China now ahead of U.S. as largest smartphone market, research firm says

by Phil Hornshaw

We knew China was a big deal for smartphone manufacturers, but according to new findings from market research firm Strategy Analytics, it’s actually The Biggest Deal.

Engadget has the story, in which Strategy Analytics reports that the U.S. has been surpassed as the No. 1 smartphone market by China. The data focuses on the third quarter of 2011, finding that 23.9 million smartphones were shipped in the country during that period. In the U.S., smartphone shipments hit only 23.3 million.

That China bested the U.S. in smartphone shipments isn’t the whole story either: In fact, smartphone shipments in the U.S. dropped 7 percent during Q3 2011, as compared to the same time the year previous. In China, shipments increased by 58 percent over Q3 2010, suggesting that the Chinese market is expanding rapidly, but the U.S. market might be shrinking.

The Chinese market has been huge for both Google’s Android operating system and Apple’s iOS. Google has been readily expanding into the Chinese market all year, and Apple revealed that China was the second most important market after the U.S. in terms of revenue. A Morgan Stanley analyst also recently speculated that China could surpass the U.S. as Apple’s largest market as the company expands its mobile reach to the east.

Strategy Analytics points to more devices being pushed into retail channels as driving the growth. Android device makers like ZTE are providing lower-priced models that are easily affordable to customers, while more carriers are subsidizing higher-end phones. Nokia still dominates in the country with 28 percent of all shipments in the quarter, but Android phone maker Samsung also has a big chunk of the market, taking second with 18 percent of shipments. Samsung recently surpassed Apple to become the No. 1 smartphone manufacturer by revenue in the world.

This might be a good time to make the distinction that shipments aren’t sales – they’re the numbers of smartphones available, not the number of smartphones being placed in customers’ hands. What Strategy Analytics is measuring isn’t the actual demand for smartphones among customers, it’s the willingness of smartphone manufacturers to send devices to the country. That’s an indication of what those companies believe the market is capable of supporting, and also shows something about demand. Since so many devices are being sent to China, at least some must be getting bought. But it’s not as accurate an indicator of the market as a consumer-side analysis might be.

Still, it seems that China isn’t going anywhere in terms of demand for mobile devices. That China is a bigger market for smartphones than the U.S. probably won’t mean too much for those of us buying devices state-side just yet, but in the future, we might see device makers putting a larger focus on their eastern markets than they do on those in the west.