Analysts say low cost of devices playing 'very important' role in lifting demand

Nearly seven out of 10 mobile phone owners in China were using smartphones in 2012, surpassing developed economies such as the United States and the United Kingdom, a Nielson report said on Tuesday.

The smartphone penetration rate in China reached 66 percent while the proportion in the US was 65 percent, said Nielson after the company conducted research in more than 20 Chinese cities including Beijing, Shanghai, Guangzhou and Chengdu.

The only nation with higher smartphone density than China was South Korea, where the proportion hit 67 percent, according to the report.

China is set to overtake the US this month as the world's largest market for active Android and iOS smartphones and tablets, according to US IT research website Flurry Analytics.

The country will have 246 million smart devices by the end of February, compared with 230 million in the US, Flurry estimated.

However, industry researchers argued that smartphone popularity in China may not as high as Nielson stated.

Wang Jingwen, an analyst at research company Canalys, said less than 40 percent of the phones being used in China were smartphones by the end of 2012. This figure will increase to around 55 percent by the end of this year.

Forrester Research Inc said around 35 percent of subscribers in China were smartphone users by 2012. The company expects the percentage will not reach 64 percent until 2017.

Nielson admitted that the actual smartphone penetration rate may be lower than it reported because its interviews were only conducted in cities, excluding the large number of China's rural residents from the research.

Yet Chinese consumers are set to purchase more smart devices in the coming years, a move that will further increase the smartphone penetration rate.

In the third quarter of 2012, China shipped more than 60 million smartphones, roughly three times more than the country's personal computer shipments in the same quarter, said IT consultancy company IDC.

Lower purchase costs played a "very important" role in boosting China's smartphone user numbers, said Bryan Wang vice-president and principal analyst at Forrester.

"With the stiff competition in the 3G era, all three telecom operators have started to subsidize their devices for consumers. Therefore consumers are able to obtain smartphone devices at a much lower cost than before," he said.

At least 35-40 percent of the smartphones priced at around 1,000 yuan ($160) were sold through operator channels, Wang from Forrester added.

Devices priced less than 1,000 yuan were the key driver of increased demand for smartphones in China.

"It has been extremely successful getting more consumers using smartphones, as well as 3G services from the mobile operators - thanks to support from local mobile device manufacturers such as Lenovo Group and Huawei Technologies Co," said Wang.

[email protected]