Chinese Gray-Market Handsets to Decline 100 millions Units Within Four Years

The Chinese white-box and gray-smartphone market, 2011 will see domestic Chinese suppliers focus mainly on EDGE smartphones based on the Android operating system, as well as 3G smartphones from 2012 onward, reports IHS iSuppli.

From the report, the illegal handets are projected to expand to 255 million units in 2011 and then begin to decline to 213 million units in 2012.  By 2015, it will be less than 200 million units.

Several factors account for the decline in the shipment of gray-market smartphones in China, including stronger supervision by the Chinese government of gray-market handsets and a serious crackdown on counterfeit mobile phones. Moreover, players in the emerging markets, supplying product to their own areas, are grabbing market share away from gray-handset suppliers.

 

Other factors include concern from end customers about the quality and aftersales services of gray handsets; the expansion in market share of dominant local players like ZTE, Huawei, TCL/Alcatel and Sangfei into the developing countries, with cooperation from local operators; the change from some traditional gray-handset suppliers into branded original equipment manufacturers that promote their own trade names in the developing countries; the increasing difficulty among gray handsets in differentiating from similar platforms, such as those operated by big entities MediaTek or Spreadtrum; and the lack of a cost advantage in gray handsets when compared to 2G phones, as well as the absence of a competitive 3G turnkey solution for gray handsets in the near future.

It is interesting to know that the Chinese government has started to clamp on the makers of these fake or illegal handsets. We expect that to happen and for the makers to become increasingly unprofitable in the business.