According to GfK Retail Audit data, in 2011 smartphones held a market share of 33 percent in the mobile phone arena, while the ratio exceeded 50 percent in February 2012, indicating an acceleration of feature phones being replaced by smartphones.
Attributing the growing smartphone penetration partly to telecom operators' vigorous promotion of handset contracts and customized products, Wu commented in the report that in 2012 operator-subsidized phones took up 52 percent of total smartphone sales, up from 37 percent in 2011.
Another key driver behind the widening popularity of smartphones is the explosion of the super low-end smartphone. Sales for gadgets under 1,500 yuan ($240.3) totaled 110 million units in 2012, up 173 percent from the previous year, while sales of products above 1,500 yuan rose by 79 percent to 77 million units during the same period, according to GfK.
Budget strategy means a lot
"Riding on low-end smartphone sales and operator subsidies, Chinese handset brands are building momentum," Wu further noted in the report.
Chinese brands already take up 64 percent of the smartphone market volume share, per the GfK report.
The performance of China's smartphone sector was stronger than expected in the fourth quarter of 2012, as rapid growth in the low-end segment contributed to robust growth in the nation's overall smartphone market, which grew by 112.1 percent during the quarter compared to a year earlier, Wang Jiping, assistant director of the China personal systems research department at IDC, also said in a note sent to the Global Times on Thursday.
While the likes of Apple's iPhone or Samsung's Galaxy lineups retain their cachet among Chinese consumers, growth prospects in the higher segments of the market are dimmer than those in the more affordable line, remarked Wang with Forrester Research.
"That's why Apple may consider a cheaper option," he said. "China is among a few markets where the iPhone 4 remains available. Priced at just under 3,000 yuan, it is already a hot commodity in the lower-end market."
"Even in a scenario of low 40 percent gross margin and one-third iPhone cannibalization rate (flattening legacy iPhone shipment growth), which we view as conservative, the iPhone Mini adds incremental revenue and gross profit dollars," Morgan Stanley's Huberty said, estimating that sales of Apple's iPhone may rise substantially after the launch of a cheaper iPhone.
Apple's share of the Chinese market already fell to the sixth spot in the third quarter of last year by shipment, according to IDC, while a slew of more affordable local Chinese brands saw rising prominence in the market. While South Korea's Samsung retained the No.1 position in the Chinese market during the third quarter, local brands - Lenovo, Coolpad, ZTE and Huawei - followed to hold the second to fifth place, according to IDC.
Although uncertainties remain concerning Apple's rumored plans to unveil a cheaper iPhone, as "an apparently cheap design is likely to tarnish the gadget's attraction for those desiring an affordable but equally fancy iPhone, the iPhone Mini, if coming to the market, will definitely deal a blow to these eking out a living in the market," noted Bryan Wang.
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