Chinese Smartphone Market Saturated 

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May 28, 2015 by ...

Due to hyper cheap smartphones, the Chinese market took off. This, coupled with a ole tithed of itinerant laborers who needed to stay in touch with their kin and apps which facilitates this created the ideal ecosystem of user needs, platform and infrastructure. 

This was definitely great news for fledgling firms. They cut their teeth on less sophisticated customers with limited needs. This demographic was more forgiving that their high brow peers. After all, a shorty smartphone beats none at all. And at $100 or less, the price was right.

Good times over

Smartphones have reached the tipping point and explosive low end growth no longer the game. Conversely, people now want to buy phones which not only meet their needs better , but also demand a handheld whose shelf life tops a peeled banana or calendar. With China’s growing economy, they now can afford there as well. 

Shipments dropped 4.3%, which was the first time such a thing had happened in six years. To make matters worse, sales are trending down, a sign of saturation. 

With smartphone penetration of greater than 90%, people are either holding on to their phones longer and then buying ‘up’ or merely choosing a higher quality unit the first time. 

China is now a market for replacements, which does not bode well for Xiaomi. The reason is that Xiaomi’s client base is less educated consumers in low tier cities. Their phones are great entry level devices. They fail in quality, cachet and ‘wow’ factor, which makes them a less desirable second gen device. 

The upshot is that Xiaomi now will not be competing with other Chinese knockoffs, but Apple and Samsung as well. Thus far, the news has not bee good. Although Apple units sell for three to five times more, they are the top seller in China,

 Consumers tend to be brand loyalists such as MiFans, or they buy foreign. They question is if Xiaomi can capture he hearts of that latter group. From the looks of it thus far, that does not seem to be the case. 


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