This Year China will Overtake the US as the World's Largest Mobile Phone Market by Revenue

A new report by Strategy Analytics takes a look at revenue generated this year by the sale of mobile phones. Unfortunately, while the report shows major strides for China, it shows a rather stagnant view of the U.S. The report is entitled “BRIC Country Handset Revenue Forecasts: 2009 to 2020.”

It seems that mobile phone sales have begun to stabilize here in the U.S. This should not really come as any surprise since several reports in the past have talked about the smartphone market reaching a saturation point. By the end of this year we can expect to see only 163 million units being sold, which will bring in revenue of about $60 billion.

On the other hand, it seems that 2014 will see China’s mobile phone market taking off and coming into its own. According to Strategy Analytics, China’s mobile phone sales will reach 430 million units and generate revenue of about $87 billion. This represents a substantial year-over-year growth for China as compared to a rather flat growth for the U.S.

Senior analyst at Strategy Analytics, Linda Sui, said, "We forecast mobile phone sales to grow 15 percent annually to reach a record 430 million units in China during 2014. Mobile phone trade revenues will surge 53 percent annually to reach a record $87 billion this year. In contrast, mobile phone sales in the United States will grow zero percent annually, while trade revenues will increase only 4 percent to  $60 billion in 2014. China will finally overtake the United States for the first time this year to become the world's largest mobile phone market by value."

You can see a breakdown between 2013 and 2014 in the following chart:

One possible factor could be Apple. Tim Cook, Apple’s CEO, is committed to serving the growing clientele in China. Apple booked a 21 percent revenue increase during the first two quarters of 2014, making China Apple's fastest-growing market. The company has seen a massive retail expansion in China which has been led by its new retail stores chief Angela Ahrendts. You may also recall that at the beginning of this year, China’s largest telecommunication company China Mobile, began to sell the iPhone 5. This led to an immediate increase in Apple sales.

In a statement, Cook said "We plan to triple the number of Apple Retail Stores [in China] over the next two years. We're continuing to expand in online. We're continuing to build out channels," Cook said during the company's last earnings call. "We're up to 40,000 points of sales now in iPhone, but we're not nearly where we need to be on the rest of our product line and even the 40,000 is a low number in considering the broad landmass and the number of folks in China. And so, I feel like there's still loads of opportunity there and feel really, really good about how we're doing."

Another thing to keep in mind is that in December 2013, China awarded LTE licenses to its three top carriers to expand the deployment of 4G LTE networks in the country. Woody Oh, senior analyst at Strategy Analytics, mentioned, "China's impressive mobile growth is being driven by the country's rapid shift to 3G and 4G smartphones. Major brands, such as Samsung, Huawei and Lenovo, are aggressively expanding their distribution channels and product ranges across the region to meet extremely strong demand from Chinese consumers for more advanced mobile phones."

Neil Mawston, who is the executive director at Strategy Analytics, added, "The United States is maturing and has now lost its crown to China as the world's largest mobile phone market by revenue. However, it is important to remember the U.S. remains by far the mobile industry's most valuable country by profit. High average selling prices for mobile phones and huge operator subsidies from Sprint and others continue to make the U.S. a very profitable market for major device brands such as Apple, Samsung and Alcatel."

It is fair to say that Apple has had a hand in this growth. Apple has played an important part in this current shift. The iPhone is responsible for about half of the 2.8 million 4G subscribers on China Mobile. Meanwhile, on behalf of a smaller competitor, China Telecom, the iPhone seems to have helped to boost 3G revenues by nearly 30 percent.