China overtakes U.S. in smartphone shipments, says research firm

The U.S. was still the largest market by revenue in the third quarter, said Strategy Analytics

China has passed the U.S. in the third quarter to become the world's largest smartphone market by shipments, but may find it tough to hold the position in the next two quarters, according to a research firm.

China's smartphone shipments reached 23.9 million units by the end of the third quarter, according to Strategy Analytics. This put the country just ahead of the U.S. where 23.3 million smartphones were shipped in the quarter.

Strategy Analytics cautioned that the U.S. could possibly regain the lead as the top smartphone market during the fourth quarter, when holiday sales are expected to pick up. "In the coming one or two quarters, it's going to be a seesaw game," Strategy Analytics director Thomas Kang said Thursday. "But going into next year, China will outstrip the U.S. market continuously. China is going to be larger every quarter."

The U.S. however, still remains the top smartphone market in terms of total revenue generated, driven by sales of high-end devices like Apple's iPhone. China will need three or four years before it can surpass the U.S. by revenue, Kang said.

Two other research firms report that the U.S. is still the top smartphone market by volume, although China is not far behind. Gartner, which tracks smartphone volume by devices sold rather than shipments, said that U.S. smartphone sales reached 22.2 million units in the third quarter, ahead of China's 21.7 million units.

Canalys said last month that the U.S shipped over 200,000 more smartphones than China at the end of the third quarter. Their definitions of smartphones or the vendors they include may be different, said Strategy Analytics.

Strategy Analytics credited the growth in China to better availability of smartphones in the country's retail channels, and subsidies on high-end devices like the Apple iPhone offered by China's mobile operators. More low-cost Android smartphones from domestic brands such as ZTE are also entering the Chinese market.

Nokia, which has seen its smartphone sales dramatically drop this past year, still holds the lead in China as the top smartphone vendor, with a 28% market share, according to Strategy Analytics.

"Historically, Nokia has been a very good brand in China," Kang said. The company has a strong presence in China's retail channels, and also offers a Chinese language texting software used on its phone, that has appealed to customers in the country, he said.

Nokia has however seen its smartphone market share in the country plummet from the 70% it had in 2010, according to Kang. The company's sales have been hit by competition from middle-end Android phones from domestic brands, and by China's mobile operators promoting the devices of rival smartphone makers.

Apple, a company that has seen its iPhone sales soar in China, has an estimated 12% share in the country's market, Kang said. "It's share has been doubling every year," he added.

In the third quarter, HTC had a 24% market share in the U.S., while Apple had a 20.6% share.

Copyright © 2011 IDG Communications, Inc.

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