes towards online or offline channels, by demographics, November 2016
                                                                                                      • When to buy a new phone
                                                                                                        • Most consumers do not wait until their phone breaks to get a new one
                                                                                                          • Figure 32: Attitudes towards mobile phone purchase, November 2016
                                                                                                        • 30s are an important target group
                                                                                                          • Figure 33: Attitudes towards mobile phone purchase, November 2016
                                                                                                        • Accessories or not
                                                                                                          • Accessories can be an added-value feature to increase appeal
                                                                                                            • Figure 34: Attitudes towards mobile phone accessories, by demographics, November 2016
                                                                                                        • Meet the Mintropolitans

                                                                                                          • Mintropolitans prefer Huawei and Apple
                                                                                                            • Figure 35: Current smartphone brands, by consumer classification, November 2016
                                                                                                          • Greater drop of purchase intention among Mintropolitans
                                                                                                            • Figure 36: Smartphone purchase intention in the next 6 months, by consumer classification, November 2016
                                                                                                          • Non-Mintropolitans show higher upgrade rate
                                                                                                            • Figure 37: Average price of current smartphone and future purchase budget, by consumer classification, November 2016
                                                                                                          • Adopting latest technology and modular design appeals to Mintropolitans
                                                                                                            • Figure 38: Smartphone purchase motivation, by consumer classification, November 2016
                                                                                                          • Online and offline channels are both important
                                                                                                            • Figure 39: Attitudes towards mobile phone purchase, by consumer classification, November 2016
                                                                                                        • Appendix – Market Size and Forecast

                                                                                                          • Detailed market size and forecast table
                                                                                                            • Figure 40: Volume sales of mobile phone market in China, 2011-21
                                                                                                            • Figure 41: Value sales of mobile phone market in China, 2011-16
                                                                                                        • Appendix – Market Segmentation

                                                                                                          • Detailed market segmentation table
                                                                                                            • Figure 42: Volume sales of mobile phone market in China, by market segment, 2011-16
                                                                                                        • Appendix – Methodology and Abbreviations

                                                                                                          • Methodology
                                                                                                            • Fan chart forecast
                                                                                                              • Abbreviations

                                                                                                              Companies Covered

                                                                                                              To learn more about the companies covered in this report please contact us.

                                                                                                              Mobile Phones - China - February 2017

                                                                                                              US $3,990.00 (Excl.Tax)