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Mobile Phones and Apps - China - February 2014

INTRODUCTION
Definition
Report structure
Methodology
Abbreviations
EXECUTIVE SUMMARY
The mobile phone market
Forecast
Figure 1: Mobile phone forecast, by volume sales, 2008-18
Mobile phone market in China embraced prosperous growth in 2013
Figure 2: Mobile sales in China, by value and volume, 2011-13
A lucrative market for smartphones
Figure 3: Non-smart phones and smartphones split, by volume share, 2008-13
3G capable mobile phones are the current mainstream - but the future lies with 4G
Figure 4: 3G and 2G capable mobile phones sales split, by volume share, 2011-13
Market drivers and growth barriers
The mobile app market
A complex app market full of potential
Market drivers and growth barriers
Companies and brands
Samsung leads while domestic companies are catching up
Figure 5: Top mobile phone companies, by volume share, 2012-13
Commoditisation
Major players in app market
The Consumer: Mobile phone ownership
Figure 6: Smartphone and non-smartphone ownership, December 2013
Figure 7: Smartphone and non-smartphone ownership, by percentage shares of smartphone only users, non-smartphone users, and dual users, December 2013
The Consumer: Operating system of current smartphone
Figure 8: Operating system of current smartphone, by percentage share, December 2013
The Consumer: Price of current smartphone
Figure 9: Price of current smartphone, by percentage shares of price ranges, December 2013
The Consumer: Consideration factors for buying mobile phones
Figure 10: Top three Important factors in choosing a mobile phone, December 2013
The Consumer: Types of apps used
Figure 11: Frequently used types of apps, by category type, December 2013
The Consumer: Attitudes towards mobile apps
Figure 12: Attitudes towards mobile phone apps, December 2013
The Consumer: Attitudes towards mobile phone and apps
Figure 13: Attitudes towards mobile phone and apps, any agree, December 2013
Key issue: How to reach different consumer segments in the mobile phone market
Key issue: How to be successful in China’s app market
Figure 14: Attitudes towards mobile apps, by percentage, agreement on “I would like to see more mobile apps tailored for Chinese users”, December 2013
Key Issue: The revolution on mobile payment
What we think
THE MOBILE PHONE MARKET
Key points
Mobile phone market in China exhibited prosperous growth in 2013
Figure 15: Mobile sales in China, by value and volume, 2011-13
Figure 16: Average mobile phone price per handset, 2011-13
A lucrative market for smartphones
Figure 17: Non-smart phones and smartphones split, by volume share, 2008-13
Figure 18: Mobile phone volume growth rate, by non-smartphones and smartphones, 2008-13
The start of 4G era
3G capable mobile phones are the current mainstream…
Figure 19: 3G and 2G capable mobile phones sales split, by volume share, 2011-13
…but the future lies with 4G
Figure 20: 3G network registered users, 2013
Market drivers
National economic growth continues
Figure 21: GDP and growth rates, China, 2008-13
Income rises in both urban and rural areas
Figure 22: Annual per capita net income and actual growth rate of urban and rural residents in China (RMB), 2008-12
Demands of mobile population in modern life
An internet savvy nation
Development of mobile networks
Growth barriers
A dynamic market with technology development challenges
Mobile phone platform and product innovation challenges
Threats from copycats (Shanzhai)
Forecast
Figure 23: Mobile phone forecast, by volume sales, 2008-18
THE MOBILE APP MARKET
Key points
A complex app market full of potential
Market drivers – apps
Booming smartphone market
4G opportunity
App-friendly Chinese consumers
Growth barriers
The clash between free usage mind-set and profit model
The competitive environment
A motley variety of app stores
Intellectual property concerns
COMPANIES AND BRANDS
Key points
Samsung is leading the race in mobile phone market…
Figure 24: Top mobile phone companies, by volume share, 2012-13
Figure 25: Top mobile phone companies, by value share, 2012-13
…and its success lies in broad product ranges and understanding local needs
Commoditisation
Domestic brands emerge as strong contenders the smartphone segment
Major players in app market
Local platforms are leading downloading portals for Android
Internet giants’ influence
Company profiles: Mobile phone manufacturers:
Samsung Group
Apple Inc.
Nokia Corporation
Lenovo Group
Xiaomi Inc.
App platforms:
Apple Inc. (iOS)
Wandouja (Android)
Internet companies:
Tencent Inc.
Alibaba Group
THE CONSUMER – MOBILE PHONE OWNERSHIP
Key points
Mobile phones are an essential part of consumers’ lives
Figure 26: Technology products ownership, December 2013
Smartphones are the mainstream
Figure 27: Smartphones and non-smartphones ownership, December 2013
Figure 28: Smartphones and non-smartphones ownership, by percentage shares of smartphone only users, non-smartphone users, and dual users, December 2013
Dual users tend to be young, single and on low incomes
Figure 29: Mobile phone ownership, by smartphone only and smartphone and non-smartphone dual users, December 2013
THE CONSUMER – OPERATING SYSTEM OF CURRENT SMARTPHONE
Key points
Android is the leading smartphone operating system
Figure 30: Operating system of current smartphone, by percentage share, December 2013
No strong preference for Android and iOS by age and gender
Figure 31: Operating system of current smartphone, by gender and age, December 2013
iOS/iPhone attracts higher income and better educated consumer groups
Figure 32: Operating system of current smartphone, by income, city, and education, December 2013
THE CONSUMER – PRICE OF CURRENT SMARTPHONE
Key points
Around half smartphones used are mid-price
Figure 33: Price of current smartphone, by percentage shares of price ranges, December 2013
Figure 34: Price of current smartphone, December 2013
Older women are prepared to spend on premium phones
Figure 35: Price of current smartphone, by gender, age and income, December 2013
Consumers from tier one cities are more likely to own more expensive mobile handsets
Figure 36: Price of current smartphone, by city, December 2013
THE CONSUMER – CONSIDERATION FACTORS WHEN BUYING A MOBILE PHONE
Key points
Good value for money is top of mind when purchasing a mobile phone
Figure 37: Single most Important factors in choosing a mobile phone, December 2013
High processing speed and configuration most important when aggregating top three factors
Figure 38: Top three Important factors in choosing a mobile phone, December 2013
Large screen fantasy
Demand for high quality cameras
The question of colour
For people who are willing to pay a premium for mobile phones, brand becomes the most important factor
Figure 39: Single most Important factors in choosing a mobile phone, by current mobile phone price, December 2013
THE CONSUMER – TYPES OF APPS USED
Key points
Social, daily life services, entertainment, and payment/investment related apps are most frequently used
Figure 40: Frequently used types of apps, by category type, December 2013
Social networking and instant messenger apps are the most often used apps
Growth scale for daily life service apps
Entertainment needs
Mobile payment potential
Figure 41: Frequently used types of apps, December 2013
Women and young people using social networking and instant messenger apps most frequently
Figure 42: Frequently used types of apps, by gender and age, December 2013
THE CONSUMER – ATTITUDES TOWARDS MOBILE APPS
Key points
Half of consumers willing to try new apps
Figure 43: Attitudes towards mobile phone apps, on new apps, December 2013
Word of mouth and recommendations help apps to increase usage
Figure 44: Attitudes towards mobile phone apps, on social influence on apps, December 2013
Mobile app advertising is acceptable, but requires careful execution
Figure 45: Attitudes towards mobile phone apps, on mobile app advertising, December 2013
Well-designed paid apps can have a broad appeal
Figure 46: Attitudes towards mobile phone apps, on payment of apps, December 2013
THE CONSUMER – ATTITUDE TOWARDS MOBILE PHONES AND APPS
Key points
International brands are still seen as better quality
Figure 47: Attitude towards mobile phone, on international brands, December 2013
Consumers are looking for the latest versions of phones
Figure 48: Attitude towards mobile phone, on function and size, December 2013
Apps with Chinese features appeal to consumers
Figure 49: Attitude towards mobile apps, December 2013
More efforts required for mobile payment adoption
Figure 50: Attitude towards mobile apps, on mobile payment, December 2013
KEY ISSUE – HOW TO REACH DIFFERENT CONSUMER SEGMENTS IN MOBILE PHONE MARKET
Key points
Consumer segmentation
Figure 51: Target groups, December 2013
Status Aware (27% of sample)
App Enthusiasts (25% of sample)
Casual Users (24% of sample)
Skeptics (24% of sample)
Figure 52: Attitudes towards mobile phone and apps, by Target groups, November 2013
Different pricing strategies for different target groups
Budget priced mobile phones should target Casual Users and Skeptics first…
…and everyone fights in the mid-price range…
…while premium positioned models should prioritise the Status Aware and App Enthusiasts
Figure 53: Price of current smartphone, by target groups, November 2013
iOS/Apple is more appealing to the Status Aware and App Enthusiasts
Figure 54: Operating system of current smartphone, by target groups, November 2013
What it means
KEY ISSUE – HOW TO BE SUCCESSFUL IN CHINA’S APP MARKET
Key points
Lucrative but competitive app market full of potential
Figure 55: Attitudes towards mobile phone apps, on new apps, December 2013
Be Chinese
Figure 56: Attitude towards mobile apps, by percentage, agreement on “I would like to see more mobile apps tailored for Chinese users”, December 2013
Add social elements
Figure 57: Attitude towards mobile apps, by percentage, agreement on “Social networking apps are becoming an essential part of my life”, December 2013
Find a sustainable monetisation model
Figure 58: Attitudes towards mobile phone apps, on payment of apps, December 2013
Figure 59: Attitudes towards mobile phone apps, on mobile app advertising, December 2013
Select the right app downloading platforms
Know your enemies
Figure 60: Attitude towards mobile apps, by percentage, agreement on “The hidden risks of copycat apps puts me off trying new mobile apps”, December 2013
What it means
KEY ISSUE – CATCHING THE REVOLUTION IN MOBILE PAYMENTS
Key points
The potential of mobile payment
The future of payment lies in mobile payment
Figure 61: Frequently used types of apps, by payment and investment related apps, December 2013
Mobile payment is in its infancy
Figure 62: Attitude towards mobile apps, on mobile payment, December 2013
Key players and types of mobile payment in China
Future opportunity in NFC
Future opportunity in mobile payment through apps
Broader scale of coverage and applications
Better understanding of consumers and hence more focused and targeted marketing
What it means
APPENDIX – MOBILE PHONE OWNERSHIP
Figure 63: Technology products ownership, December 2013
Figure 64: Most popular technology products ownership, by demographics, December 2013
Figure 65: Next most popular technology products ownership, by demographics, December 2013
APPENDIX – OPERATING SYSTEM OF CURRENT SMARTPHONE
Figure 66: Operating system of current smartphone, December 2013
Figure 67: Operating system of current smartphone, by demographics, December 2013
APPENDIX – PRICE OF CURRENT SMARTPHONE
Figure 68: Price of current smartphone, December 2013
Figure 69: Most popular price of current smartphone, by demographics, December 2013
Figure 70: Next most popular price of current smartphone, by demographics, December 2013
Figure 71: Other price of current smartphone, by demographics, December 2013
Figure 72: Price of current smartphone, by technology products ownership, December 2013
APPENDIX – TYPES OF APPS USED
Figure 73: Frequently used types of apps, December 2013
Figure 74: Frequently used types of apps, by operating system of current smartphone, December 2013
APPENDIX – CONSIDERATION FACTORS FOR BUYING MOBILE PHONES
Figure 75: Important factors in choosing a mobile phone, December 2013
Figure 76: Most popular important factors in choosing a mobile phone – Rank 1, by demographics, December 2013
Figure 77: Next most popular important factors in choosing a mobile phone – Rank 1, by demographics, December 2013
Figure 78: Most popular important factors in choosing a mobile phone – Rank 2, by demographics, December 2013
Figure 79: Next most popular important factors in choosing a mobile phone – Rank 2, by demographics, December 2013
Figure 80: Most popular important factors in choosing a mobile phone – Rank 3, by demographics, December 2013
Figure 81: Next most popular important factors in choosing a mobile phone – Rank 3, by demographics, December 2013
Figure 82: Important factors in choosing a mobile phone, by technology products ownership, December 2013
Figure 83: Important factors in choosing a mobile phone, by price of current smartphone, December 2013
APPENDIX – ATTITUDES TOWARDS MOBILE APPS
Figure 84: Additional attitude towards mobile phone apps, December 2013
Figure 85: Additional attitude towards mobile phone apps – Social influence on apps, by demographics, December 2013
Figure 86: Additional attitude towards mobile phone apps – Mobile app advertising, by demographics, December 2013
Figure 87: Additional attitude towards mobile phone apps – New apps, by demographics, December 2013
Figure 88: Additional attitude towards mobile phone apps – Payment of apps, by demographics, December 2013
Figure 89: Additional attitude towards mobile phone apps – None of these, by demographics, December 2013
APPENDIX – ATTITUDES TOWARDS MOBILE PHONES AND APPS
Figure 90: Attitude towards mobile phone and apps, December 2013
Figure 91: Agreement with the statement ‘It is worth paying to have my mobile phone upgraded to the latest version’, by demographics, December 2013
Figure 92: Agreement with the statement ‘The bigger the mobile phone is, the more convenient it is to use’, by demographics, December 2013
Figure 93: Agreement with the statement ‘Mobile phones that just provide the basic functions are more convenient to use’, by demographics, December 2013
Figure 94: Agreement with the statement ‘International mobile phone brands are of higher quality than China’s own’, by demographics, December 2013
Figure 95: Agreement with the statement ‘It is worth paying more for mobile apps of higher quality’, by demographics, December 2013
Figure 96: Agreement with the statement ‘I would like to see more mobile apps tailored for Chinese users’, by demographics, December 2013
Figure 97: Agreement with the statement ‘The hidden risks of copycat apps puts me off trying new mobile apps’, by demographics, December 2013
Figure 98: Agreement with the statement ‘Social networking apps are becoming an essential part of my life’, by demographics, December 2013
Figure 99: Agreement with the statement ‘There is a lack of different mobile payment services/apps to choose from’, by demographics, December 2013
Figure 100: Agreement with the statement ‘There are a lack of places where i can pay via my mobile phone’, by demographics, December 2013
Figure 101: Agreement with the statement ‘There is not enough information available on mobile phone payment’, by demographics, December 2013
Figure 102: Agreement with the statement ‘Mobile payment is just as safe as paying through traditional methods’, by demographics, December 2013
APPENDIX – FURTHER ANALYSIS
Figure 103: Target groups, December 2013
Figure 104: Target groups, by demographics, December 2013
Figure 105: Technology products ownership, by target groups, December 2013
Figure 106: Operating system of current smartphone, by target groups, December 2013
Figure 107: Price of current smartphone, by target groups, December 2013
Figure 108: Frequently used types of apps, by target groups, December 2013
Figure 109: Important factors in choosing a mobile phone, by target groups, December 2013
Figure 110: Additional attitude towards mobile phone apps, by target groups, December 2013
Figure 111: Attitude towards mobile phone and apps, by target groups, December 2013

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