Smart Connected Devices to Reach 514 Million Units in 2015

Estimated reading time: 2 minutes

According to the latest China Quarterly Smart Connected Devices Market Tracker released by IDC in June 2015, China’s total shipments for smart connected devices (including PCs, tablets and smartphones) are estimated to reach 514 million units in 2015, up only 1.3% from 2014. Compare this to a much stronger growth rate of 15.2% from 2013 to 2014. According to Nick Mu, Senior Market Analyst of IDC China, “China’s smart connected devices market is entering a new normal state of low-speed growth in 2015, accompanied by transformation and challenges for the distribution network.”

China’s smart connected device market is expected to expand at a slower pace, but the personal IT devices market remains to be a hotly contested battlefield amid the complicated distribution network. IDC believes the distribution network for personal IT products will be characterized by the following features: 

1. Distribution networks are flatter and wider 

In a flattened distribution network, the distribution process is compressed, and the number of distributors is reduced while their coverage is widened so as to remove the redundant links and boost efficiency. From the perspective of device manufacturers, a flatter distribution network can reduce cost, get them closer to the market and weaken distributors’ monopoly or excessive bargaining power in some region. Lower prices and more convenient purchases will make products even more appealing to end users. As smart connected devices are increasingly penetrating into lower-tier cities, the distribution network for personal IT products is going to be further flattened. 

2. Scale and brand buildup become increasingly important for distributors

A prominent problem in the smart connected devices market is the escalating price war caused by lack of product differentiation. Fierce price competition leads to thinner profit margins. In order to gain an upper hand in the competition with rivals, distributors must get bigger and stronger by consolidation or acquisition. The trend to take advantage of the economy of scale will prompt enterprises to diversify operations to value-added businesses and after-sale services. In the meantime, advocating corporate culture and building brand image can bring additional value to consumers and distinguish them from competitors.

3. Disparate distribution networks will continue to cover the market

The traditional distribution network has been facing growing threat from the swiftly emerging online channels, yet disparate channel patterns will continue to be the mainstream means to distribute smart connected devices for a period of time. Chinese device manufacturers will attach greater importance to market coverage, and therefore they prefer to partner with distributors with disparate channels, so that they can adopt different sales models at different markets to avoid potential risks, reduce losses and bolster the reliability of distribution channels. IDC’s advice for device manufacturers? Work to increase the efficiency of product ordering and logistics to cope with distributors’ inventory turnover, while taking into consideration individual distributors’ circumstances and avoid piling up inventories into distributors, which might provoke backlashes from stressful distributors.