As China Smartphone Market Slows, Focus Goes To India

A sharp slowdown in smartphone sales in China prodded research firm IDC to cut its 2015 growth estimates, with India now seen as a key market for growth.

IDC now expects smartphone shipments of 1.44 billion units in 2015, up 10.4% from last year. It had been forecasting 11.3% growth.

The IDC outlook is comparable to a report last week from research firm Gartner. It said global smartphone sales last quarter rose by the slowest quarterly rate since 2013, as sales in China fell for the first time, with Apple (NASDAQ:AAPL) taking market share from Samsung.

Market leader Samsung, despite the April launch of its new S6 models, continued to be challenged by Apple's large-screen iPhones. In Q2, Samsung unit sales fell 5.3% from Q2 2014, Gartner said. Apple iPhone sales rose 36%, lifting its market share to 14.6% from 12.2%. Samsung's share fell to 21.9% from 26.2%.

IDC's report said China has joined North America and Western Europe in a more mature growth pattern. As a result, it says the focus on smartphone growth will shift to India.

"India has captured a lot of the attention that China previously received and it's now the market with the most potential upside," IDC analyst Ryan Reith said in the report.

"The interesting thing to watch will be the possibility of manufacturing moving from China and Vietnam over to India," he said. The shift in manufacturing to India is seen as a way to cut costs and capitalize on financial benefits associated with localized India manufacturing.

China clearly remains a key market, IDC said, accounting for 32.3% of new smartphone shipments in 2014. But China's smartphone unit sales are expected to rise just 1.2% in 2015, vs. 19.7% in 2014.

Despite Apple's continued success with its iPhones, the story among operating systems is not expected to change, IDC said. The Google (NASDAQ:GOOGL) Android operating system is expected to hold a dominant 81% share of the smartphone market this year, due partly to Android's widespread use on cheaper smartphones. Apple's iOS is expected to have a 15.6% share. IDC said Apple's efforts to maintain profit margins significantly higher than its rivals is much more valuable for the company than chasing market share.

Last week, Google announced that the new version of its Android operating system, previously called Android M, will be called Marshmallow.

Microsoft (NASDAQ:MSFT) continues to struggle to generate wider demand for Windows Phone devices and will remain a marginal challenger. IDC estimates that Microsoft Windows will have a market share of 2.6% in 2015.

Follow Brian Deagon on Twitter: @IBD_BDeagon.

Source: As China Smartphone Market Slows, Focus Goes To India