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Smartphone market is slowing massively…blame China

The smartphone market is set to grow at a significantly slower pace this year, with previously explosive demand from China set to cool.

Worldwide, smartphone shipments are expected to grow 10.4 percent in 2015 to 1.44 billion units—a big drop from the 27.5 percent growth recorded last year, according to a report released by research firm IDC on Tuesday. Previously, IDC forecast 11.3 percent growth this year.

And in China, a market that purchased almost a third of the world's smartphones last year, shipments are expected to grow just 1.2 percent in 2015, a dramatic decline from the 19.7 percent growth seen last year.

"China clearly remains a very important market. However, the focus will be more on exports than consumption, as domestic growth slows significantly," Ryan Reith, program director for the IDC's Worldwide Quarterly Mobile Phone Tracker, said in a statement.



Where’s the next big market?

The smartphone market will be driven over the next few years by "steadily falling" average selling prices of phones, with global shipments expected to hit 1.9 billion units annually by 2019.

But China has joined the likes of North America and Western Europe as a market with high penetration of smartphone users and therefore a smaller number of potential buyers.

Over the past year, Chinese device makers have been looking to expand beyond their domestic market, where they previously built a big customer base without the need for looking elsewhere.


Kevin Frayer | Getty Images

Xiaomi, the so-called "Apple of China", has recently launched in India and Brazil and has plans to move into Russia and Turkey.

Xiaomi's Chinese rival, Huawei, has also been moving further out of China to focus on international markets.

"India has captured a lot of the attention that China previously received and it's now the market with the most potential upside. The interesting thing to watch will be the possibility of manufacturing moving from China and Vietnam over to India," said IDC's Reith.


Apple fears?

Investors have been concerned about the affect a slowing Chinese smartphone market, as well as broader economic worries, could have on foreign handset makers selling into China.

In a rare move, Apple CEO Tim Cook sent an email to CNBC's Jim Cramer, in a bid to reassure investors about the company's performance in the world's second-largest economy.

"Obviously I can't predict the future, but our performance so far this quarter is reassuring. Additionally, I continue to believe that China represents anunprecedented opportunity over the long term as LTE penetration is very low andmost importantly the growth of the middle class over the next several yearswill be huge," Cook said.

iOS won’t kill Android

What's clear is that Apple's iOS mobile operating system won't dislodge the dominance of Google's rival Android this year. IDC forecasts Android will hold an 81.1 percent global market share in 2015, compared to Apple iOS's 15.6 percent share.

IDC see Android dominating through to 2019.

"Even if Apple were to introduce another low-cost iPhone (e.g., 'C' version), IDC believes the price will struggle to compete with Android OEMs (original equipment manufacturers) that are focused on portfolios aimed at price points of $200 and less," the research firm said in a note.

Still, IDC noted that the iPhone will continue to be a success and Apple's "efforts to maintain significantly higher margins compared to its competitors are much more valuable than chasing share."