IDC: 2015 China Smart Connected Device Top 10 Predictions

IDC: 2015 China Smart Connected Device Top 10 Predictions

02 Feb 2015

Beijing, February 2, 2015 — The shipment of China’s smart connected devices (“SCDs”, including PCs, tablets and smartphones) in 2014 was around 510 million units, a year-on-year (YoY) increase of 16.2%. Wherein, the shipment of PCs was 61.02 million units, down by 5.5% YoY; the shipment of tablets was 27.86 million units, up by 7.5% YoY; the shipment of smartphones was 420 million units, up by 20.9% YoY. IDC predicts that in 2015, the shipment of China’s SCDs will reach 540 million units, and the YoY growth will slow down.

According to Nick Mu, Senior Analyst of IDC China, “2014 witnessed the rapid integration of China’s SCD products. In 2014, many factors changed China’s SCD market, including the penetration of SCD products into lower tier cities, changes in sales channels, as well as the impact of smartphones and tablets on PCs. ”

Although the overall growth of China’s SCDs will slow down a little bit, the real question is what will  occur in regional markets and urban markets, at different tiers of cities as well as different products and channels? Which trends will determine how consumers and suppliers adapt to the market changes? Bearing these questions in mind, IDC concluded the following 10 predictions for China’s SCD market in 2015:

1.    PC demands will recover 1st- to 3rd-tier cities
In the recent two years, PCs were impacted by smartphones and tablets, in the way that the sales of the smartphones and tablets were greatly stimulated by the demand for the mobile Internet. Thus far, PCs didn’t fare well in the mobile Internet age, and consumers’ PC-upgrading cycle was undoubtedly prolonged. Recently though, Microsoft has formally issued Windows 10, which was advertized as the universal OS compatible on PCs, tablets, smartphones and all desired devices. It is expected to become the standard in the PC industry in 2015, especially for the corporate users in the 1st- to 3rd-tier cities and the individual consumers pursuing interconnectivity. Hardware manufacturers will begin to see the redemptive recovery resulting from the consumers’ accumulated demands to upgrade their PCs.

2.    Smartphone market growth in the 4th- to 6th-tier cities will slow down
In recent years, smartphones have been substantially popularized, thanks to high subsidies offered by telco operators and the fierce competitions among manufacturers of medium-to-low-end products. In 2014, the shipment of China’s smartphones reached 250 million units in the 4th- to 6th-tier cities, a YoY growth of over 25%. However, with the saturation of the smartphone market, these cities will face the challenge of transforming from increment market to replacement market. The explosive growth will come to an end. IDC predicts that in 2015 the growth rate of smartphone shipment in the 4th- to 6th-tier cities will be lowered to single digit.

3.    Tablet markets in lower tier cities will face great challenges
After three years of high growth, the tablet market returned to rationality, with growth rate of shipments declined from 86.9% in 2013 to 7.3% in 2014. Reasons causing this decline are many folds. Wherein, an important one is the rapid growth of phablets (i.e., smartphones with the screen size of 5.5 to 6.99 inches); with the constant decline in price, phablets will become more attractive for consumers in the 4th- to 6th-tier cities. At the same time, eager to prevent the rapid industry decrease, tablet manufacturers will invest more in product R&D for 1st- to 3rd-tier cities where there are many commercial and smart home target customers. As a result, the 4th- to 6th-tier markets will undoubtedly face a greater challenge. Manufacturers and channels have to think about how to survive in the markets full of low-price strategies.

4.    Smartphone shipment in Western China will exceed 80 million units

Western China has long been regarded as a promising SCD market, mainly because of the national policy support and increasing urbanization in that region. Urbanization, a vital impetus for Chinese economic growth, will continue to play an important role. Smartphone market will face exciting chances for accelerating penetration and popularization in the rapid urbanization development. IDC predicts that smartphone market in Western China will grow by double digits in the next 1 to 2 years.

5.    SCD shipments in Central China will keep on growing by double digits
Central China, neighboring the Pearl River Delta in the south, the Yangtze River Delta in the east and the rapidly developing Great West, holds an advantageous position in the national and regional development layout. This region will see the high-speed increase of SCD popularization that comes with urbanization, as well as recovery of the PC market resulting from the upgrading demand in the developed cities. IDC predicts that in 2015, SCD market in Central China will keep on growing by double digits.

6.    Market development of Northern China enters the “New Normal”
With respect to population, economic aggregate and scale of the SCD market, North China is the largest region. The development trend of this region in the future will be basically consistent with the overall market of China. As the industrial base of important equipment manufacturing industry and energy raw material, Northern China has been facing significant challenges. While industrial and investment growth declined severely, and consumption has replaced investment as the main engine to drive GDP growth. Scientific and technological innovation have become the new growth point. All of these factors lead to what IDC calls the “New Normal” stage, ushering the SCD market of Northern China into a stable development stage.

7.    Shipments of tablets in Southern China will exceed 6 million units
The rapid popularization of smartphones in the 4th- to 6th-tier cities as well as township markets in Southern has cultivated a large amount of consumers who are used to touch control experience, and hence an enormous potential customer base for tablet market. IDC predicts that the growth of consumer tablet market in this region will continue to outrun the national average, driving the overall shipment of tablets of Southern China to more than 6 million units in 2015.

8.    Growth of commercial tablets in Eastern China will outrun the national average
Eastern China has entered into the economic development stage which is mainly led by service industry,  replacing traditional industry as the most important power for the economic development. The convenience of commercial tablets will be recognized in the intensified and standardized development of services. IDC predicts that the shipment of commercial tablets in Eastern China in 2015 will exceed 2.3 million units, with the YoY growth rate of 17%.

9.    Product integration of wearables and smart home  continues in largest urban cities
Along with consumer habit changes, SCD products have entered into the period of in-depth product structural adjustment. In developed urban areas, the growth of the wearable equipment and smart home market will drive further integration of SCD products, and at the same time, further intensify the competition of the mobile ecosystem.

10.    Channel advantages of cities of different tiers are different
The growth of shipments of China’s SCDs through E-commerce channels has seen a slowdown. However, the development trends in cities of different tiers are not the same. E-commerce in high tier cities has taken the strong position, while lower tier cities and the rural market will become the new battlefield for E-commerce enterprises, including the constant improvement of logistics facilities and internet payment systems.

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