China Loves Its Smartphones

China overtook the U.S. in the number of Internet users a few years ago. It was just a matter of time before the world's most populous nation because the largest consumer of smartphones.

Needham & Company analyst Charlie Wolf's latest report on the mobile industry shows that smartphone shipments in China soared 164% to 33.1 million in the second quarter. There were only 25 million handsets shipped in the U.S. during the same three months.

Why do you think Baidu (Nasdaq: BIDU  ) made a bigger push into mobile with its Baidu Cloud announcement two months ago?

Unfortunately for Baidu, this remains largely a two-horse race. Google's (Nasdaq: GOOG  ) Android becomes the runaway leader with 69.5% of the market. That's a result of Android's open-source nature, where even Baidu's smartphone initiatives are based on Android.

However, we can't discount Apple (Nasdaq: AAPL  ) and its 17.3% chunk of the market. Apple had less than 10% of the Chinese market a year ago. That's heady growth, and things can get even better for Apple when the iPhone 5 comes out later this year.

See, iPhones aren't currently compatible with the country's largest carrier, but that should change with the iPhone 5 update. China Mobile (NYSE: CHL  ) , with twice as many subscribers as the population of the United States, could easily push Apple's share of the market past 20%, if not 25%.

Nokia (NYSE: NOK  ) is in third place, but its 11.2% share of the market will continue to shrink over time. Just as the stateside market has become a matter of choosing between Android and iPhone, China's pretty much the same way -- only it's bigger now.

Pay attention, investors.

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The Motley Fool owns shares of China Mobile, Baidu, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Baidu, Apple, and Google and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 10, 2012, at 11:03 PM, techy46 wrote:

    Nokia is in third place, but its 11.2% share of the market will continue to shrink over time. Just as the stateside market has become a matter of choosing between Android and iPhone, China's pretty much the same way -- only it's bigger now.

    I think the Chinese are smarter consumers and will not be so swayed by the Crapple's toys.

  • Report this Comment On July 11, 2012, at 2:11 PM, imersion wrote:

    Nok has 11% of smartphones? Does that mean that Lumia is selling like hotcakes? Lumia is NOK's only smartphone. It's share must have been close to 0 in the first quarter. That sounds pretty amazing!

  • Report this Comment On July 11, 2012, at 6:00 PM, CameraFTP wrote:

    Nokia used to be huge in China. However, the brand name is quickly fading. It's betting on WP8 phones. If it can still produce high quality phones, it will have a chance in China because it still has very strong brand name in small cities.

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