Lack of innovation of smartphones finally met its repercussion in the consumer market. Chinese consumers’ passion to upgrade their smartphone has slackened compared with last year. This is the most important finding from the report released by Penguin Intelligence and China Tech Insights that studies China’s smartphone consumption and frequency of smartphone upgrades in 2017.
Based on results of a survey done by 73,900 Chinese netizens, this report focuses on topics including the frequency that Chinese consumers upgrade their smartphones, the proportion of online and offline sales of different smartphone brands, the elements that influence why they choose a brand, users’ satisfaction and loyalty to different brands, and lastly, the user flow between brands.
A glance at some key findings:
1. The proportion of Android users who update smartphones annually dropped from 34.7% to 23.5% compared with last year; iPhone users dropped from 27.8% to 16%;
2. iPhone users are the least frequent in updating phones in comparison to Xiaomi users who are the most frequent;
3. iOS system is the foremost reason why users stick with iPhones;
4. Android phones lower price bracket is the main reason for its advantage over the more expensive iPhones;
5. “I am happy with the brand, but I want to change for another brand…” Are mostly OPPO and vivo users;
6. The biggest proportion of previous iPhone users switched to Huawei.
To get a PDF version of this report, please follow China Tech Insights' OA on WeChat (OA ID: chinatechinsights), and reply "smartphone" to get the access.
Willingness to upgrade phones
Overall, the Chinese market is experiencing gliding need from users to upgrade smartphones, especially those who use iPhone
For Android users (*those who have never used an iPhone), the proportion of those who upgrade phones at least once a year has dropped from last year’s 34.7% to 23.5%. Comparatively for iPhone users, the percentage decreased from 27.8% to 16%. Overall, Android users upgrade their smartphones more frequently than iPhone users.
For major smartphone brands, the biggest proportion of users change their phones twice a year. There are only 16% of iPhone adopters who upgrade phones at least once a year, compared with Xiaomi adopters, who change phones the most frequently, with 32.3% of them upgrading phones at least once a year.
Different smartphone brands vary significantly in sales channels; Apple recorded around half of its users purchasing iPhones from Apple Stores
49.6% iPhone adopters report that they bought iPhones in offline retailing stores, while 25.3% of them say they bought iPhones from online. Xiaomi and OPPO/vivo differ drastically in regards to their sales channels. Xiaomi has seen 78.3% of its users from online while 60% of OPPO/vivo users purchased from offline stores.
Apple has been permeating quickly to lower tier Chinese cities in recent years
Data from China’s second biggest online marketplace JD.com showed that the proportion of iPhone users in third-tier and below cities have been scaling up since 2010. This might be due to two main improvements. Firstly, the improvement of consumption power of consumers in those cities, and secondly the e-commerce platforms’ efforts made in expanding downwards over the years. However, it’s notable that the growth rate of Apple’s expansion has been steady in recently two years.
Factors influencing decisions made in choosing mobile brands
iOS system is the foremost reason why users stick with iPhones while the lower price range of Android mobiles is their biggest advantage over iPhones.
77.5% iPhone users say that iOS is the biggest advantage of iPhones. Also, other closely important aspects include good performance and its security features. Only a total of 14.2% have recognized Apple’s innovation in mobiles technology as an advantage over Android devices.
Comparatively, the top reason why Android users have chosen the Android brand is due to its price (a bigger range of lower priced smartphones to choose from compared to iPhones). The safety capability is the least recognized advantage of Android phones.
Taking a more detailed look into the advantages of some other mobile brands, Huawei is comparatively more recognized by its name and OPPO/vivo for their photo effects.
User satisfaction and brand loyalty
Brand satisfaction: iPhone comes first, followed by Huawei vs. brand loyalty: Huawei takes the lead and iPhone follows in second
Overall, the user satisfaction of most smartphones is high, with most brands rated as “satisfactory” by over 70% of their respective users, expect Samsung, which comes only at 50%. Among all, iPhone is the most recognized brand with the highest satisfaction degree (77.7%). And Huawei ranked the second by a very narrow gap.
When respondents are asked whether they would stick to the brand they are using now, Huawei and iPhone users showed much higher loyalty than other brands. 72.8% Huawei adopters say they will consider Huawei for their next mobile versions, and 65.7% iPhone users for newer iPhone models.
OPPO/vivo stay alert！Your users are satisfied with your phone but will choose another brand in the future.
Comparing the user satisfaction and loyalty of each brand, we see varied user stickiness to different brands. Huawei, Apple and Xiaomi have relatively high user stickiness, while vivo, OPPO and Samsung should be concerned that their users are more likely to dump them despite their average user satisfaction.
User flow between brands
Those who no longer use iPhones: Huawei is the biggest beneficiary
Huawei becomes the next top choice for those who have previously used an iPhone. Compared with data in 2016, the proportion of users changing from iPhone to Huawei increased drastically. To compare, the proportion of users turning from iPhone to Samsung and Xiaomi have both seen a decrease in 2017.
1. As the smartphone penetration plateaued in China, it becomes more difficult for this industry to gain new smartphone users. This is why the frequency of smartphone upgrading by the current smartphone adopters matters so much. This report discloses the first ever decrease in smartphone upgrading frequency in 2017, signaling unpleasant news for the market. For years, there have been no major innovation breakthroughs in the smartphone industry, in the end it finally reaps the repercussion from the consumer market that consumers are not as interested to upgrade their phones as before.
2. The key to win the battle over sales channels among smartphone manufacturers is by balancing the integration of both online and offline channels. For example, Huawei’s stunning performance in shipment volumes is partly due to its well-balanced sales channels (as shown in the chart above indicating 40.9% of its offline vs. 41.5% online). Evidence can be seen in June and July’s data provided by Counterpoint, which illustrated that Huawei surpassed Apple for the first time to becoming the second largest smartphone vendor globally. Despite this, the objective of balancing between online and offline channels is perceived to be a short-term strategy. For the long run, the online channel is predicted to surpass the offline channel, and offline stores will exert more influence on brand building, community building, just to name a few.
3. It also doesn’t hurt to know the psychographics of some users. “My phone is good, but next time I would like to try another brand”, or “the new releases did not surprise me, but still I might buy one”. A lesson for vendors who already have a huge sales figure: the next step will be to focus on your brand culture building in order to make your current users become your biggest fans.