Distribution challenges for China’s flatlining smartphone sector

The latest data from research firm IDC suggests that China’s total shipments for smart connected devices – which includes not only smartphones but also connected PCs and tablets – will reach 514 million units in 2015, an increase of only 1.3 per cent from 2014. This is a significant slowdown when compared to the period 2013 to 2014, when the growth rate was 15.2 per cent.

“China’s smart connected devices market is entering a new normal state of low-speed growth in 2015,” explained Nick Mu, senior market analyst at IDC China, “accompanied by transformation and challenges for the distribution network.”

However, the market is still competitive and fiercely contested, and a complex distribution model in the country adds to the challenges.

IDC believes the distribution networks for personal IT products will become flatter and wider, with the current number of distributors reduced while their coverage is widened. This should mean that device manufacturers can reduce costs even more (in a market where the successful local vendors are already pioneers of ultra-thin margins, end user costs are a critical factor).

IDC also believes that scale and brand build-up will become increasingly important for distributors, to combat the escalating price war caused by lack of product differentiation..

“Chinese device manufacturers will attach greater importance to market coverage, and therefore they prefer to partner with distributors with disparate channels, so that they can adopt different sales models at different markets to avoid potential risks, reduce losses and bolster the reliability of distribution channels,” added Nick Mu.