Asia’s fast-growing smartphone market is forecast to slow down dramatically, with ABI Research predicting growth to drop to 17 per cent last year from 43 per cent in 2013.

The research firm expects growth to slow further this year to 10 per cent as China’s robust expansion stalls. The country, the world’s largest smartphone market and supplier, faces rising smartphone penetration (already 52 per cent at China Mobile) as well as a sharp cut back in handset subsidies after the government instructed the three state-owned operators in July to reduce subsidies by a combined CNY40 billion ($6 billion) over the next three years.

China Mobile, with 806 million connections, spent CNY15.3 billion ($2.48 billion) on subsidies in the first half of last year and planned to slash that to just CNY5.7 billion in H2. It spent CNY34 billion in 2013.

ABI said these factors will accelerate the move from high-end ($400+) to mid-range and low-end (sub-$200) segments, placing further pressure on high-end vendors such as HTC, Samsung, Sony, HTC and even Apple.

“China’s OEMs will start to look outside of China to sustain its growth plans. We have already seen the likes of Xiaomi and Lenovo make ambitious moves outside of China; expect others to follow,” said ABI Research senior practice director Nick Spencer.

He said the overall handset market also is beginning to slow as operators push into less affluent areas, where consumers typically have less to spend on devices and the life-cycle is closer to four years than the two years in advanced markets.

This is putting pressure on the average sell price of smartphones. The sub-$200 smartphone segment will see 14 per cent growth over the next five years compared with 5 per cent growth for the $400+ tier, Spencer said.

IDC has more bullish growth forecasts for the region. It excepts smartphone shipments in Asia to increase 28.5 per cent to 642 million units last year. Emerging market shipments, which will account for more than 90 per cent of output in the region, are forecast to grow 32 per cent, while growth in mature markets will slow to less than 1 per cent.

It said Asia’s smartphone market grew 24 per cent growth in Q3 2014 from a year ago, but China’s growth slowed to just 1 per cent quarter-on-quarter.

China’s handset shipments last year dropped 22 per cent to 452 million units, according to the China Academy of Information and Communications Technology. Smartphones, which saw a decline of 8 per cent to 389 million units, accounted for 86 per cent of the country’s total shipments.