Annual sales of smart phones in China will more than quadruple over the next five years, according to “China: Mobile Handset Market” by the Coda Research Consultancy. The market will achieve an compound annual growth rate (CAGR) of +29% by the end of 2015, Coda says, with sales reaching 97.6 million units.

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Along with its corresponding faster mobile Internet access, the 3G rollout will be a core driver behind this growth, which will be the largest regional growth in smart-phone sales worldwide. Coda expects 3G sales to grow at +72% CAGR to reach 109 million in 2014, thanks to a combined investment of $23 billion (U.S.) in 3G in 2009. In the first quarter of 2010, China spent another $880 million (U.S.) on 3G investment, with under a third going to China Mobile’s homegrown TD-SCDMA network.

The shortage of affordable handsets compatible with the TD-SCDMA standard has been a significant hindrance to growth in advanced handset subscriber numbers, though inexpensive and locally made 3G handsets and smart phones will help resolve the shortage. China Mobile has helped to successfully persuade manufacturers to bring 266 different designs of TD handsets to market.

Of the three standards, TD-SCDMA phones will see the greatest growth through 2015, enabled by aggressive marketing and subsidizing of new phones. In 2015, Code anticipates TD handsets to see 44.8 million in unit sales. The subsidies will be important to advanced handset sales.

However, subsidies affect profits. With increased competition between the three operators, Coda expects subsidies on lower-end handsets to decline. The impact on profits from the 3G rollout, competition, and subsidies mean that carrier profits will fall in 2010 and then rise steadily at a +4.4% CAGR to reach $23.3 billion (U.S.) in 2015, Coda says.

Coda Research Consultancy