BEIJING–Total smartphone shipments in China fell 4% in the fourth quarter of 2013 from the third quarter, according to research firm IDC, the latest signal that the explosive growth in the world’s largest smartphone market is likely to moderate in coming years.
According to IDC, 90.8 million handsets were shipped in the fourth quarter, compared with 94.8 million in the third. It is the first drop in shipments in more than two years, and could signal harder times for both domestic and foreign smartphone companies looking to China for growth.
“This is the first hiccup we’ve seen in an otherwise stellar growth path, ” IDC analyst Melissa Chau wrote in a note.
“We are now starting to see a market that is becoming less about capturing the low-hanging fruit of first-time smartphone users and moving into the more laborious process of convincing existing users why they should upgrade to this year’s model,” she added.
The decline might be due in part to customers waiting for China’s speedier next-generation network to come online before buying their next handset, analysts said, but the drop in smartphone sales also mirrors a slowdown in the growth rate of Internet penetration. That could indicate that a large portion of the smartphone market has already been tapped, analysts said.
The drop highlights concerns about Chinese domestic consumption and could reflect the impact of slowing growth in China on consumer willingness to spend on big-ticket items including smartphones.
Steady, if moderating, growth in smartphone shipments in China in coming years is forecast by many analysts, but the boom times are over. For China’s many low-cost smartphone makers, slowing growth could be a problem. Firms that have been selling phones at low prices, forgoing profits to attract customers, will be forced to compete even harder for a more-limited customer base.
Global smartphone giants such as Apple Inc. and Samsung Electronics Co. also are likely to have to do more to attract Chinese buyers as fewer new customers buy their products.
The weak sales could put further price pressure on smartphones in China as companies seek to court rural users who haven’t yet switched to smartphones, said Mark Natkin, managing director of Marbridge Consulting, a Beijing-based market-research firm.
“The part of the population that has not yet adopted smartphones at all is a much lower income level,” he said. The next bumps in smartphone growth in China will likely come with the wide release of handsets that work on new fourth-generation networks, and then with the release of cheap smartphones that run on the network.
IDC expects growth in Asia to shift to other emerging markets such as India. In turn, the research firm said, China’s fast-growing low-cost handset makers, such as Huawei Technologies Co. and Lenovo Group Ltd., are likely to look to expand more aggressively overseas.
This article originally appeared on MarketWatch.com