from Wolf Street:
Smartphones conquered even impoverished consumers in desperately poor countries, giving them access to things they couldn’t even imagine a few years ago. The devices and the activities they spawned have been one of the world’s growth engines. China’s consumers adopted them at stunning rates. But even that growth engine is slowing down on a global basis. And in China, it just skidded backwards into the ditch.
Globally, smartphone sales in the second quarter rose 13.5% to 329.6 million units, the slowest year-over-year growth rate since 2013, Gartner reported today. What drove growth were cheaper 3G and 4G smartphones in emerging markets in Asia/Pacific – excluding China – Eastern Europe, the Middle East, and Africa. The winners in these markets were Chinese and local brands.
But in China – the world’s largest market for smartphones, accounting for 30% of global sales last quarter – unit sales fell 4%, the first decline ever.
Gartner’s explanation of the phenomenon, after years of mind-bending growth, featured the very unwelcome S-word:
China has reached saturation – its phone market is essentially driven by replacement, with fewer first-time buyers. Beyond the lower-end phone segment, the appeal of premium smartphones will be key for vendors to attract upgrades and to maintain or grow their market share in China.
It’s getting tough in China. “Saturation” inspires fear. It turns a market into a war zone of pricing and innovation, of margin pressures and profit declines. There will be shakeouts and losers. But in China, it’s worse: the market actually shrank.
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