China's Handset Shipment Growth to Slow in 2008

(Top News, 14 Feb 2008)

Mobile handset shipments from manufacturers headquartered in China grew dramatically in 2007, reaching 229 million units for the year, representing a 76.2 percent annual growth rate from 130 million in 2006. However, this rate of growth will slow considerably in 2008, dropping to about 19.7 percent to reach 274 million units, according to market researcher iSuppli Corp.

According to Kevin Wang, senior analyst, China research for iSuppli, there were two major drivers for the fast growth in China's handset industry during 2007—the continuous increase in domestic demand from first-time buyers and the replacement market; and the significant increase in export shipments from Chinese handset manufacturers.



"Domestic OEMs, such as Huawei and ZTE, doubled their export shipments. Furthermore, domestic gray market suppliers shipped millions of handsets to developing countries," says Wang.

In 2007, the domestic Chinese handset market totaled about 200 million units—consisting of 150 million licensed handset units and about 50 million gray-market handsets.

New handset features limited
Sustained increases in the Consumer Price Index (CPI), rising housing prices and major stock market fluctuations in China are expected to hurt consumer confidence in 2008. Except for handsets supporting the Global Positioning System (GPS) and mobile TV functionality, there are no popular new handset features to drive new sales. Due to higher Average Selling Prices (ASPs), iSuppli expects that GPS and mobile-TV equipped phones will remain niche consumer products for now. Consequently, the replacement market will experience very limited growth during 2008, restraining increases in shipments in 2008.

However, iSuppli anticipates that sales of handsets supporting TD-SCDMA and EDGE will ramp up quickly in 2008 as they become more widely available.

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