Lower-tier cities driving China’s smartphone growth

A new report suggests China's smartphone market is being driven by lower-tiered cities and rural markets, where smartphone penetration has increased to 32%.

Nielsen's Smartphone User Research Report, sheds light on new trends in China’s smartphone market for 2015.

China’s smartphone market is now driven by upgrading

Despite the penetration of smartphones is close to reaching maturity within first-tier cities (94%), 55% of first-tier city consumers still said they planned to purchase smartphones within the next 12 months.

Consumers aged under 30 (28%), or those with high income (35%) or at managerial level (43%) showed the highest intention of purchasing smartphones in 2015.

Oliver Rust, managing director of Nielsen China, said their demand stems from the upgrading of equipment and consumers are continuing to pay more attention to the quality and performance of smartphones.

“It is expected that middle and high-end smartphones will be the primary source of growth in 2015.”

Lower-tier cities, rural areas, middle-aged and low-income consumers are main growth drivers for China’s smartphone market in 2015

The penetration of smartphones among second (88%), third (88%) and fourth-tier (86%) cities saw double digit growth of 13%, 22% and 15% respectively in 2014. In rural markets, the penetration rate increased by 6% to 32%.

In the last quarter of 2014, consumers from third-tier and fourth-tier cities showed a 4% and 3% increase in their willingness to buy smartphones compared to the first quarter.

Nearly 10% of rural consumers also indicated plans to purchase a smartphone in 2015, representing a 4% increase when compared to the first quarter of 2014.

Smartphone penetration throughout all of 2014 also saw double-digit increase among consumers aged 40 to 49.

The purchase intention for smartphones among students presented the most prominent increase, with a jump of 14 percentage points compared to the beginning of 2014.

Wearable technology is another hot spot in the Chinese market

Nielsen’s data shows that purchase intentions for smart watches and bracelets in the following 12 months reached 7% by the end of 2014, 2% higher than in Q1 of 2014.

This figure is even higher among young and middle-aged consumers with higher incomes. In Q4 versus Q1 2014, willingness to purchase gained 2% and 13% for consumers aged below 30 (9%) and students (19%) respectively.

According to results from the Nielsen & Alibaba Platform, New Offer Advisor (NOA), appearance and design (18%) and health-related functions (34%) are the top two most important features of wearable tech for consumers.

"Every day new features appeal to a wider range of consumers, such as the elderly and children. By catering to individual demands with this new technology, we are seeing a new niche developing with massive opportunity,” Rust said.