China Prefers Cheap Androids, Expensive iPhones

NEW YORK (TheStreet) -- By the end of 2013, China topped the 700 million mark for smartphones and tablets currently in use. Most of those products sold for less than $350 and run on Google's (GOOG) Android operating system.

According to the latest numbers from research firm Umeng, 59% of all new devices were bought by smartphone users upgrading from existing hardware in the fourth-quarter of 2013. The rest were purchased by first-time smartphone users.

The survey found "as smartphone use becomes more commonplace in China new sales are increasingly driven by existing users upgrading rather than from users purchasing their first smartphone".

China, the world's largest smart device market since November 2011, is being driven by lower-priced Android devices. 57% of new purchases were devices selling for less than $330, with the largest segment coming from purchases of $149 or less.

The second largest segment is the $500+ category, accounting for 27% of China's total smart device sales. In that group, Apple (AAPL) iPhones accounted for 80% of the high-end purchases. Unlike most smartphone sales in the United States, Chinese buyers pay the full price for their new devices upfront and not as part of charges built-into a two-year service contract.


In the fourth-quarter, Samsung and China-based Xiaomi, made the most popular phones sold in China, with those two companies manufacturing all of the top ten selling devices for the year. Six out of the ten were Samsung models.

By the end of last year, Samsung controlled the market with its products accounted for a total of 24% of all Android devices in use at that time. Many local companies such as Lenovo, Huawei, Oppo and ZTE continued to do battle with other international manufactures in China's marketplace. With numbers combined they command the overwhelming majority of Android products currently in use.

While 4G services are just beginning to be rolled-out in the Chinese market most smartphones use 2G and 3G connections to wireless services. The newest comer is Wi-fi. In 2013, Wi-fi jumped from 38% of all mobile data connections to 52% by year's end. Government-imposed tariffs on mobile data use have an affect on overall usage.

The survey found that buyers of lower-priced models (below $159) tend to spend more time playing games on their devices and love purchasing special themes wallpapers. High-end device buyers spend their time (and money) using applications for news, navigation, finance and e-commerce.

--Written by Gary Krakow in New York.

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