Thanks to strong end-user demand for lower-priced smartphones, China, the largest market for smartphones this year, will overtake the U.S. as the global leader in smartphone shipments in 2012, according to a new report by IDC. China (People's Republic of China) will account for 26.5 percent of all smartphone shipments in 2012, compared to 17.8 percent for the U.S.

"Looking ahead, the PRC smartphone market will continue to be lifted by the sub-US$200 Android segment," said Wong Teck-Zhung, senior market analyst, Client Devices, IDC Asia/Pacific. "Near-term prices in the low-end segment will come down to US$100 and below as competition for market share intensifies among smartphone vendors. Carrier-subsidized and customized handsets from domestic vendors will further support the migration to smartphones and boost shipments. Looking ahead to the later years in the forecast, the move to 4G networks will be another growth catalyst."

"Regionally, we expect smartphone demand to flow down to lower-tier cities," added James Yan, senior market analyst for Computing Systems Research at IDC China. "After going through a period of sustained high growth, top-tier cities are likely to see decelerating smartphone growth rates. In contrast, secondary cities are expected to experience accelerated smartphone growth, with strong demand for low-cost models as well as high-end models, which are desired as status symbols."

However, IDC noted that China overtaking the U.S. in smartphone shipments does not mean that the U.S. smartphone market is on a decline. The growth is expected to continue in the U.S. smartphone market, but at a slower pace.

Apart from China and the U.S., several other countries will also emerge as key markets for smartphone shipment over the next five years. Countries like Brazil and Russia are expected to become some of the most hotly contested markets as vendors seek to capture new customers and marketshare.

India Has Tremendous Growth Potential

With smartphone penetration in India currently among the lowest in Asia/Pacific, the market has tremendous untapped growth potential. Low-end smartphones offering dual-SIM capability and local apps and priced around $100 will rapidly bring this market to life.

Although 3G data plans are currently too expensive for the majority of consumers in India, IDC expects that the popularization of 3G, and 4G in later years, will drive the smartphone uptake as operators roll out more affordable data plans and generous subsidies while expanding offerings to tier 2 and tier 3 cities. The affordability of service plans will be another important key to smartphone adoption in India.

Take a look at the top five smartphone markets and market share for 2011, 2012 and 2016, based on shipments:


Source: IDC Worldwide Mobile Phone Tracker, 2012 Q2 Forecast Release, August 30 2012

Chart: 2011, 2012 and 2016 Smartphone Shipment Market Share, Top 5 Countries